Policies Towards Foreign Direct Investment

Although the GRA demonstrated political will to significantly increase foreign direct investment (FDI), Angola remains a difficult operating environment for investment to thrive. FDI remains low, volatile, and largely concentrated in the extractives sector. The GRA continues to pursue an ambitious plan to reform the business and investment environment. The Private Investment Law (“PIL”) introduced in 2018 has proven to be slow to promote FDI and retain investment. At the end of May 2020, the Economic Committee of the Council of Ministers gathered to discuss some changes to the PIL, with a particular focus on attracting foreign investment through a mechanism to negotiate benefits and special conditions depending on the specific project. There have been, however, no legislative changes related to foreign direct investment since the enactment of the 2018 PIL and the Competition Law of 2018.

President João Lourenço implemented economic reform policies that provide a level playing field for domestic and foreign investors and leveraged efforts to combat and deter corruption and money laundering. Foreign investors were also encouraged to participate in the ongoing Privatization Program designed to privatize over 195 State-Owned Enterprises (SOES) by 2022. AIPEX, the country’s Private Investment and Export Promotion Agency is billed as the investors ‘one stop shop’ for business establishment. AIPEX is tasked with facilitating investment and is also supposed to manage the state’s investment portfolio to ensure the equitable implementation of the PIL and distribution of private investment, especially foreign investment. Theoretically the country prioritizes investment retention, but it does not appear to have institutional capacity to pursue and advocate for investment retention.

Limits on Foreign Control and Right to Private Ownership and Establishment

The 2018 PIL establishes the general principles and basis of private investment in Angola, determining the benefits and concessions that the GRA grants private investors and the criteria for accessing them, as well as establishing rights, duties and guarantees of private investors. The PIL is applied to private investments of any value, whether it is carried out by domestic or foreign investors, although waivers may exist under a bilateral agreement framework. Companies incorporated in conformity with the Angolan law, even with capital from abroad are, for all legal purposes, subject to the existing Angolan legislation. After the completion of a private investment project, foreign investors have the right, after approval by the GRA and settlement of taxes, to transfer abroad:

1. Values corresponding to dividends;
2. Values corresponding to the proceeds of the liquidation of their enterprises;
3. Values corresponding to due compensations;
4. Values corresponding to royalties or other earnings of remuneration from indirect investments, associated with the transfer of technology.

These processes are very bureaucratic and tedious. Foreign investors and companies with majority foreign ownership are only eligible for domestic credit after having fully implemented their respective investment projects.

On October 20, 2020 Presidential Decree No. 271/20, revoking Order No. 127/03, of 25 November 2003, was published, approving the new Legal Framework on Local Content in the Oil Sector. The statute aims to promote economic diversification, the participation of local businesses in the oil sector, the increase of domestic production and reduction of imports of goods for the sector, as well as the creation of employment and increased training of Angolans in the oil industry workforce. The statute establishes new rules on ‘Angolanization’ and procurement of goods and services for the sector, which will have a significant impact on company activities. For example, priority will be given to procurement of nationally produced goods and services, especially the obligation to contract Angolan companies included in the database approved by the National Oil, Gas and Biofuels Agency (ANPG). In addition, all companies operating in any segment of the petroleum-sector value chain will be required to present an annual local content plan to the ANPG. Failure to comply with the rules established in the new statute will result in fines in local currency to the equivalent of between USD 50,000 and USD 300,000. Additional penalties may also be applied, such as barring companies from entering new contracts or operating altogether.

Although the GRA eliminated the 35 percent local content requirement in foreign investment and encourages foreign companies to invest in the domestic economy, some FDI screening processes continue. Foreign ownership remains limited to 49 percent in the oil and gas sector, 50 percent in insurance, and 10 percent in the banking and telecommunications sectors, though there have been some exceptions recently in which the foreign investment goes beyond the limit. There are several objectives that the GRA seeks to accomplish through its FDI screening processes: 1) create jobs for Angolans or transfer expertise to Angolan companies as part of an “Angolanization” plan; 2) protect sensitive industries such as defense and finance; 3) prevent capital flight or other behavior that could threaten the stability of the Angolan economy; and 4) diversify the economy and increase competitiveness of local industries.

Other Investment Policy Reviews

Angola has been a member of the World Trade Organization (WTO) since 1996. The WTO performed a policy review of Angola in September 2015. At the government’s request, the last Investment Policy Review (IPR) of Angola’s business and economic environments was completed on September 30, 2019 by the United Nations Conference on Trade and Development (UNCTAD of Angola’s The IPR was part of a broader EU funded technical assistance project aimed to assist Angola in attracting and benefitting from FDI beyond the extractives industry and to support the GRA’s objective of increasing economic diversification and sustainable development. The full report and policy recommendations are accessible at: https://unctad.org/en/PublicationsLibrary/diaepcb2019d4_en.pdf

The review identified remaining policy gaps and bottlenecks, including the complex system for FDI entry and establishment, burdensome operational regulations, the persistence of restrictive business practices and a lack of institutional capacity and coordination. These affect the country’s ability to fully take advantage of its strategic location, abundant natural resources, and preferential access to external markets.

The Review also devoted special attention to investment in agribusiness and its contribution to sustainable development. It calls for measures to foster responsible investment and promote inclusive modes of production in agriculture. The recommendations emphasize the need to strike a policy balance between food security and export development objectives, improve access to land and infrastructure, and promote entrepreneurship and skills development.

Business Facilitation

The World Bank Doing Business 2020 report ranked Angola 177 out of 190 countries and recorded an improvement in Angola’s monitoring and regulation of power outages, and in facilitating trade through the implementation of an automated customs data management system, ASYCUDA (Automated System for Customs Data) World, and by upgrading its port community system to allow for electronic information exchange between different parties involved in the import/export process. To commence a business, investors typically register with the General Tax Administration (AGT) Social Security Institute (INSS), National Press, and a local bank Launching a business typically requires 36 days, compared with a regional average of 27 days, with Angola ranked 146 out of the 190 economies evaluated.

The Covid-19 pandemic highlighted the urgency of trade facilitation reform to improve competitiveness in non-oil business sectors. With this, export procedures in the country cost USD 240 and take 98 hours, compared to an average of USD 173 and 72 hours for sub-Saharan Africa. Many of the reforms necessary to improve conditions for Angolan businesses, such as automating customs procedures or creating a single window, are addressed by the World Trade Organization’s Trade Facilitation Agreement, which Angola ratified in April 2019. To facilitate opening, changing, or closing a company, the Guiche Único de Empresas one stop shop for investors (GUE) was folded into the Private Investment and Export Promotion Agency (AIPEX) in 2019. It combines the main public services for constitution of companies, GUE and AIPEX, allowing the investor to open and register companies and be able to access the tax benefits and other incentives resulting from the Private Investment Law.

On October 19, 2020, to facilitate the establishment of businesses and as a COVID-19 imposed biosafety measure, the GRA simplified procedures by creating an online registration portal for companies (www.gue.gov.ao). The online portal will allow for faster registry of companies (taking only 30-60 minutes) and replace the publication of the company registry in the Gazette (Diário da República), a procedure that took more than five days. There is still the option to set up a company in person, which is estimated to also take as little as 30 minutes to an hour. The cost to establish a sole proprietorship is USD 16 dollars and USD 54 for partnerships, corporations, and other entities. Payments are also made electronically.

In April 2020, to simplify bureaucracy and in anticipation of the economic slowdown eventually caused by COVID-19, the GRA proposed revoking the procedure for issuing business licenses for all economic activities and requiring companies to carry out statistical registration in the act of incorporation. With the abolition of the Company License Document (a commercial permit) and Statistical Registration, to begin business activities, companies need to register their activity with the local administration office. The office will issue an electronic operating license. Some exclusions from this regime are foreseen, such as those related to the trade in foodstuffs, live plant species, animals, birds and fisheries, medicines, car sales, lubricants and chemicals. For these sectors, a physical license is still required as they are considered high risk economic activities which may affect human, animal, environmental and state safety.

The state-run private investment and export promotion agency’s website is http://www.aipex.gov.ao/PortalAIPEX/#!/  . Contact Information: Departamento de Promoção e Captação do Investimento; Agencia de Investimento Privado e Promoção de Investimentos e Exportações de Angola (AIPEX). Rua Kwamme Nkrumah No.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81.

Outward Investment

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. According to data from the BNA, in 2018, the government did not invest abroad but received returns on previous investments abroad.

Domestic investors 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 little or no investment abroad by domestic investors. Although investing in real estate is cheaper abroad, a few invest in real estate domestically. The average Angolan invests in affordable investments with quick returns.

Transparency of the Regulatory System

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) sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. Revised energy-sector licensing regulations have permitted some purchase power agreements (PPA) participation.

Overall, Angola’s national regulatory system does not conform to other international regulatory systems. However, Angola is part of the Common Market for Eastern and Southern Africa (COMESA), the Community of Portuguese Speaking Countries (CPLP), and the SADC, among other organizations. Angola has yet to join the SADC Free Trade Zone of Africa as a full member. On March 21, 2018 together with 44 African countries, Angola joined the African Continental Free Trade Area (AfCFTA), an agreement aimed at paving the way for a liberalized market for goods and services across Africa. Angola is also a member of the Port Management Association of Eastern and Southern Africa (PMAESA), which seeks to maintain relations with other national port authorities or associations, regional and international organizations and governments of the region to hold discussions on matters of common interest.

Angola became a member of the WTO on November 23, 1996. However, it is not party to the Plurilateral Agreements on Government Procurement, the Trade in Civil Aircraft Agreement and has not yet notified the WTO of its state-trading enterprises within the meaning of 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. There have been no investment policy reviews for Angola from either the OECD or UNCTAD in the last four years. Angola conducts several bilateral negotiations with Portuguese Speaking countries (PALOPS), Cuba and Russia and extends trade preferences to China due to 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 National Assembly is Angola’s main legislative body with the power to approve laws on all matters (except those reserved by the constitution to the government) by simple majority (except if otherwise provided in the constitution). Each legislature comprises four legislative sessions of twelve months starting annually on October 15. National Assembly members, parliamentary groups, and the government hold the power to put forward all draft-legislation. However, no single entity can present draft laws that involve an increase in the expenditure or decrease in the State revenue established in the annual budget.

The president promulgates laws approved by the assembly and signs government decrees for enforcement. 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 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 the National Gas and Biofuels Agency (ANPG) through the 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 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.
• The Angolan Communications Institute (INACOM): The institute sets prices for telecommunications services and is the regulatory authority for the telecommunications sector. 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.
• As of October 1, 2019, a 14 percent VAT regime came into force, replacing the existing 10 percent Consumption Tax. The General Tax Administration (AGT) is the office that oversees tax operations and ensures taxpayer compliance. The new VAT tax regime aims to boost domestic production and consumption and reduce the incidence of compound tax created for businesses unable to recover consumption tax incurred. VAT may be reclaimed on purchases and imports made by taxpayers, making it neutral for business.

Angola acceded to the New York Convention on August 24, 2016, paving the way for effective recognition and enforcement in Angola of awards rendered outside of Angola and subject to reciprocity. Angola participates in the New Partnership for Africa’s Development (NEPAD), which includes a peer review mechanism on good governance and transparency. Enforcement and protection of investors is under development in terms of regulatory, supervisory, and sanctioning powers. Investor protection mechanisms are weak or almost non-existent.

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, in particular those relevant to foreign investors. The Diário da República (the Federal Register equivalent), is a legal document where key regulatory actions are officially published.

International Regulatory Considerations

On September 14, 2020 the GRA officially announced its intention to join the 54 countries that already apply the Standard Initiative for Extractive Industries Transparency (EITI).

In a letter to the Chairman of the EITI Board, dated September 14, 2020, the Minister of Mineral, Oil and Gas Resources, Diamantino Pedro Azevedo, described the steps already taken for the implementation of the EITI. These include the signing of Presidential Decree 117/20, appointing the Minister as chair of the National EITI Coordinating Committee, and a public statement announcing the government’s commitment to join the EITI initiative.

Angola’s overall national regulatory system does not conform to other international regulatory systems and is overseen by its constitution. Angola is not a full member of the International Standards Organization (ISO), but has been a corresponding member since 2002. The Angolan Institute for Standardization and Quality (IANORQ) within the Ministry of Industry & Commerce coordinates the country’s establishment and implementation of standards. Angola is an affiliate country of the International Electro-technical Commission that publishes consensus-based International Standards and manages conformity assessment systems for electric and electronic products, systems and services.

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 (TBT) regimes are not coordinated. Angola acceded to the Kyoto Convention on February 23, 2017.

Legal System and Judicial Independence

Angola’s legal system is primarily based on the Portuguese legal system and can be considered civil law based, with legislation as the primary source of law. Courts base their judgments on legislation and there is no binding precedent as understood in common law systems. The constitution is considered the supreme law of Angola (article 6(1)) and all laws and conduct are valid only if they conform to the constitution (article 6(3.))

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 ranks Angola 186 out of 190 countries on contract enforcement, and estimates 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. Both administrative procedures and lawsuits are extremely bureaucratic and time-consuming. Investors exercising their right to appeal should expect decisions to take months, or even years, in the case of court decisions. In 2008, the Angolan attorney general ruled that Angola’s specialized tax courts were unconstitutional. The ruling effectively left businesses with no legal recourse to dispute taxes levied by the Ministry of Finance, as the general courts consistently rule that they have no authority to hear tax dispute cases and refer all cases back to the Ministry of Finance for resolution. Angola’s Law 22/14, of December 5, 2014, which approved the Tax Procedure Code (TPC), sets forth in its Article 5 that the courts with tax and customs jurisdiction are the Tax and Customs Sections of the Provincial Courts and the Civil, Administrative, Tax and Customs Chamber of the Supreme Court. Article 5.3 of the law specifically states that tax cases pending with other courts must be sent to the Tax and Customs Section of the relevant court, except if the discovery phase (i.e., the production of proof) has already begun.

In 2008, the Angolan attorney general ruled that Angola’s specialized tax courts were unconstitutional. The ruling effectively left businesses with no legal recourse to dispute taxes levied by the Ministry of Finance, as the general courts consistently rule that they have no authority to hear tax dispute cases and refer all cases back to the Ministry of Finance for resolution. Angola’s Law 22/14, of December 5, 2014, which approved the Tax Procedure Code (TPC), sets forth in its Article 5 that the courts with tax and customs jurisdiction are the Tax and Customs Sections of the Provincial Courts and the Civil, Administrative, Tax and Customs Chamber of the Supreme Court. Article 5.3 of the law specifically states that tax cases pending with other courts must be sent to the Tax and Customs Section of the relevant court, except if the discovery phase (i.e., the production of proof) has already begun.

The judicial system is administered by the Ministry of Justice at trial level for provincial and municipal courts and the supreme court nominates provincial court judges. In 1991, the constitution was amended to guarantee judicial independence. However, per the 2010 constitution, the president appoints supreme court judges for life upon recommendation of an association of magistrates and appoints the attorney general. Confirmation by the General Assembly is not required. Angola enacted a new Criminal Code and a new Criminal Procedure Code in November 2020 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 system lacks resources and independence to play an effective role though 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.

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 further proceedings called 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).
• Delivery of assets; and
• Provision of information on the whereabouts of assets.

The Civil Procedure Code also provides 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.

Laws and Regulations on Foreign Direct Investment

The GRA is favorable to FDI and offers freedom of establishment in all sectors with exception a few that have been traditionally been closed to FDI: military aircraft and security equipment, the activities of the Central Bank, ports, and airports. However, in 2020, the GRA encouraged foreign investors to take over management of ports and airports under the Privatization Program (PROPRIV). The acquisition of holdings is also possible. A special investment regime applies to the oil, gas, diamond, and financial sectors. Investment values exceeding USD 10m, require an investment contract with the Angolan Government and must be authorized by the Council of Ministers and finally approved by the President.

Investment values exceeding USD 10m, require an investment contract with the Angolan Government and must be authorized by the Council of Ministers and finally approved by the President.

Investors, foreigners or not, theoretically have the same right of access to incentives, even if the policy of “Angolanization” aims to promote the employment of nationals. Regarding capital repatriations, the law guarantees foreign investors the right to transfer dividends or other income from direct investment out of the country. Starting in 2020, importing capital from foreign investors willing to invest in Angolan companies is immune from licensing by the Angolan central bank.

AIPEX is the investment and export promotion regulation center tasked with promoting Angola’s export potential, legal framework, environment, and investment opportunities in the country and abroad. Housed within the Ministry of Industry & Commerce, AIPEX is also responsible for ensuring the application of the 2018 NPIL on foreign direct investments, entered into force on June 26, 2018.

Competition and Antitrust Laws

On May 17, 2018 Angola’s National Assembly approved the nation’s first anti-trust law. The law set up the creation of the Competition Regulatory Authority, which prevents and cracks down on actions of economic agents that fail to comply with the rules and principles of competition. The Competition Regulatory Authority of Angola (Autoridade Reguladora da Concorrência – ARC) was created by Presidential Decree no. 313/18, of December 21, 2018, and it succeeds the now defunct Instituto da Concorrência e Preços. It has administrative, financial, patrimonial and regulatory autonomy, and is endowed with broad supervisory and sanctioning powers, including the power to summon and question persons, request documents, carry out searches and seizures, and seal business premises.

The ARC is responsible, in particular, for the enforcement of the new Competition Act of Angola, approved by Law no. 5/18, of May 10, 2018 and subsequently implemented by Presidential Decree no. 240/18, of October 12. The Act has a wide scope of application, pertaining to both private and state-owned undertakings, and covers all economic activities with a nexus to Angola. The Competition Act prohibits agreements and anti-competitive practices, both between competitors (“horizontal” practices, the most serious example of which are cartels), as well as between companies and its suppliers or customers, within the context of “vertical” relations.

Equally prohibited is abusive conduct practiced by companies in a dominant position, such as the refusal to provide access to essential infrastructures, the unjustified rupture of commercial relations and the practice of predatory pricing, as well as the abusive exploitation, by one or more companies, of economically dependent suppliers or clients. Prohibited practices are punishable by heavy fines that range from one to ten percent of the annual turnover of the companies involved. Offending companies that collaborate with the ARC, by disclosing conduct until then unknown or producing evidence on a voluntary basis, may benefit from significant fine reductions, under a leniency program yet to be developed and implemented by the ARC. Considering the ample powers and potentially heavy sanctions at the disposal of the ARC, companies present in (or planning to enter) Angola are well advised to consider carefully the impact of the new law on their activities, in order to mitigate any risk that its market conduct may be found contrary to the Competition Act.

With the surge of the privatization agenda in 2019 and ongoing anti-corruption and asset recovery strategy and privatization of SOEs program, the Institute of Assets and State Equity (IGAPE) also emerged in providing oversight for acquisitions and mergers

Expropriation and Compensation

Under the Land Tenure Act of November 9, 2004 and the General Regulation on the Concession of Land (Decree no 58/07 of July 13, 2007), all land belongs to the state and the state reserves the right to expropriate land from any settlers. The state is only allowed to transfer ownership of urban real estate to Angolan nationals and may not grant ownership over rural land to any private entity (regardless of nationality), corporate entities or foreign entities. The state may allow for land usage through a 60-year lease to either Angolan or foreign persons (individuals or corporate), after which the state reserves legal right to take over ownership.

On January 24, 2020 Parliament approved the revised Law of Expropriations by Public Utility putting into practice the general principles contained in articles 15, no. 3 and 37, of the Angolan Constitution, which recognize the right to private property and establish that expropriations are only allowed when based on reasons of public interest and upon payment of fair and prompt compensation. The National Assembly also approved Law No. 1/21 on January 7, 2020, which approves the Expropriation Law and revokes legislation that governed this matter since before Angola’s independence. 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.

In order to implement these fundamental principles, the Expropriation Law establishes the specific procedure that governs expropriation. The new law justifies expropriation for public utility and for other purposes such as defense and national security, the creation of new housing clusters, development of Special Economic Zones and Free Trade Zones, industrial use of mines and mineral deposits, water resources, operation of public services, operation of public transport systems, construction and assembly of power plants, substations and transmission lines integrated in the linked electrical system, as well as any other cases of public utility that may be established in special legislation.

Dispute Settlement

ICSID Convention and New York Convention

Angola is not a member state to the International Centre for Settlement of Investment Disputes (ICSID Convention) but has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On March 6, 2017, the Government of Angola deposited its instrument of accession to the Convention with the UN Secretary General. The Convention entered into force on June 4, 2017. Its ratification was endorsed domestically via resolution No. 38/2016, published in the Official Gazette of Angola on August 12, 2016.

Investor-State Dispute Settlement

The Angolan Arbitration Law (Law 16/2003 of July 25) (Voluntary Arbitration Law — VAL) provides for domestic and international arbitration. Substantially inspired by Portuguese 1986 arbitration law, it cannot be said to strictly follow the UN Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. The VAL contains no provisions on definitions, rules on interpretation, adopts the disposable rights criterion in regard to arbitration, does not address preliminary decisions or distinguish between different types of awards, and permits appeal on the merits in domestic arbitrations, unless the parties have otherwise agreed.

Angola is also a member of the Multilateral Investment Guarantee Agency (MIGA), which can provide dispute settlement assistance as part of its political risk insurance products and eligibility for preferential trade benefits under the African Growth Opportunity Act. The United States and Angola have signed a TIFA, which seeks to promote greater trade and investment between the two nations.

There have not been any judicial proceedings or claims under the TIFA. Angola has no FTA agreement with the United States.

U.S. Embassy Luanda is aware of one ongoing formal investment dispute involving an American company since 2017. To date, the U.S. investor’s complaints against the GRA remain unsettled. The GRA denies being party to the investor dispute and advised the plaintiff to file a case in Angolan courts against its business partner. The GRA recognizes this case as being an investor-to-investor and not investor-to-state dispute.

International Commercial Arbitration and Foreign Courts

Other means of alternative dispute resolution are not mandatory by law and, therefore not commonly used in commercial disputes. Under the Public Procurement Law, in the case of a dispute related to the termination of a public works contract, before the judicial proceeding takes place it is mandatory that an extrajudicial conciliation attempt be made. The extrajudicial conciliation attempt takes place before a committee composed of one representative of each of the parties and chaired by the President of the Superior Council of Public Works or a member designated by him for this purpose, within 30 days after the written application and answer of the parties. If the attempt to conciliate is successful, the written terms and conditions must be submitted to the approval of the Minister of Public Works and are then valid as enforceable title.

Angola recognizes and enforces foreign arbitration rulings against its government. However, extra-judicial cases against foreign investors are rare. Although not widely implemented, the Government of Angola and public sector companies recognize the use of arbitration to settle disputes with foreign arbitration awards issued in foreign courts.

Commercial contracts usually include arbitration clauses if foreign companies are involved. Arbitration proceedings are more flexible than litigation through the courts and less time is required to obtain a resolution. Additionally, appointed arbitrators are often experts in the matters in dispute and, as such, the decisions are of higher quality. However, arbitration proceedings are sometimes more expensive than judicial proceedings.

Bankruptcy Regulations

Angola ranks 168 out of 190 on the World Bank’s Doing Business 2020 report on resolving insolvency. Banks are bound to comply with prudential rules aimed at ensuring that they always maintain a minimum amount of funds not less than the minimal stock capital to ensure adequate levels of liquidity and solvability. The Bankruptcy Regime is summarized in the antiquated Code of Civil Procedure. The Ministry of Justice has begun to conduct studies to identify the most appropriate mechanisms for insolvency resolution, as well as to deepen its general legal and regulatory framework, taking as references the best international practices.

Banking insolvency is regulated by the Law on Financial Institutions No. 12/2015 of June 17, 2015. Based on this law, the BNA increases the social capital requirement for banks operating in the country to guard against possible damages to clients and the financial system. All monetary deposits up to 12.5 million Kwanzas (USD 27,000 equivalent) are also to be deposited into the BNA’s Deposit Guarantee Funds account (Presidential Decree 195/18 of 2018) so that clients (both local and foreign) are guaranteed a refund in case of bankruptcy by their respective bank. Article 69 of the law expressly states that it is the responsibility of the President of the Republic to create the fund, but it is silent on the rules governing its operation or the amounts guaranteed by the fund.

While Angola’s arbitration law (Arbitration Law No. 16/03) for insolvency adopted in 2013 introduced the concept of domestic and international arbitration, the practice of arbitration law is still not widely implemented. The law criminalizes bankruptcy under the following classification: condemnation in Angola or abroad for crimes of fraudulent bankruptcy, i.e., involvement of shareholders or managers in fraudulent activities that result in the bankruptcy, negligence bankruptcy, forgery, robbery, or involvement in other crimes of an economic nature. The Ministry of Finance, the BNA and the Capital Markets Commission (CMC) oversee credit monitoring and regulation.

Investment Incentives

The New Private Investment Law (NPIL) issued in 2018 seeks to incentivize incoming investment. Investment incentives in the NPIL include:

• Elimination of the minimum 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. There is no lower limit to invest and qualify for incentives.
• Elimination of the obligation 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. Under the new law, investors will decide on their capital structure and origin.
• Granting to foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all tax dues.

Investment incentives are now granted by AIPEX, the State’s investment agency; the president had that responsibility under the 2015 investment law. Companies need to apply for such incentives when submitting an investment application to AIPEX and the relevant ministry. The NPIL 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 3-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.

1. The State guarantees “non-public interference in the management of private companies” and “non-cancellation of licenses without administrative or judicial processes.”
2. The State provides a new and simplified procedure for the approval of investment projects, along with the adoption of measures aimed at accelerating the contractual process. It also provides special rights projects (undefined), including easier access to visas for investors and priority in the repatriation of dividends, and capital.

Note: Angola is a signatory to the Agreement on Trade-Related Investment Measures (TRIMs) applicable to foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

Angola is a signatory to SADC but not a member of the SADC Free Trade Area. Angola is analyzing and revising its tariff schedule to accommodate beneficial adjustments in regional trade under the SADC Free Trade Area.

Under the NPIL, Angola is divided into three economic zones, zone A through C. Zone A offers a three-year tax exemption for capital tax and a reduction in the tax burden by 25-50 percent; Zone B a three to six-year tax exemption for capital tax with a reduction in the tax burden by 50-60 percent; and, for Zone C, an eight-year tax exemption for capital tax with a with a 60-70 percent reduction in the tax burden.

Porto Caio is under construction in the province of Cabinda. The port is designated as a Free Trade Zone (FTZ) and is slated to provide numerous opportunities for warehousing, distribution, storage, lay down area and development of oil and gas related activity. The Port will also serve as a new major gateway to international markets from the west coast of Angola, and the development will facilitate exports and render them more cost-effective for companies.

Although the government has not yet established regional or international free trade zones, on March 21, 2018 the government signed an agreement to join the AfCFTA. The AfCFTA, by bringing together all 54 members of the African Union will be the largest FTZ in the world since the emergence of the WTO. The agreement’s implementation could create a market of 1.2 billion consumers.

On October 12th, Law no. 35/20 – the Free Trade Zones Law (“FTZL”) – was passed. The FTZL has established benefits to be conceded to investors by the Angolan Government, aiming at attracting foreign investment in Angola thus creating economic growth. All types of investment are permitted in the Free Zones, specifically investment in agriculture, industry (that use Angolan raw materials and are focused on exports) and technology.

All types of investment are permitted in the Free Zones, specifically investment in agriculture, industry (that use Angolan raw materials and are focused on exports) and technology.

Specific aspects pertaining to the access to Free Zones (such as monetary requirements, number of jobs created investments in fixed assets) shall be determined in the investment contract.

Access to the Free Zones is permitted to companies, joint ventures, groups of companies or any other form of companies’ representation, whose scope meets the purpose of the Free Zones.

The investments made in Free Zones must consider environmental protection interests.

Activities to be developed in the Free Zones

In the Free Zones 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.

Investment Operations

Internal, external and mixed (also known as indirect) investments operations are permitted. All investment operations are subject to the private investment regulations in force in Angola.

Use of the Free Zones

The use of the Free Zones is granted for a minimum period of 25 (twenty-five) years which may be extended for equal period of time.

Benefits

According to the FTZL benefits pertaining to Industrial Tax, VAT, Custom Rights, Land, Capital and other benefits may be granted to the investors in the Free Zones. In the Free Zones, tax and customs benefits are applicable and are not limited in time.

Tax benefits may include:

• Reduction of the taxable basis;
• Accelerated depreciation and reincorporation;
• Tax credits;
• Exemption and reduction of rates and taxes;
• Contributions and importation rights;
• Deferral of tax payment;
• other exceptional measures.

In order to benefit from these measures, investors may not exercise the same economic activity in Angolan territory.

Special Regimes

Free Trade Zones permit special benefits regarding migration, labor, foreign-exchange and financial, to be specifically defined.

Facilities

The relevant authorities must create facilities for the investors to have priority access to services and simplified processes to obtain licenses and authorizations.

Local Content / Employment

In addition to the Local Content regulations currently in force in Angola, the FTZL creates an obligation for investors to give preference in employing Angolan employees. Nevertheless, investors may employ foreign qualified employees provided that the number of Angolan employees is higher.

Capital Repatriation

After the implementation of the foreign investment, and in accordance with the foreign-exchange special regime, foreign investors are granted the right to transfer to foreign territory:

1. Dividends or profits;
2. The result of the liquidation of the investment including capital gains;
3. Any amounts that are due to the investor, as established by acts and contracts;
4. Compensations attributed due to the extension of the Free Zones for national interest reasons;
5. Royalties or other incomes related to indirect investments, in connection with the transfer or concession of technology.

Performance and Data Localization Requirements

Angola widely observes a policy to restrict the number of foreign workers and the duration of their employment. The policy aims to promote local workforce recruitment and progression. Decree 6/01, of 2001 establishes that expatriate workers can only be recruited if the Labor Inspectorate gets confirmation from the employer that no Angolan personnel duly qualified to perform the job required is available in the local market. The same decree limits foreign employment to 36 months and temporary employment less than 90 days on the explicit authorization of the Labor Inspectorate. Employers must register an employment contract entered with a foreign national within 30 days at the employment center. The registration includes submission of a copy of the job description approved by the Labor Inspectorate during registration of the employment contract and the payment of a registration fee of 5 percent of the gross salary plus all the benefits.

Companies must deregister employees upon termination of the contract. Deregistration applies to all levels of personnel from administrative staff to boards of directors. Foreign employees require work permits, and no employment is authorized on tourist visas. The visa application procedure, though improved, remains complex, slow and inconsistent. Processes and requirements vary according to the labor market situation at the time of application, the type of work permit being applied for, the nationality of the applicant, the country of application, and personal circumstances of the assignee and any family dependents.

Through the NPIL Angola created the investor visa, granted by the immigration authority to foreign investors, representatives, or attorneys of an investing company, to carry out an approved investment proposal. It allows for multiple entries, and a stay of two years, renewable, for the same period. The NPIL liberalizes foreign investment, limits mandates for local hiring, and primarily calls for strict enforcement on labor sourcing in the petroleum sector. International oil companies are working with the government on a new local-content initiative that will establish more explicit sourcing requirements for the petroleum sector in staffing and material. Specific to the oil sector, because of its significance to the Angolan economy, the Petroleum Activities Law requires Sonangol and its services providers to acquire materials, equipment, machinery, and consumer goods produced in Angola.

Currently, local content regulations offer only guidelines that are loosely enforced, and companies lack clarity on how to satisfy Angolan government’s regulation. While the lack of enforcement may make it easier for foreign companies to comply with local content regulations, the lack of specificity challenges companies in 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 NPIL is strongly encouraged.

Regulations around data management including encryption are still at nascent stages. Data storage 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 10 October 2016, establishing the organizational framework of the data protection authority. The Ministry of Telecommunications and Information Technology (‘MTTI’) announced, on 9 October 2019, that the National Database Protection Agency (APD) had become operational.

Real Property

Transparency and land property rights are critical for Angolan economic development, given that two thirds of Angolans work in agriculture and are directly dependent on land property rights. However, the Land Act (Lei de Terras de Angola) has not been revised since its approval in December 2004. While the Land Act is a crucial step toward addressing issues of land tenure, 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 law included a formal mechanism for transforming traditional land property rights into legal land property rights (clean titles). During the civil war, a transparent system of land property rights did not exist, so it was crucial to re-establish one shortly after the end of hostilities in 2002.

According to the “Land Act,” 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 in Angola. The recipient of private property rights from the State can only transfer those rights with consent of the local authority and after a period of five years of effective use of the land according to the Land Act. 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 also 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 in order 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. An updated property certificate (“certidão predial”) is obtained from the relevant Real Estate Registry, 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 “certidão predial” 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 unit (UCF).

Intellectual Property Rights

Angola is a member of the World Intellectual Property Organization (WIPO) and follows international patent classifications of patents, products, and services to identify and codify requests for patents and trademark registration. Angola is also member of the Paris Convention where each contracting state must grant the same IP protection to nationals of other contracting states and provides for the right of priority in the case of patents, trademarks and designs. It also recognizes the goods and services classes from the Nice Classification and allows for multi-class filing. The Nice Classification, established by the Nice Agreement, is an international classification for the registration of trademarks.

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.

Implemented by the Presidential Decree No. 62/20 of March 4, the new official fees related to Industrial Property procedures in Angola, were published in the Official Gazette of the Angola Republic. The new fees came into force on March 20, 2020 and reflect an increase of values in all Industrial Property procedures practiced in this jurisdiction, updating rates that have remained unchanged for more than 20 years. The most significant alteration with respect to trademarks, consists of joining in a single fee, paid at the time of the registration application, the filing fees, the first and second publication fees, and the granting and registration certificate fees.

With regard to 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 treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  . The U.S. Embassy point of contact for IPR related issues is Logan Council ( CouncilLR@state.gov ). For legal counsel, refer to Angola’s Country Commercial Guide Local Professional Services List ( http://export.gov/ccg/angola090710.asp 

Capital Markets and Portfolio Investment

There is a visible effort by the government to create more attractive conditions for foreign investment as reflected in the attempt to create a more favorable social and political climate, the new legislation on private investment and in a greater liberalization of capital movements. The dangers of absorption by the local partner or the impossibility of transferring profits are thus mitigated. The BNA abolished the licensing previously required on importing capital from foreign investors allocated to the private sector and exporting 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 participate. In addition to the operations, BNA is also exempt from licensing, the export of 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.

BODIVA is Angola’s Debt and Securities Stock Exchange. The Stock Exchange (BODIVA) allows through a platform the trading of different types of financial instruments available to investors with rules (self-regulation), systems (platforms) and procedures that assure market fairness and integrity to facilitate portfolio investment. However, there is no effective regulatory system to encourage and facilitate portfolio investment which is poorly explored. At the moment, only local commercial banks have the ability to potentially list on the nascent stock exchange.

The central bank (BNA) partially observes IMF Article VIII on refraining from restrictions on payments and transfers for current international transactions. Foreign exchange crises and the loss of correspondent banking relationships since 2015 have prompted the BNA to adopt restrictive monetary policies that negatively affect Angola’s payment system, seen in the delay in foreign exchange denominated international transfers.

Credit is not allocated on market terms. Foreign investors do not normally access credit locally. For Angolan investors, credit access is very limited, and if available, comes with a collateral requirement of 125 percent, so most either self-finance, or seek financing from non-Angolan banks and investment funds such as the “Angola Invest” government-subsidized funding program for micro, small and medium private enterprises (SMEs). The fund, sourced from the Annual State Budget, ended on September 25, 2018, further reducing funding opportunities for many SMEs. Banks credit issue appetite also lies more on government than the private sector as credit to government is more profitable for these commercial banks.

Money and Banking System

Angola is over-banked. Although four banks have been closed since 2018, 26 banks still operate in Angola. The top seven banks control nearly 80% of sector deposits, but the rest of the sector includes a large number of banks with minimal scale and weak franchises. 47% of income-earners utilize banking services, with 80% being from the urban areas. Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds.

The banking sector largely depends on monetary policies established by Angola’s central bank, the Banco Nacional de Angola (BNA). Thanks to the ongoing IMF economic and financial reform agenda, the BNA is adopting international best practices and slowly becoming autonomous. On February 13, 2021 President Joao Lourenco issued an edict granting autonomy to the BNA, a decision taken after IMF recommendations. 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.

Although the RECREDIT Agency purchased non-performing loans (NPLs) of the state’s parastatal BPC bank, NPLs remain high at 32%, a decrease of 5% since 2016. Credit availability is minimal and often supports government-supported programs. The GRA obliged banks to grant credit more liberally in the economy, notably by implementing a Credit Support Program (PAC). For instance, the BNA has issued a notice obliging Angolan commercial banks to grant credit to national production in the minimum amount equivalent to 2.5% of their net assets until the end of 2020.

The country has not lost any additional correspondent banking relationships since 2015. The BNA is currently working on reforms to convince international banks to reestablish correspondent banking relationships. The majority of transactions go via third party correspondent banking services in Portugal banks, a costly option for all commercial banks. At the time of issuing this report no correspondent banking relationships were at jeopardy.

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

The Monetary Policy Committee (MPC) of the BNA met in March 2020, to consider recent changes to the main economic indicators, and taking into account the COVID-19 pandemic and its impact on the domestic economy. The MPC paid particular attention to the external accounts, and their implications for the conduct of monetary and exchange rate policies. The MPC has accordingly decided to:

• Maintain the base interest rate, BNA rate, at 15.5%;
• Maintain the interest rate on the liquidity absorption facility with an overnight maturity, at 0%;
• Reduce the interest rate on the liquidity absorption facility with a seven-day maturity, from 10% to 7%;
• Maintain reserve requirement coefficients for national and foreign currencies at 22% and 15%, respectively;
• Establish a liquidity facility with a maximum value of Kz 100 billion for the acquisition of government securities held by non-financial corporations:
• Extend to the 54 products defined in PRODESI the credit granted with recourse to the reserve requirements, and establish a minimum number of loans to be granted per bank;
• Exempt from the limits established per type of payment instrument, the import of products included in the basic food basket, and of and these continue to cripple lending appetite of commercial banks to the private sector medicines;
• Set April 1 as the start date for the use of the Bloomberg platform by the oil companies and by the National Agency of Petroleum, Gas and Biofuels, for the sale of foreign currency to commercial banks.

Foreign Exchange and Remittances

Foreign Exchange

The Angolan National Bank (Banco Nacional de Angola –BNA) published Notice no. 15/2019, of December 30, 2019, which establishes the rules and procedures applicable to foreign exchange operations conducted by non-resident entities related to: (a) foreign direct investment; (b) investment in securities (portfolio investment); (c) divestment operations; and (d) income earned by non-residents from direct investment or portfolio investment (the “Notice”). The notice also applies to all foreign exchange transactions relating to “foreign investment projects that were registered with BNA prior to its publication.” Investments made by non-resident foreign exchange entities in the oil sector are excluded from the scope of the Notice.

The notice distinguishes foreign direct investment and portfolio investment. Direct investment is investment made in the “creation of new companies or other legal entities” or through the acquisition of shareholdings in non-listed Angolan companies or, if listed in a regulated market when the investment gives the external investor a right of control equal to 10% or more. In turn, portfolio investment represents the investment in securities. In the case of the purchase of securities representing the capital of a listed company, portfolio investment will be considered only when the voting rights associated with the investment are less than 10% of the listed company’s capital stock.

Since dropping the peg on the dollar in 2018, the local currency fluctuates freely. In October 2019, the BNA fully liberalized the foreign exchange regime, abandoning the trading band that had been in place since January 2018. Its previous policy of controlled exchange rate adjustment prevented the kwanza from depreciating by more than 2.0% at currency auctions. The BNA also has allowed oil companies to directly sell foreign currency to commercial banks. The BNA said the move is expected to normalize the foreign exchange market through the reduction of its direct intervention with oil firms, increase the number of foreign currency suppliers, and revive the country’s foreign exchange market. The exchange rate is determined by the rate on the day of sale of forex to commercial banks. On June 22, 2020, the BNA adopted Bloomberg’s foreign exchange electronic trading system (FXGO) and its electronic auction system to bring greater efficiency and transparency to Angola’s forex market.

Remittance Policies

Based on the notice issued on December 23, 2019 as per above, as long as adequate supporting documentation is submitted to the commercial bank, foreign investors can freely transfer within 5 days abroad:

1. dividends, interest and other income resulting from their investments;
2. shareholder loan repayments;
3. proceeds of the sale of securities listed on the stock exchange;
4. when the participated entity is not listed on the stock exchange, the proceeds of the sale, when the purchaser is also a foreign investor and the amount to be transferred abroad by the seller is equal to the amount to be transferred from abroad by the purchaser, in foreign currency;

The transfer abroad of capital, requiring the purchase of foreign currency, when the participated entity is not listed on the stock exchange, requires prior exchange control approval when it relates to the following:

1. The sale of the whole or a part of an investment;
2. The dissolution of the participated entity;
3. Any other corporate action that would reduce the capital of the participated entity.

There may be delays greater than 60 days if the documentation submitted to the BNA is not complete such as a tax due statement from the General Tax Agency and companies’ balance sheet statements.

The BNA has facilitated remittances of international supplies by introducing payment by letters of credit. Also, the 2018 NPIL grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due. The government continues to prioritize foreign exchange for essential goods and services including the food, health, defense, and petroleum industries.

Sovereign Wealth Funds

In October 2012, former President Eduardo dos Santos established a petroleum funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA). The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles.

In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10. The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component ( http://www.fundosoberano.ao/investments/  ). Jose Filomeno dos Santos (Zenu), son of former President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but was removed by President Lourenco in 2017, and is appealing a five-year jail term pronounced in August 2020, following his trial for money laundering, embezzlement and fraud. Former Minister Carlos Alberto Lopes was named new head of the FSDEA that same year.

Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed-income instruments, global and emerging-market equities, and other alternative investments. The FSDEA is in possession of approximately USD 3.35 billion of its private equity assets previously under the control of QG and given to economic and financial hardship, the fund’s equity was reduced by USD 2 billion to finance the Program for Intervention in the Municipalities in 2019 and USD 1.5 billion for the fight against the Covid-19 pandemic in 2020. The FSDEA also announced that the government will use the remainder, USD 1.5 billion of the fund’s assets to support social programs on condition of future repayment through increased tax on the BNA’s rolling debts.

In Angola, certain SOEs exercise delegated governmental powers, especially in the mining sector where the government is the sole concessionaire. Foreign investors may sometimes find demands made by SOEs excessive, and under such conditions, SOEs have easier access to credit and government contracts. 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.

SOEs, often benefitting from a government mandate, operate mostly in the extractive; transportation; commerce; banking; and construction, building, and heavy equipment sectors. All SOEs in Angola are required to have boards of directors, and most board members are affiliated with the government. SOEs are not explicitly required to consult with government officials before making decisions. By law, SOEs must publish annual financial reports for the previous year in the national daily newspaper Jornal de Angola by April 1. Such reports are not always subject to publicly released external audits (though the audit of state oil firm Sonangol is publicly released). The standards used are often questioned. Not all SOEs fulfill their legal obligations, and few are sanctioned.

Angola’s supreme audit institution, Tribunal de Contas, is responsible for auditing SOEs. However, reports from the Tribunal de Contas are only made public after a few years. The most recently published report, for 2017, was published in 2019. Angola’s fiscal transparency would be improved by ensuring its supreme audit institution’s audits of SOEs and the government’s annual financial accounts are made public within a reasonable period. Publicly available audit reports would also improve the transparency of contracts between private companies and SOEs.

In November 2016, the Angolan Government revised Law 1/14 “Legal Regime on Issuance and Management of Direct and Indirect Debt,” which now differentiates between ‘direct’ and ‘indirect’ public debt. 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. The strategy included the prospective privatization of 195 SOE assets that are deemed not profitable to the state. The privatization will possibly include the restructuring of the national air carrier TAAG, as well as Sonangol and its subsidiaries. The latter intends to sell off its non-core businesses as part of its restructuring strategy to make the parastatal more efficient.

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.

Privatization Program

In 2020 the GRA increased the number of assets to be privatized by 2022 from 90 to 195 through the Angola Debt and Securities Exchange market (BODIVA) and under the supervision of the Institute of Management of Assets and State Holdings (IGAPE). The privatization program “PROPRIV,” implements the Government’s Interim Macroeconomic Stabilization Program (PEM), which aims to rid the government of unprofitable public institutions. The GRA plans to privatize part of state-owned Angola Telecommunications Company, companies in the oil and energy sector, as well as several textile and beverages industries. The GRA has stated that the privatization process will be open to interested foreign investors and has guaranteed a transparent bidding process. The tenders are open to local and foreign investors. In 2020 PROPRIV helped the government raise over USD 500 million through the privatization of 33 assets following public tenders.

The oil company Sonangol, the State’s largest SOE, sold 14 of the 20 companies it planned to privatize in 2019. It also sold 19 out of 26 planned to be sold in 2020. The Covid-19 pandemic has slowed privatization efforts, and the rest of the total 70 assets to be privatized will likely be sold in 2021 and 2022. The list includes divestments in the subsidiaries and assets of Sonangol Cabo Verde – Sociedade e Investimentos and Óleos de São Tomé and Príncipe, as well as stakes in Founton (Gibraltar), Sonatide Marine (Cayman Islands), Solo Properties Knightbridge (United Kingdom), Societé Ivoiriense de Raffinage (Cote d’Ivoire), Puma Energy Holdings (Singapore) and Sonandiets Services (Panama), by 2021.

Sonangol will sell its stake in WTA-Houston Express and French company WTA, as well as assets in Portuguese real estate companies Puaça, Diraniproject III and Diraniproject V, in Sonacergy – Serviços e Construções, Sonafurt International Shipping and Atlantis Viagens e Turismo. Sonangol also holds assets to be privatized in Angolan companies in the Health, Education, Transport, Telecommunications, Energy, Civil Construction, Mineral Resources and Oil and Banking sectors.

The sale of more than 60 non-core assets will make the company “financially more robust,” and allow it to focus on its core business.

The GRA created a privatization commission on February 27, 2018 and a website https://igape.minfin.gov.ao/PortalIGAPE/#!/sala-de-imprensa/noticias/5413/anuncio-de-concurso-tender-announcement   for submission of tenders. Full tender documents can be obtained by visiting the below link: http://www.ucm.minfin.gov.ao/cs/groups/public/documents/document/zmlu/mdu4/~edisp/minfin058842.zip

Alternatively, contact igape@minfin.gov.ao .

The government has few initiatives to promote responsible business conduct. On March 26, 2019, the UNDP launched the National Network of Corporate Social Responsibility, called “RARSE,” to promote the creation of 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.” 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 (2018-2022) to eradicate the worst forms of child labor (the PANETI). 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 making significant efforts to do so. Those efforts to Angola being led to Angola being upgraded to Tier 2 in 2020. A National Action Plan to Combat and Prevent Trafficking in Persons in 2019 included measures to improve the capacities of coordination agencies, investigating more potential trafficking cases, convicting more traffickers, training front-line responders, conducting some awareness-raising activities, and improving data collection on trafficking crimes through use of the Southern African Development Community (SADC) regional data collection tool.

The government continues to strengthen its bilateral efforts on anti-corruption and improved governance. On July 1, 2019, the government signed a Memorandum of Understanding (MOU) on Security and Public Order with the United States. The MOU enables the two governments to cooperate in the fields of information exchange related to the prevention, investigation, and combatting of criminal activity, including the collection and processing of evidence. The MOU encourages the exchange of information on criminal investigation techniques, the implementation of professional training programs, and exchange of delegations.

To support increasing fiscal transparency and sustainable debt management, the U.S. Government offers ongoing technical assistance to the Financial Intelligence Unit on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). The United States also provides periodic technical assistance to the Ministry of Finance and communicates with the Angolan banking sector to adopt international best practices that will help Angola prepare for the Financial Action Taskforce review starting in 2021.

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. 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.

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Angola occupies the 142nd place out of 180 in the Corruption perception index  of the organization Transparency International, in clear progress since the last report (+19 places).

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. Angola has a comprehensive anti-corruption legal framework, but implementation remains a severe challenge.

In January 2020, the government issued a general conduct guide mostly for the National Public Procurement Service, the regulatory and supervisory body of public procurement in Angola, outlining whistleblowing responsibilities for corruption and related offences in public procurement. Since coming into office on an anti-corruption platform, President Lourenco has led a concerted effort to restore investor confidence by prioritizing anti-corruption and the fight against nepotism. Following approval in October 2019, a new law on anti-money laundering, combating the Financing of Terrorism, and the proliferation of weapons of mass destruction came into force in January 2020, superseding Law No. 34/11, of 12 December 2011. The new law incorporates several IMF and the Financial Action Task Force (FATF) recommendations. Importantly, it now recognizes and politically exposed persons as any national or foreign person that holds or has held a public office in Angola, or in any other country or jurisdiction, or in any international organization, and subjects them to greater scrutiny by the financial sector. Other significant improvements in the new law include:

• The definition of “ultimate beneficial owner” was expanded to encompass, notably, all persons that hold, directly or indirectly, a controlling interest in a company, including the control of the share capital, voting rights or a significant influence in the company. There is no longer a minimum threshold to determine the existence of control.
• Identification and diligence duties are now applicable to occasional transactions executed via wire transfers in an amount of more than USD 1,000, in national or foreign currency.
• The scope of the duty to communicate suspicious transactions in cash or wire transfers has been amended and is now applicable to transactions between USD 5,000 and USD 15,000, depending on the underlying operation.
• Payment service providers that control the ordering and reception of a wire transfer must consider the information received from the sender and the beneficiary to determine whether there is a duty to report.
• The Tax Authorities now have a duty to report suspicious cross-border payments.

The president approved a set of amendments to the Public Contracts Law on November 16, 2018, which imposed further requirements for the declaration of assets and income, interests, impartiality, confidentiality, and independence in the formation and execution of public contracts. In December 2018, the Government of Angola rolled out a national anti-corruption strategy (NACS) billed under the motto, “Corruption – A fight for all and by all.” The five-year strategy, developed in concert with the UNDP, is designed to improve government transparency, accountability, and responsiveness to citizen needs. The NACS focuses on three pillars in the fight against corruption – prevention, prosecution, and institutional capacity building.

Crimes linked to corruption are enforced through the Public Probity Law of 2010. President Lourenco’s mandate for senior government officials requires all public officials to disclose their assets and income once every two years, and it prohibits public servants from receiving money or gifts from private business deals. The Attorney General’s Office has indicted two members of Parliament on corruption charges since the publication of the country’s anti-corruption strategy in 2018. The Penal Code makes it a criminal offense for private enterprises to engage in business transactions with public officials.

Angola has incorporated regional anti-corruption guidelines and into their domestic legislation, including: the SADC “Protocol Against Corruption,” the African Union’s “Convention on Preventing and Combating Corruption,” and the United Nation’s “Convention against Corruption.” Angola does not have an independent body to investigate and prosecute corruption cases, and enforcement of existing laws is generally weak or non-existent. However, the Attorney General’s office has a department focused on investigating of corruption crimes and recovering Assets. Three institutions – the Audit Court, the Inspector General of Finance, and the Office of the Attorney General – perform many of the anti-corruption duties in Angola. http://www.business-anti-corruption.com/country-profiles/sub-saharan-africa/angola/initiatives/public-anti-corruption-initiatives.aspx  

The government also passed the Law on the Repatriation of Financial Resources in June 2018, which established the terms and conditions for the repatriation of financial resources held abroad by resident individuals and legal entities with registered offices in Angola. The law exempted individuals and legal entities, who voluntarily repatriated their financial resources within a period of 180 days following the date of entry into force of the Law, by transferring the funds to an Angolan bank account, from any obligation or liability of tax, foreign exchange and criminal charge. Upon expiry of the grace period for repatriation, the law allowed for the possibility of forced repatriation by the government. The government estimates that USD 30 billion of Angolan assets are sheltered overseas though some estimates point to as much as USD 100 billion. In early 2019, the government established the National Asset Recovery Service (SNRA), an institution linked to the Attorney General’s Office (PGR), in charge of ensuring compliance with the repatriation law. Attorney General Helder Pita Groz announced in December 2020 that since the establishment of the SRNA, Angola had recovered more than USD 5 billion in assets and cash. Also, in January 2019, the National Assembly approved the new Penal Code, which includes harsher punishment for active and passive corruption. While a substantial proportion of Angolans (44%) see corruption as declining, a majority (54%) say the GRA is doing a poor job in fighting corruption. The perception persists that the GRA is using the fight against corruption as a tool to crack down on political opponents within the ruling MPLA party. More than half (55%) believe that people who report corruption to the authorities risk retaliation or other negative consequences. The national police are widely perceived as more corrupt than any other public officials with whom citizens regularly interact.

Private sector companies have individual internal controls for ethics, compliance and tracking fraudulent activities. However, they do not have a mechanism to detect and report irregularities related to dealings with public officials. It is important for U.S. companies, regardless of their size, to assess the business climate in the sector in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in Angola, should take the time to become familiar with the relevant anticorruption laws of both Angola and the United States in order to properly comply with them, and where appropriate, to seek legal counsel.

Angola is not a member state to the UN Anticorruption Convention or the OECD Convention on Combatting Bribery. On March 26, 2018 it ratified and published in the national gazette the African Union Convention on the Prevention and Fight against Corruption and now takes legislative measures against illicit enrichment (Article 8), confiscation and seizure of proceeds and means of corruption (Article 16), and international cooperation in matters of corruption and money laundering (Article 20).

Resources to Report 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: 244-222-333172

Angola maintains a politically stable environment. Politically motivated violence is not a high risk, and incidents are rare. The last significant incident of political violence happened in 2010 during an attack against the Togolese national soccer team by FLEC-PM (Front for the Liberation of the Enclave of Cabinda—Military Position) in the northern province of Cabinda. FLEC 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.

President Lourenco has pledged to govern for all Angolans and to combat two of the country’s major problems: corruption and mismanagement of public funds. President Lourenco’s government seeks reform of the state and national cohesion. Local elections – “Autarquias” –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.

Angola is also becoming more assertive and demonstrating a more steadfast commitment to peace and stability in Africa, particularly in the Great Lakes region. In 2019 and 2020 it facilitated an agreement to end mounting tensions between the Rwanda and Uganda. Angola maintains the rotating presidency of the International Conference on the Great Lakes Region (ICGLR) and has played an important convening role on the situation in the Central African Republic.

With Angola’s economy continuing to struggle, social dissatisfaction is on the rise and is triggering reactions particularly among Angolan young adults who take to the streets occasionally to protest against overall economic hardship and unrealized political pledges. Large pockets of the population live in poverty without adequate access to basic services, and the country could benefit from more inclusive development policies. According to the 2018/2019 Expenditure and Income Survey from the National Institute of Statistics, the poverty index was at 40.6%. A social protection scheme program has been launched with a pilot cash transfer project which will benefit over 1.6 million vulnerable families until 2022 around the country.

The Angolan labor force has limited technical skills, English language capabilities, and managerial ability. Many employers find it necessary to invest heavily in educating and training their Angolan staff. Angola’s labor force was estimated to be 13.1 million in 2019. The literacy rate is estimated to be 70 percent (82 percent male, 60.7 percent female). According to the National Statistics Institute, in 2019, the unemployment rate in the population aged 15 and above was around 31 percent, although more than 60 percent of all jobs are in the informal sector. Eighty-six percent of primary school age children attend school. The law mandates that children must attend school for six years beginning at age six. Twenty-nine percent of boys and seventeen percent of girls attend high school.

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. Forced labor is sometimes used in agricultural, fishing, construction, domestic services, and artisanal diamond mining sectors. Additional information is available in the 2019 Trafficking in Persons Report, (https://www.state.gov/reports/2020-trafficking-in-persons-report/angola/), 2020 Country Report on Human Rights Practices (https://www.state.gov/reports/2020-country-reports-on-human-rights-practices/angola/), and 2019 Findings on the Worst Forms of Child Labor, ().

Angola’s General Labor Law (Law No. 2/00), updated in 2015, recognizes the right of workers, except members of the armed forces and police, to form and join independent unions, to collectively bargain, and to strike, but these rights are either limited or restricted. To establish a union, a minimum of 30 percent of workers from a sector at the provincial level must participate and prior authorization by authorities with accompanying bureaucratic approvals is required. Unlike workers in the private sector, civil service employees do not have the right to collective bargaining. While the law allows unions to conduct their activities without government interference, it also places some restrictions on engaging in a strike. Strict bureaucratic procedures must be followed for a strike to be considered legal. The government can deny the right to strike or obligate workers to return to work for members of the armed forces, police, prison staff, fire fighters, other “essential services” public sector employees, and oil workers. The government may intervene in labor disputes that affect national security, particularly strikes in the oil sector. The definition of civil service workers providing “essential services” is broadly defined, encompassing the transport sector, communications, waste management and treatment, and fuel distribution.

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.

The General Labor Law also spells out procedures for hiring workers. For work contracts of indefinite duration, the law provides for a basic probationary period of up to six months, during which the worker or employer can terminate the contract without notice or justification. After the probationary period ends, dismissed workers have the right to appeal to a labor court. Many employers prefer to reach a monetary settlement with workers when a dispute arises, rather than bring cases before the labor court. The World Bank’s Doing Business 2020 report found that fired workers with one to ten years of service received on average 13.6 weeks of salary compensation. The notice period before dismissing a worker is 4.3 weeks.

The government conducts annual surveys of the oil industry to implement a requirement that oil companies hire Angolan nationals when qualified applicants are available. If no qualified nationals apply for the position, then the companies may request the government’s permission to hire expatriates. Outside of the petroleum sector, policies to encourage “Angolanization” of the labor force, i.e., the hiring of locals, discourages bringing in expatriates. However, the associated visa processes for the oil industry are currently easier and faster due to a special process the Angolan Ministry of Petroleum offers companies in that sector. Additionally, working visas for other sectors have also become easier to obtain and the GRA launched an investor’s visa in 2018.

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

Table 4: Sources of Portfolio Investment
Data not available.

Dorcas Makaya, Economic Specialist
United States Embassy, Luanda
Rua Houari Boumedienne 32 Miramar, Angola
Telephone: +244 222 641 154
Email: MakayaDC@state.gov

Policies Towards Foreign Direct Investment

Creating a conducive business environment to attract foreign direct investments is a corner stone of Cameroon’s development strategy. Governance and strategic management of the state constitutes one of the four pillars of the National Development Strategy 2030 (NDS 30), which was launched on November 16, 2020. The government of Cameroon acknowledges that the challenging nature of the domestic business climate remains a concern. To fight corruption, rebuild a weak legal system, and modernize an inefficient public service, the NDS 30 has adopted a holistic approach to governance, which includes political and institutional governance, administrative governance, economic and financial governance, regional governance, and social and cultural governance.

Cameroon has put in place an arsenal of institutions and laws to improve governance. The country has prevention programs and has reinforced the powers of the judiciary through the creation of the Special Crime Tribunal on corruption and economic crimes. This special tribunal, which began activities on December 14, 2012, is empowered to trial perpetrators of economic crimes amounting to at least $100,000. The court specifically targets custodians of public funds as well as officials who have the prerogatives to collect or spend money on behalf of the state. Since its creation, the tribunal has tried 225 cases and recovered $323 million. However, corruption and administrative mismanagement continue to hamper the business climate in Cameroon. Cameroon consistently ranks at the bottom of the World Bank’s Ease of Doing Business index and Transparency International’s Corruption Perceptions Index. In 2020, Cameroon ranked 167 of 190 on the Ease of Doing Business index and 149 of 180 on the Corruption Perceptions Index.

Despite the active presence of state-owned companies in important sectors of the economy, private entities – both domestic and foreign – can create and own businesses that engage in all forms of legal remunerative activities. They can also enter joint ventures and public-private partnerships with the government. There are no general economy-wide (statutory, de facto, or otherwise) limits on foreign ownership or control. Cameroon has no laws or regulations that prescribe outright prohibition on investment, equity caps, mandatory domestic joint venture partners, licensing restrictions, or mandatory intellectual property (IP)/technology transfer requirements. Cameroon has a screening process, which is applicable to all domestic and foreign investments.  This screening process ensures that investors have legitimate registered businesses and are able to meet criteria, such as employment creation and export quantities, to qualify for private investment incentives.

The Cameroon Investment Promotion Agency (CIPA) was created in 2010. To date, the CIPA has signed 172 investment agreements and generated the creation of over 60,000 jobs. CIPA’S mission, in collaboration with other state institutions and private bodies, is to contribute to the development and implementation of government policy in the field of investment promotion. The agency seeks also to foster an enabling environment for investments in Cameroon.

The investment incentives offered by CIPA cover existing and emerging economic sectors. The agency also serves as a one-stop-shop facilitator through the assistance it provides to foreign and domestic investors. It processes application files for approval in compliance with its investment charter and assists in the alignment of projects with the general tax code. It can support potential foreign investors for visas applications. The agency also follows up to monitor the implementation of commitments made by approved companies.

CIPA’s sector coverage

Sources: National Institute of Statistics, IMF, Internal estimates 2019-2020

The government maintains dialogue with business associations such as the Groupement Inter-Patronal du Cameroun (GICAM) and Enterprise Cameroon through the Cameroon Business Forum, which is sponsored by the World Bank.  Over the past year, GICAM has been critical of the government handling of the negative impact of COVID-19 on business.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no general economy-wide (statutory, de facto, or otherwise) limits on foreign ownership or control. Apart from national defense and security areas, there are no sector-specific restrictions, limitations, or requirements applied to foreign ownership and control. Despite an active government presence in most sectors of the economy, private entities – both domestic and foreign – can create and own businesses that engage in all forms of legal remunerative activities. They can also enter joint ventures and public-private partnerships with the government.

Cameroon has no laws or regulations that prescribe outright prohibition on investment, equity caps, mandatory domestic joint venture partners, licensing restrictions, or mandatory intellectual property/technology transfer requirements.  Cameroon has a screening process, which is applicable to all domestic and foreign investments.  This screening process ensures that investors meet the criteria, such as employment and export quantities, to qualify for private investment incentives.

Other Investment Policy Reviews

On June 22, 2020, the Minister of Economy and Regional Planning (MINEPAT) announced an economic stimulus package to counter the negative economic and social impacts of the COVID –19 pandemic. With a total expected budget of $798 million, the package planned to allocate funds to five areas, which include strengthening the health system ($97.3 million), supporting economic and financial resilience ($625 million), and maintaining strategic suppliers of essential goods ($9.1 million). In addition to these financial measures, the government introduced a set of temporary tax rebates, incentives, moratoria, and deferred payments for private companies. Cameroon has also benefitted from regional measures introduced by the regional central bank, Banque des Etats de l’Afrique Centrale (BEAC). Throughout 2020, BEAC maintained low interest rates, increased liquidity provisions, and widened the range of private financial instruments accepted as collateral for monetary policy operations.

The pandemic emerged as Cameroon prepared to close a three-year Extended Credit Facility agreement with the International Monetary Fund (IMF), which it signed in June 2017.  The program included structural reforms to accelerate and consolidate growth and control spending.  Under the terms of the agreement, the IMF has conducted five policy reviews outlined below.  Copies of the reviews can be found on the IMF website.

• First Review (January 2018)
• Second Review (July 2018)
• Third Review (December 2018)
• Fourth Review (July 24, 2019)
• Fifth Review (February 14, 2020)

The evaluation and closure of the program has been disrupted by the eruption of COVID-19. But on January 22, 2021, IMF said the economic shock associated with the COVID-19 pandemic was set to have long-lasting effects on the economic outlook for the Central African Economic and Monetary Community (CEMAC). The IMF indicated that the CEMAC economic outlook is highly uncertain and contingent on the evolution of the pandemic and its impact on oil prices. Before COVID-19, IMF expressed satisfaction with the progress of the implementation of reforms, while urging the country to implement stronger measures on budget transparency and improvement of the business climate.

Sources: Cameroon Ministry of Finance and IMF

The IMF estimates that the economic shock associated with the COVID-19 pandemic is set to have long-lasting effects on the economic outlook for Cameroon and other CEMAC members. The IMF has granted financial resources to individual countries in the region to fight the pandemic. This emergency financial support has contained the initial economic fallout. Uncertainties remain in the long-term impact, especially in the context of stagnating oil prices. The IMF outlook projects that CEMAC’s fiscal and external adjustments will be slower than previously envisaged, entailing large external financing needs (around $7.7 billion for 2021–23). The IMF concludes that the outlook is highly uncertain and contingent on the evolution of the pandemic and its impact on oil prices.

Business Facilitation

Entrepreneurs obtain a unique tax identifying number when they open a company in Cameroon. This taxpayer’s identification number, known as the single identification number, is attributed to the business owners immediately when they start the registration procedure of their business. Any entity or sole proprietor starting a business in Cameroon is attributed this single identification number by the Directorate General of Taxation. The number is attributed on a permanent basis upon effective localization of the taxpayer and only after the taxpayer has filed an application to register the business with the competent tax authority within 15 working days following the commencement of activities.

According to the World Bank, it takes 14 procedures and 82 days to establish a foreign-owned limited liability company in Douala, Cameroon’s largest city and economic capital.  This process is lengthier and more complex than regional and global averages.  For foreign investors, a declaration of foreign investment to the Ministry of Finance is mandatory 30 days prior to the beginning operations. In addition, if the company wants to engage in international trade, registration in the importers’ file is required to obtain an automated customs systems number (Système Douanier Automatisé, or “sydonia”).  This number facilitates the entry and exit of goods produced by the company.  The authentication of the parent company’s documentation abroad is required only to establish a subsidiary. Foreign-owned resident companies that wish to maintain foreign currency bank accounts must obtain prior approval.  The Minister of Finance issues such authorization, which is subject to approval from the Bank of Central African States (BEAC) as per Section 24 of the exchange control regulations.  This approval takes on average 38 days to obtain.  There is a minimum paid-in capital requirement of CFA 1,000,000 (~USD 1,800) for establishing LLCs.

In Cameroon, business registration remains manual after the failure of a registration portal launched by the Ministry of Small and Medium-Sized Enterprises that was supposed to automate the process. To register, entrepreneurs must go to one of the regional centers for the creation of enterprises, which can complete the registration procedure within one week.

Outward Investment

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

Cameroon has Bilateral Investment Treaties or Free Trade Agreements with the following countries:

• Belgium-Luxemburg: convention between the Union Belgo-Luxembourg Union for the Reciprocal Promotion and Protection of Investments (1980)
• Canada:  Investment Promotion and Protection Agreement (2014)
• China:  Bilateral Investment Treaty Agreement (1997)
• Egypt:  Memorandum of Understanding with the General Authority for Investment
• Germany:  Treaty between the Federal Republic of Germany and the Federal Republic of Cameroon concerning the encouragement of investments (1962)
• Guinea:  Mutual Discussions and Framework Agreement
• Italy:  Economic, Technical, and Financial Development Cooperation Agreement between the Government of the Republic of Italy and the Government of the Republic of Cameroon (1989)
• Mali:  Cultural Agreement and Commercial Agreement (1964)
• Mauritania:  Framework Agreement for General Bilateral Cooperation following recognition After Independence
• Mauritius: Framework Agreement for General Bilateral Cooperation following recognition after independence
• Morocco:  Economic and Technical Cooperation Agreement (1974)
• Netherlands:  Agreement (1967)
• Romania:  Agreement between the Government of the Socialist Republic of Romania and the Government of the Republic of Cameroon on the mutual promotion and protection of investments (1980)
• Switzerland:  Cameroon-Switzerland Bilateral Investment Treaty (1964)
• Turkey:  Cultural and Scientific Cooperation Agreement (2002), Trade, Economic and Technical Cooperation Agreement (2002), Joint Economic Commission Protocol (2003)
• United Kingdom:  Agreement between Great Britain and the Government of the Republic of Cameroon for the promotion and protection of investments (1982). UK and Cameroon signed a new Economic Partnership Agreement on March 09, 2021.
• United States of America:  Bilateral Investment Treaty (1986)
• On December 1, 2020, Cameroon became the 33rd country to ratify the African Continental Free Trade Area agreement.

Cameroon does not have a Bilateral Tax Treaty with the United States; it has tax treaties with Canada, France, Morocco, South Africa, Tunisia, United Arab Emirates, and other members of CEMAC (Gabon, Equatorial Guinea, Congo, Chad, and Central African Republic).

The latest finance law, passed in December 2020, is the main new legal instrument to have been published in the past year.  It contains new taxes and a few exonerations for specific sectors, for example, for the import of aquaculture equipment.  The main innovations are the prohibition of the payment of taxes and duties in cash, which is replaced by electronic and digital electronic payment, or payment by bank transfer. Second, the government maintains and increases advantages granted to companies located in the Northwest, Southwest, and Far North Regions. Full implementation of these measures began on February 2021. During the first quarter of 2021, the government extended tax declaration deadlines to companies to cushion the impact of COVID-19 as part of its economic relief measures.

The new 2021 finance law can be found  here .

Tax disputes tend to emerge from penalties imposed by the Taxation Directorate. In case of suspected wrongdoing, for example, late filing or payment, interest on the amount due may be imposed at 1.5 percent of the tax due per month. Regarding the monthly payments of taxes, late declarations are subject to a penalty of 10 percent per month, which shall not exceed 30 percent. Penalties are calculated as follows: 30 percent (if there is evidence of force majeure which prevented the payment in time or “good faith”), 100 percent (if there is evidence of deliberated delays not ascribed to force majeure or “bad faith”) and 150 percent (fraud). Where a taxpayer initiates the process to settle outstanding taxes, no penalties will be assessed. In case of dispute, the taxation director generally requires the payment of penalties upfront. But it takes years to recover these payments even when the company eventually wins the case.

Transparency of the Regulatory System

Cameroon laws are consistent with international business and legal norms. Cameroon legal architecture is made of national, regional (CEMAC), and supra-national regulations, most of which are applicable to domestic and foreign businesses. Weak implementation and investigating capacity, a lack of understanding of international business practices, and corruption in the judiciary limit the effectiveness of the rule of law. In many circumstances, judicial loopholes persist, leading to arbitrary interpretations of the texts.

Some government ministries, though not all, consult with public and private sector organizations through targeted outreach to stakeholders, such as business associations or other groups. There is no formal process for such consultations. Ministries do not report the results of consultations, but there is no evidence that such processes disadvantage U.S. or other foreign investors.

Cameroon’s National Assembly and Senate pass laws. The Executive proposes bills and then executes laws. Though there is technically a separation of powers, the Presidency is the supreme rule-making and regulatory authority. Decentralized institutions in the regions and municipalities have little additional regulatory authority. Draft bills and regulations are not made available for public comment. The website for the Office of the Prime Minister (www.spm.gov.cm) contains PDF versions of most new regulatory actions published in the Cameroon Tribune, the country’s newspaper of record.

Ministries and regulatory agencies do not have a list of anticipated regulatory changes or proposals intended to be adopted/implemented within a specified period. Ministries do not have a legal obligation to publish the text of proposed regulations before their enactment. There is no period set by law for the text of the proposed regulations to be publicly available. There is no specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies.

Cameroon has administrative courts that specialize in the application and enforcement of public laws. From a strictly legal perspective, the Supreme Court has oversight on enforcement mechanisms, but a lack of separation of powers prevents the judiciary from carrying out its responsibilities. There have been no new regulatory or enforcement reforms announced since the 2020 Investment Climate Statement.

Cameroon does not meet the minimum standards of fiscal transparency. This is partly because many of the state-owned enterprises do not have public accounts. But companies that are listed or aspire to be listed on the Central African Stock Exchange (CASE) have more stringent transparency requirements. There are only four publicly listed companies on the CASE. All four use the Organization for the Harmonization of Business Law in Africa (OHADA) accounting system, which does not align completely with International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP) standards. Cameroon is a member of CEMAC and is thus subject to its regulations, though implementation remains weak. CEMAC’s central bank, BEAC, controls monetary policy and is the de facto finance sector regulator, in coordination with the Ministry of Finance.

The National Institute of Statistics (INS) conducts surveys and produces statistics, which are meant to inform policy decisions. Some of these statistics are cited in government documents when ministries are drafting legislative proposals or during parliamentary debates. Quantitative analysis conducted by the INS have often been used by multilateral lenders such as the IMF, the World Bank, and the African Development Bank. However, empirical evaluation and data-driven assessments of the impact of new and existing regulations are limited. Similarly, public comments are not the main drivers of regulations. However, some consultations take place for the national budget, which is produced each year, but there is little oversight to ensure adherence to the document. The framework of the IMF’s 2017 Extended Credit Facility has induced the publication of more information on public debt by the Debt Management Office (better known by its French acronym CAA).

International Regulatory Considerations

Cameroon is a CEMAC member. CEMAC regulations supersede those of individual members, though areas such as the free movement of people, goods, and services are not respected by some states. Recent reforms by CEMAC’s central bank, BEAC, have met stiff resistance and delays in their application by individual member states, including Cameroon.

The government requires use of OHADA accounting standards, which is used by 14 African nations. No other norms or standards are referenced in the country’s regulatory system.

Cameroon joined the World Trade Organization (WTO) on December 13, 1995 and was previously a member of the General Agreement on Taxes and Tariffs. On March 11, 2019, Cameroon was suspended from the WTO for failure to meet its designated 180 million CFA (USD 308,000) contribution to the organization. The government of Cameroon is expected to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

The Cameroonian legal system is a legacy of French, German (Codified Laws), English (Common law), and domestic national customs, which varies for each ethnic group. The government wants to harmonize these different legal traditions to equip Cameroon with laws that are applicable across the country and to reduce the need to navigate different legal opinions. This project, however, is being met with stiff resistance from English-speaking lawyers, who believe that the initiative will undermine the English system to which they are accustomed.

In terms of standards, Cameroon’s commercial legal system follows the OHADA rules, which are supposed to be aligned with International Financial Reporting Standards (IFRS).  Enforcement is weak partly because of lack of capacity. Cameroon does not train enough specialized judges in the commercial and economic fields. Consequently, poor enforcement of laws and accounting standards tends to create confusion for foreign investors. Despite efforts to align OHADA standards to international norms, government accounting regulations remain obsolete in the context of rapid developments in international finance and capital markets.  To circumvent the problem, U.S. enterprises and investors often maintain two sets of accounting records, one in accordance with U.S. Generally Accepted Accounting Principles (GAAP) or suitable international standards, and another set to address the OHADA standards and government reporting requirements.

The judicial system is not independent of the executive branch.  The executive regularly interferes in judiciary matters.  The current judicial process is not procedurally competent, fair, or reliable. Endemic corruption, lack of funding, and political considerations makes the courts unable to function as independent arbiters of disputes.

Arbitration is becoming the solution of choice to solve business disputes in Cameroon.  Arbitration is in the OHADA corporate law. Since OHADA is a supra-national law, Cameroon is bound by its decisions. In OHADA, regulations and enforcement actions are appealable, and they can also be adjudicated in the national court system. Due to the court’s lack of objectivity, few businesses attempt to appeal unfavorable rulings.

Laws and Regulations on Foreign Direct Investment

Foreign direct investments are governed by Law No. 2013/004 of 18 April 2013, which defines incentives for private investment in Cameroon, while proposing generic and special incentives and affirming the government’s responsibilities towards private investors.  The law remains valid for domestic and foreign investors.  Additional laws and regulations that refer to specific economic sectors are available on the website of the Ministry of Finance (http://www.minfi.gov.cm/index.php/en/documents ).

The 2021 finance law is the main new legal instrument to have been published in the past year.  The new finance law has created new taxes, while maintaining some existing exonerations, notably on value-added taxes and life insurance savings. Full implementation started on February 2021. The Cameroon Investment Promotion Agency maintains a list of relevant laws, rules, procedures, and reporting requirements for investors ( https://investincameroon.net/en/ ).

Competition and Antitrust Laws

The National Competition Commission handles anti-competition and anti-trust disputes.  In some cases, the regulator of a specific economic sector can play the anti-trust role. State-owned companies tend to have quasi-monopoly or monopsony status in their markets.

Expropriation and Compensation

Decree N°.85-9 of 4 July 1985 and the subsequent implementation of Decree N°.87-1872 of 16 December 1987 outline the procedure governing expropriation for public purposes and conditions for compensation. Some of the provisions of these legal texts were repealed by Instruction n°005/I/Y.25/MINDAF/D220 of 29 December 2005. Essentially, for the public interest the state may expropriate privately-owned land. The laws also explain the formalities to be observed within the context of the procedure, both at the central and local levels.

In recent years, the government of Cameroon has expropriated in the context of the construction of large infrastructure projects, such as roads and hydroelectric dams. The government has a compensation process in place to meet the losses of those affected by such decisions.

Despite weakness in the actual implementation and execution of laws on the ground, compensation after expropriation generally follows a due process. There are no cases of indirect expropriation, confiscatory tax regimes, or regulatory actions that deprive investors of substantial economic benefits from their investments. However, serious allegations of corruption have plagued compensation procedures over the last decade. These incidents, often carried out by civil servants, have undermined trust in the process.

Dispute Settlement

ICSID Convention and New York Convention  

Cameroon ratified the “International Centre for Settlement of Investment Disputes” (ICSID) Convention on January 3, 1967 and the New York Convention on February 19, 1988. There is no specific domestic legislation providing for enforcement under the 1958 New York Convention and for the enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement  

The OHADA-signatory nations adopted a uniform act on arbitration (the Uniform Act) on March 11, 1999. The Uniform Act sets out the basic rules applicable to any arbitration, where the seat of arbitration is in an OHADA member state.  The Uniform Act is based on the United Nations Commission on International Trade Law (UNCITRAL) model law.  It supersedes the national laws on arbitration of the OHADA states. Cameroon’s arbitration law is contained in its code of civil and commercial procedure in the third volume, Articles 576 to 601.

Cameroon has a Bilateral Investment Treaty (BIT) with the United States. There have been no claims against the BIT since it came into force in 1989. While there have been disputes between Cameroonian partners and U.S. companies, few have risen to the level of requiring arbitration. Misunderstandings between partners have led to conflicts, but such cases have been infrequent over the past 10 years.

Local courts may recognize foreign arbitral awards issued against the government, but they are not well-equipped to enforce such decisions. Post is aware of several such awards against state-owned companies that have not been enforced. In general, foreign investors complain more about administrative harassment or bottlenecks, and less about extrajudicial actions.

International Commercial Arbitration and Foreign Courts  

The OHADA system serves both as domestic and primary reference legislation for alternative dispute resolution but is rarely used. GICAM, the country’s largest business lobby group, has an arbitration center based in Douala. In principle, local courts have the power to recognize and enforce foreign arbitral awards issued against the government if found at fault. As a treaty, OHADA standards prevail over domestic laws.  An international arbitration award can prevail especially if operating through the OHADA framework. The Common Court of Justice and Arbitration (CCJA) enforced under OHADA are both an arbitration institution and a judicial court, with jurisdiction overall OHADA states.

Judicial processes are bureaucratic, expensive, time-intensive, and lengthy. This is true even for domestic and state-owned companies, which like their foreign competitors, also suffer from the weaknesses of the legal system and are not guaranteed any better treatment in case of dispute.

In a prominent November 2019 case, the general manager of a state-owned hydrocarbon distribution company complained that debts owed by the state-owned electricity company, in combination with frequent power cuts, had caused millions of dollars in financial losses. Instead of addressing the issue or seeking arbitration, the company fired the manager.

Bankruptcy Regulations

Cameroon has bankruptcy laws, which recognize the right of creditors, the equity of shareholders and other types of liabilities. Bankruptcy is not criminalized unless it can be proven that it is a deliberate collusion to avoid tax or mislead investors. In 2020, Cameroon ranked 167th out of 190 economies in the World Bank’s ranking of the ease of doing business and 129th on its ability to resolve insolvency. In bankruptcy situations, it takes 2.8 years on average and costs 33.5 percent of the debtor’s estate, with the most likely outcome being that the company will be sold piecemeal. The average recovery rate is 15.8 cents on the dollar.

Investment Incentives

Cameroon’s investment incentives remain in place. The 2013 investment law lists several types of investment incentives for investors and specifies the conditions that they must meet in order to benefit from those incentives. This law specifies incentives available to Cameroonian or foreign legal entities, whether established in Cameroon, conducting business therein, or holding shares in Cameroonian companies, with a view to encouraging private investment and boosting national production. For example, during the establishment phase (which cannot exceed five years), the new code provides for exemptions from VAT and duties on key services/assets (including an exemption from stamp duty on the lease of immovable property). During the operation phase (which cannot exceed 10 years), further exemptions from, or reductions of, other taxes (including corporate tax), duties (such as stamp duty on loans), and other fees are granted. Overall, the law seeks to facilitate, promote, and attract productive investment to develop activities geared towards strong, sustainable, and shared economic growth as well as job creation. In a context where businesses must navigate between national and regional incentives, U.S. companies and investors must seek local and regional expertise if they plan to operate in the CEMAC region.

Common incentives are granted to investors during the establishment and operation phases.  During the operation phase, which may not exceed 10 years, the investor may enjoy exemptions from or reductions of payment of several taxes, duties, and other fees including corporate tax, tax on profit and stamp duty on loans. In addition, any investor may benefit from a tax credit provided he or she meets one of the following criteria: (1) employs at least five graduates each year, (2) combats pollution, and (3) develops public interest activities in rural areas.

The investor shall enjoy the following benefits during establishment phase, which may not exceed five years, with effect from the date of issuance of the approval:

• Exemption from stamp duty on establishment or capital increase;
• Exemption from stamp duty if immovable property used exclusively for professional purposes and that is part of an integral part of the investment program;
• Exemption from transfer taxes on the acquisition of immovable property, land, and buildings essential for the implementation of the investment program;
• Exemption from stamp duty on contracts for the supply of equipment and construction of buildings and installations that are essential for the implementation of their investment program;
• Full deduction of technical assistance fees in proportion to the amount of the investment made, calculated on the basis of the total amount of the investment;
• Exemption from VAT on the provision of services related to the execution of the project and obtained from abroad;
• Exemption from stamp duty on concession contracts;
• Exemption from business license tax;
• Exemption from taxes and duties on all equipment and materials related to the investment program;
• Exemption from VAT on the importation of equipment and materials;
• Immediate removal of equipment and material related investment program during clearance operations;
• The right to open in Cameroon and abroad local and foreign currency accounts and to carry out transactions on such accounts;
• The right to freely use and or keep abroad funds acquired or borrowed abroad, and to freely use the funds;
• The right to freely keep abroad dividends and proceeds of any kind from capital invested, as well as proceeds from the liquidation or sale of their assets;
• The right to directly pay abroad non-resident suppliers of goods and services essential for conduct of business; and,
• Free transfer of dividends and proceeds from the sale of shares in case of disinvestment.

With respect to foreign staff employed by the investor and resident in the Republic of Cameroon, they shall enjoy free conversion and free transfer to their country of origin of all or part of amounts due them, subject to prior payment of various taxes and social security contributions to which they are liable in compliance with the regulations in force. Finally, the government shall institute facilities necessary for the establishment of a specific visa and a reception counter at all airports throughout the national territory for investors, subject to their presentation of a formal invitation from the body in charge of investment promotion of small and medium-sized enterprises. There are additional incentives in priority economic sectors. In addition to the above-mentioned incentives, specific incentives may be provided to enterprises, which carry out investments that contribute to the attainment of the following priority objectives:

• Development of agriculture, fisheries, livestock, and plant, animal or fishery product packaging activities;
• Development of tourism and leisure facilities, social economy, and handicrafts;
• Development of housing, including social housing;
• Promotion of agroindustry, manufacturing industries, industry, construction materials, iron and steel industry, construction, maritime and navigation activities;
• Development of energy and water supply; encouragement of regional development and decentralization;
• The fight against pollution and environmental protection;
• Promotion and transfer of innovative technologies and research and development;
• Promotion of exports; and,
• Promotion of employment and vocational training.

Foreign Trade Zones/Free Ports/Trade Facilitation

In Cameroon, Foreign Trade Zones (FTZ) are demarcated and fenced geographic areas, with controlled access, where some standard trade barriers, tariffs, quotas, or other bureaucratic requirements are lifted or lowered to attract investments. Cameroon passed a special law instituting FTZs in 1990. Applications for an authorization to establish an industrial free zone are submitted to the National Office for Industrial Free Zones.  The authorization to establish an Industrial Free Zone is granted by the Minister in Charge of Industrial Development.  Some of the benefits of the FTZ are built into commercial, fiscal, custom, and labor codes.  The status of FTZs has not changed since the last reporting period.

Performance and Data Localization Requirements

The government of Cameroon does not mandate local employment except as an incentive to entice foreign investment. It encourages investors to create jobs and employ local labor. There are no compulsory or legal requirements on senior management and boards of directors either, although local managers can facilitate the understanding of the domestic business environment. Prospective investors and their employees can travel to Cameroon on standard intentional visas. The fees may vary per country of application. Once they settle in Cameroon, they can apply for long-term residence permits. The government of Cameroon applies the visa reciprocity rules to a limited extent, but companies have in the past complained about the difficulty of obtaining work permits or the fact that work visas expire after six months and frequently are single entry. Longer term work permits are now said to be available, but they have not been issued to Post’s interlocutors unless included as residency work permits, a different category with more complicated application procedures. The government does not impose rules on the recruitment of senior management nor excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees.

The government does not impose conditions on permission to invest in Cameroon. It gives incentives to investors to transform local raw materials, goods, and services in their production or their projects. There is no “forced localization” policy. Enforcement procedures for performance requirements are not yet standardized, but the government generally develops terms of reference on a case-by-case basis for contract performance. The government has not stated intentions to maintain, increase, or decrease performance requirements.

Investment incentives, described above, are available to both domestic and foreign investors.  Foreign information technology providers are not required to turn over source code and/or provide access to encryption, but they can be required to provide them in cases of cybercrime under the national cybercrime law. Post is unaware of any measures designed to prevent or impede companies from freely transmitting customer or other business-related data outside of Cameroon.

Property rights are recognized by law, but Cameroon’s weak judiciary makes enforcement sporadic. For mortgage transactions between two private parties, a proper contract is required for the agreement to be binding and enforceable in the courts. Liens must be recorded in the contract. A registry of land title exists in Cameroon. The land rights of indigenous peoples, tribes, and farmers are recognized in the Constitution. Existing legislation does not discriminate against foreign landowners.

Records from the Ministry of State Property and Land Tenure (French acronym “MINDAF”) indicate that land registration rates have not significantly increased since colonial times.  Between 1884 and 2005, only 125,000 title deeds were issued.  On average, this represents approximately 1,000 titles per year, covering less than two percent of the land in Cameroon. In 2009, a study by the African Development Bank (AfDB) identified other distinctive patterns in land ownership. For example, formal land registration is more common in urban (60 percent) than in rural areas. According to the World Bank, the registration process can cost up to 13.7 percent of the property value.

Land disputes are common among Cameroonian citizens. The disputes are generally caused by non-respect of commercial sales contracts or by informal sales of land. Illegal occupations of lands are also common. Globally, Cameroon ranks 175th out of 190 economies on the ease of registering property in the World Bank’s Doing Business Report 2020.

Intellectual Property Rights

The legal structure for intellectual property rights (IPR) and corresponding enforcement mechanisms are weak.  IP infringement and theft are especially common in the media, pharmaceuticals, software, and print industries. To secure a trademark registration right, a Cameroonian attorney must prepare and file a trademark application with the African Organization for Intellectual Property Rights (OAPI). The courts are responsible for enforcement.

There were no new IPR-related laws or regulations enacted during the previous year. The government seizes and publicly burns counterfeit goods. These actions are not documented systematically, and no cumulative data exists on the seizures. Cameroon is not listed in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List. For additional information about national laws and points of contact at local IP offices, see WIPO’s country profiles at  http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The Cameroonian government is open to portfolio investment. With the encouragement of IMF and BEAC, Cameroon and other members of the CEMAC region have designed policies that facilitate the free flow of financial resources into the product and factor markets.

The Financial Markets Commission (CMF) of Cameroon physically merged with the Libreville-based Central African Financial Market Supervisory Board (CONSUMAF) in February 2019.  The merger has led to the establishment of a unique regional stock exchange called the Central African Stock Exchange (CASE). Cameroon’s financial sector is underdeveloped, and government policies have limited bearing on the free flow of financial resources into the product and factor markets. Foreign investors can get credit on the local market and the private sector has access to a variety of credit instruments. In 2016, Cameroon sought to encourage the development of capital markets through Law No 2016/010 of 12 July 2016, governing undertakings for collective investment in transferable securities in Cameroon.

Cameroon is connected to the international banking payment system. The country is a CEMAC member, which maintains a central bank, BEAC.  The current governor of BEAC is Abbas Mahamat Tolli (from Chad). CEMAC’s central bank works with the IMF on monetary policies and public finance reform.  BEAC respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Despite generally respecting Article VIII, BEAC has instituted several restrictions on payments to boost foreign exchange reserves. Throughout much of 2019-2020, financial institutions and importers complained of a backlog of requests for foreign exchange. BEAC is currently negotiating with several international oil companies on repatriation of revenues before external payments. While the situation has improved over the last six months, investors should be aware that timely repatriation of profits may be a stumbling block.

In 2020, with the support of the IMF, BEAC took steps to address the economic impact of COVID-19 in the region. The central bank eased monetary policy and introduced accommodative measures to ensure adequate liquidity in the banking system to supporting internal and external stability. Concomitantly, the regional banking sector controller (Commission Bancaire de l’Afrique Centrale or COBAC) eased prudential regulations to help banks delay pandemic-related losses.

Money and Banking System

Less than 15 percent of Cameroonians have access to formal banking services. The Cameroonian government has often spoken of increasing access, but no coherent policy or action has been taken to alleviate the problem. Mobile money, introduced by local and international telecom providers, is the closest tool to banking services that most Cameroonians can access.

The banking sector is generally healthy.  Large, international commercial banks do most of the lending.  One local bank, Afriland, operates in multiple other countries. Most smaller banks deal in small loans of short duration. Retail banking is not common. According to the World Bank, non-performing loans were 10.31 percent of total bank loans in 2016. The Cameroonian government does not keep statistics on non-performing assets. Cameroon’s largest banks are:

1.  Afriland First Bank ($3 billion)
2.  Société Générale Cameroon ($2.5 billion)
3.  Banque Internationale Du Cameroun Pour L’Epargne Et Le Crédit-BICEC ($2.1 billion)
4.  EcoBank ($1.4 billion)
5.  BGFI Bank Cameroon ($918 million)
6.  Union Bank of Africa Cameroon ($ 811 million)

(Source: Jeune Afrique, October 2020)

Foreign banks can establish operations in Cameroon.  Most notably, Citibank and Standard Chartered Bank have operated in Cameroon for more than 20 years. They are subject to the same regulations as locally developed banks. Post is unaware of any lost correspondent banking relationships within the past three years. There are no restrictions on foreigners establishing bank accounts, credit instruments, business financing, or other such transactions.

The country has 412 registered microfinance institutions, 19 insurance companies, 4 electronic money institutions, and one Post Office bank. Two major money transfer operators are also present, essentially offering over-the-counter services. The Cameroon market is at the startup stage for its digital financial system. This emerging market segment is currently provided by banks in partnership with telecom operators. According to the World Bank (June 2020), in Cameroon, mobile money accounts are held by 15.1 percent of the adult population, which falls right after Gabon (43.6 percent). The specific market for e-payments is also less developed when compared to peer countries in the region such as Côte d’Ivoire (38.9 percent) and Senegal (31.8 percent).

Financial inclusion is low despite some progress brought about by mobile telephony. There were 21 million mobile telephony subscriptions at the end of 2019 in Cameroon (Agence de Regulation des Telecommunications – ART, 2018). Putting aside the multi-SIM effect, the penetration rate in terms of unique subscribers was about 50 percent at the end of 2019, which puts Cameroon in the lower end in the Central African region.

Foreign Exchange and Remittances

Foreign Exchange

In May 2020, the BEAC reported that foreign reserves had increased by 30 percent compared to 2019. According to the central bank, this is the result of the tightening of regulations after foreign exchange reserves plummeted in the aftermath of the 2014 oil shock. At the time, the IMF estimated that the volume of foreign exchange assets illegally held outside the CEMAC zone by local firms and institutions was five trillion CFA ($8.3 billion).

On March 1, 2019, CEMAC members states through BEAC adopted a new foreign exchange currency regulation, which restricts payments in foreign currency by individuals and businesses. All sectors of the economy without exception will be subject to the new regulations. Given the importance of the oil sector in the economy of the region and the challenges in the implementation, BEAC allowed for an implementation period until December 31, 2020. In November 2020, this moratorium on implementing the foreign exchange regulations was extended until December 31, 2021. In addition, the bank has tightened administrative procedures. Each request for a foreign exchange transaction requires a “dossier” that would include various documents. The documents required vary based on the type of transaction to demonstrate the “legitimacy” of the planned purchase in foreign exchange that BEAC would approve. The formal list of required documents from BEAC includes a significant number of required supporting documents.

The IMF has stated that forex transactions of less than one million U.S. dollars only require approval by local BEAC representatives in each country and should take place in a matter of days. Forex transactions exceeding one million U.S. dollars require approval from BEAC headquarters in Yaoundé and should occur in less than 48 hours. Banks and other financial institutions complain that requests are often rejected on minor technical grounds. In practice, approved requests often take more than two weeks to process.

As of May 2020, BEAC is requiring international oil companies to repatriate 70 percent of proceeds from the sale of oil and gas and then apply to receive dollars or euros. Several Ministers of Finance and/or Energy in CEMAC countries have assured oil companies that they do not need to comply with the regulation, creating uncertainty for the operators.  In theory, funds associated with any form of investment can be freely converted into any world currency, but the current BEAC restrictions are causing currency conversion concerns at financial institutions and oil companies.

The Central African CFA Franc is the currency of six independent states in Central Africa: Cameroon, Central African Republic, Chad, Republic of the Congo, Equatorial Guinea, and Gabon. It is administered by BEAC and is currently pegged at roughly 657.02 CFA to one Euro (April 08, 2021).

Remittance Policies and Sovereign Wealth Funds

According to the United Nations High Commissioner for Refugees, officially recorded inbounded remittances to Cameroon are estimated at $242 million and outbound remittances at $2.55 billion in 2017. Therefore, Cameroon is a net sender of remittances. Also according to UNHCR, ninety percent of the outbound remittances from Cameroon are sent to Nigeria.

Apart from the tightening of foreign exchange and remittance rules in 2019, Post is unaware of any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances. There are no time limitations on transactions beyond the classic banking transactions timeline. BEAC regulates remittance policies and banking transactions. Foreign investors can remit through convertible and negotiable instruments through legal channels recognized by BEAC, subject to the recent issues mentioned above. Cameroon does not have a sovereign wealth fund.

Cameroon has at least 200 SOEs. Roughly 70 percent of SOEs are profit-oriented, though most are a net negative on government finances. Some provide public services. Many SOEs are so dominant in their markets that they act as de facto regulators, specifically in telecommunications and media. The Government of Cameroon has over 130 state-owned companies in which it has majority ownership, and which operate in key sectors of the economy including agribusiness, energy, and mining. SOEs are also present in real estate, transportation, services, information and communication technology, finance, and travel.

In 2017, the National Assembly voted into law a new regulation to govern SOEs. The stated objective is to improve the services offered and the competitiveness of public companies, in line with the country’s development objectives. Some of the innovations of this law include the diversification of the investment universe of SOEs, modern control through reporting requirements, and compliance with modern governance principles. As of 2021, it does not appear that any of these objectives have been completed.  SOEs competing in the domestic market receive non-market-based advantages from the Cameroonian government. They receive taxpayer subsidies, and in many markets, serve as de facto regulators. They also have a history of accumulating unpaid tax arrears while at the same time benefitting from preferential access to land and to public funds through state interventions.

The Supreme Audit Chamber of Cameroon indicates in its yearly reports that SOEs are not financially transparent. Only about 22 percent of these companies publish financial accounts. Other reports have highlighted corruption cases involving managers of SOEs, inefficiencies, severe dysfunctions, and opacity in the management of SOEs. These problems are exacerbated by the government’s failure to impose any performance targets, productivity requirements, and quality of service standards nor any significant budget constraints on SOEs. The governing boards and senior executive teams are political appointees and connected individuals.  The SOEs have means to avoid tax burdens levied on private enterprises, receive specialized consideration for subsidies and enhanced operating budgets, and obtain generally preferential treatment from the government (including courts).

Privatization Program

In general, privatization appears to be on hold. The government favors Public-Private Partnerships or some variations of outsourcing of contractual management, with the state retaining some ownership of assets or of the business, rather than outright privatization. In some cases, the state also prefers to participate in ventures, such as mining companies, rather than creating a state-owned company. Yet, in at least one case, the government has appeared to be reversing privatization.  This is the case for the country’s utility sectors, such as water and electricity, where the government has outsourced distribution to private operators. The state retains control of infrastructure, and there are no indications that this situation will change soon. There has been call for the government to list part of its stakes in state-owned companies on the Central African Stock Exchange (CASE).

Foreign investors can and do participate in the privatization programs. According to some analysts, of the 30 state-owned companies that were privatized before 2004, foreign bidders won the majority (22). For example, a British private equity firm owns the controlling share in ENEO, the country’s electricity monopoly. The public bidding on tender offers is transparent. They are advertised in the media, but the actual process of awarding contracts may still be tainted by corruption, particularly on large projects. The listing of public tenders in the Cameroon Tribune newspaper – the government-owned paper of record –and publication of which firms received the contract do not guarantee a fully transparent process of awards.

Post is unaware of a formal definition of responsible business conduct (RBC) within the Cameroonian government. It does not have a national ombudsman for stakeholders to get information or raise concerns about RBC.  The government has not conducted a national action plan on RBC nor does it factor RBC into its procurement decisions. Post is not aware of any recent high-profile instances of private sector impact on human rights. Cameroon does not have laws that regulate responsible business conduct. However, the government of Cameroon has enacted laws that cover issues related to what is locally considered corporate social responsibility. There are additional initiatives in the private sector to foster a corporate social responsibility culture.

All major infrastructure projects in Cameroon are compelled to conduct an Environmental and Social Impact Assessment (ESIA) to establish the impact of the projects on people and nature. Cameroon’s ESIA law strives to follow World Bank standards. An August 1996 master law related to environmental management prescribes environmental impact assessment for all projects that can cause environmental degradation. The ESIA is fast becoming an important and unavoidable compliance step for foreign and domestic companies.

The Cameroonian government struggles to enforce laws in relation to human rights, labor rights, consumer protection, and environmental protection. This situation has been exacerbated by the conflicts in the Northwest, Southwest, and Far North Regions. There is little corporate governance law in Cameroon, mostly since very few companies are open to portfolio investment. The Business Council for Good Governance, the American Chamber of Commerce, Rotary International, and Transparency International promote RBC in Cameroon, though their ability to monitor RBC is limited. Post is unaware of any government efforts to adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. Cameroon participates in the Extractive Industries Transparency Initiative. Domestic transparency measures requiring the disclosure of payments made to governments are lacking.

The economy of Cameroon is modernizing, but most sectors experience disruptions from informal activities. Even though this sector provides crucial livelihoods to the most vulnerable in urban environments, labor conditions are generally precarious. In the agricultural sector for example, the government estimates that 70 percent of labor is informal with instances of child labor especially in subsistence agriculture. In other sectors, for example mining, allegations of human or labor rights abuses by Chinese mining companies have surfaced in the recent past.

(Source: Cameroon Ministry of Finance, Finance laws 2016-2020)

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Resources to Report Corruption

Corruption is punishable under sections 134 and 134 (a) of the Pena1 Code of Cameroon. Despite these rules, corruption remains endemic in the country. In 2020, Cameroon ranked 149 of 180 in Transparency International’s Corruption Perception Index. Anti-corruption laws are applicable to all citizens and institutions throughout the national territory. Article 66 of the constitution requires civil servants and elected officials to declare their assets and property at the beginning and at the end of their tenure of office, but it has never been implemented. Similarly, the Civil Service Statute contains provisions and the procedures to be followed in the event of a conflict of interest. These provisions are enshrined in Law No. 003/2006 of 25 April 2006, which also created the Commission for the declaration of property and assets. Other codes of conduct in different public institutions have created gift registers to prevent bribes, but they are not implemented. In terms of public contracts, Decree N° 2018/0001/PM of January 5, 2018 created a portal called Cameroon Online E-procurement System (Coleps) for the digitalization, including application processing, award, and monitoring and evaluation of all tenders. Since the launch of the portal, technical issues and disregard by civil servants have curbed its effectiveness, leading to the parallel continuation of the bribe-prone paper-based procurement system. U.S. firms indicate that corruption is most pervasive in government procurement, award of licenses or concessions, transfers, performance requirements, dispute settlement, regulatory system, customs, and taxation.

Since its inception in 2006 (Presidential Decree No. 2006/088 of 11 March 2006), the National Anti-Corruption Commission (CONAC) has encouraged private companies to establish internal codes of conduct and ethics committees to review practices. Post is unaware of how many companies have instituted either program. Bribery of government officials remains common. While some companies use internal controls to detect and prevent such bribery, Post is unaware of how widespread these internal controls are.

Cameroon is signatory to the United Nations and the African Union anti-corruption initiatives, but the international initiatives have practical limited effects on the enforcement of laws in the country. Post is unaware of any NGO’s involvement in investigating corruption. The government prefers the National Anti-Corruption Commission (CONAC) to investigate potential cases.  U.S. firms indicate that corruption is most pervasive in government procurement, award of licenses or concessions, transfers, performance requirements, dispute settlement, regulatory system, customs, and taxation.

Resources to Report Corruption

Rev. Dieudonné MASSI GAMS
Chairman
National Anti-Corruption Commission
B.P. 33200 Yaoundé Cameroon
(+237) 22 20 37 32
www.conac-cameroun.net   infos@conac-cameroun.net 

Barrister Charles NGUINI
Country Representative
Transparency International Cameroon
Nouvelle route Bastos, rue 1.839,  BP : 4562 Yaoundé
(+237) 33 15 63 78
transparency@ti-cameroon.org 

Cameroon faces several security challenges. A conflict between security forces and armed separatists is entering its fifth year in the English-speaking Southwest and Northwest Regions.  Boko Haram and ISIS-West Africa continue to attack civilians and security forces in the Far North Region. In the Adamoua and East Regions, a wave of kidnappings and the presence of refugees from the Central African Republic and from Nigeria, has led to increased military presence. Terrorists and separatists alike have targeted economic assets to affect political change. The country is growing increasingly more politicized and insecure.

In the Anglophone regions, separatist leaders have claimed responsibility on social media for the arsons that destroyed hospitals, schools, bridges, and roads. Separatists have also posted videos of executions and beheadings on the internet while also claiming multiple kidnappings for ransom. Human rights organizations have accused soldiers and separatists of grave human rights abuses. In the Far North of Cameroon, Boko Haram and ISIS-West Africa fighters have looted villages and cattle, kidnapped, and abused women. Consequently, several infrastructures projects have ground to a halt.

Cameroon is growing increasingly insecure. In 2020, despite public statements by the government of a willingness to dialogue to resolve the Anglophone crisis, it continues to rely on the military to control and curb the conflict. At the same time, security forces are stretched thin, allowing Boko Haram and ISIS-West Africa to maintain a footprint in the country’s Far North Region. Political dissent is quickly stamped out. Several members of opposition political parties are still languishing in jail, in most cases without trial.

COVID-19 has had a significant impact on the labor market. Data from the National Institute of Statistics show that a large proportion of workers have seen a drastic reduction in wages (68 percent) and temporary job suspension (31.6 percent). Also, unemployment rate reached 7.47 percent in April 2020. Officially, the unemployment rate hovers around four percent based on International Labor Organization (ILO) standards but is believed to be much higher.  Most of the youth who possess skills that could be put to use in the economy are under-employed in the informal sector. Under-employment, which is generally under-reported, has continued to hover around 75 percent for youth under 30. Most Cameroonians find occupation in the informal sector, where unskilled labor is prevalent, especially in the agricultural and service sectors, manufacturing, commerce, technical trades, and mid-management jobs.

Other structural problems in the labor market include the chronic shortage of technical trade skills, for example for maintenance and repair of industrial machinery, in every sector of the economy. Truck and automotive maintenance are widely practiced in the informal sector, while rudimentary or artisanal agriculture, fishing, and textile manufacturing continue to hamper industrialization with unskilled labor.

The government of Cameroon does not require foreign companies to hire nationals. Foreign nationals are required, however, to obtain work permits prior to formal employment. While foreign nationals are automatically issued work permits for companies of the industrial free zones regime, their number may not exceed 20 percent of the total work force of a company after the fifth year of operation in Cameroon if it benefits from the Industrial Free Zone (IFZ) regime.

Although union and contract agreements vary widely from sector to sector, in general, Cameroon functions as an “employment at will” economy, and labor laws differentiate between layoffs and firing. Layoffs are not caused by the fault of the employees and are often considered as alternative solutions to dismissing workers based on performance fault or economic grounds. There is no special treatment of labor in special economic zones, foreign trade zones, or free ports.

While the Labor Code applies to enterprises of the Industrial Free Zone (IFZ) regime, some matters are governed by special provisions under the 1990 law establishing IFZs. These include the employer’s right to determine salaries according to productivity, free negotiation of work contracts, and automatic issuance of work permits for foreign workers. The Ministry of Labor monitors labor abuses, health and safety standards, and other related issues, but enforcement is poor.  Labor laws are waived within the framework of IFZs to attract or retain investment. The waivers include the employer’s right to determine salaries according to productivity, free negotiation of work contracts, and automatic issuance of work permits for foreign nationals.

There are independent labor unions and others affiliated with the government that operate under existing laws and regulations. Over 100 trade unions and 12 union confederations are active in the country. However, the labor union movement is highly fractured and somewhat ineffective in promoting workers’ rights. Some union leaders accuse the government and company managers of promoting division within trade unions to weaken them, as well as protecting non-representative trade union leaders with whom they can negotiate more easily.

Cameroon’s labor dispute resolution mechanisms are outlined in the labor code. The procedure differs depending on whether the dispute is individual or collective. Individual disputes fall under the jurisdiction of the civil court dealing with labor matters in the place of employment or residence of the worker. The legal procedure is initiated after the labor inspector fails to settle the dispute amicably out of the court system. Settlement of collective labor disputes is subject to conciliation and arbitration, and any strike or lock-out started after the procedures have been exhausted and have failed is deemed legitimate. While the conciliation procedure is conducted by the labor inspector, arbitration of any collective dispute that has not been settled by conciliation is handled by an arbitration board, chaired by the competent judicial officer of the competent court of appeal. Workers who ignore procedures to conduct a legal strike can be dismissed or fined.

Strikes occur regularly and are generally repressed by the police, though they are often due to lack of payment by the employer and are resolved quickly. The latest strike started on February 3, 2021 at the construction site of the Nachtigal hydroelectric dam, which will have a capacity of 420 megawatts. The dispute erupted after a new electronic time keeping system grossly reduced the wage of workers. On March 15, 2021, the construction company announced that the dispute had been resolved after the Minister of Labor and Social Security and the Minister of Energy and Water held talks with 1,350 workers.

Cameroonian labor code lays down principles of labor laws regarding employment, dismissal, remedies for wrongful dismissal, compensation for industrial injuries, and trade unions.  But most jobs do not have binding contracts, and employers generally seem to have the upper hand in labor disputes. There is informality even in the formal sector, which is against the law. Because of this landscape, it is important for U.S. companies to ensure compliance with the local labor laws and to abide by international best practices. There were no new labor-related laws or regulations enacted during the last year.  Post is unaware of any pending draft bills.

* Source for Host Country Data: 2021 Cameroon Finance Bill, page 13 (converted at $1=563 Central African Francs as of March 16, 2021)    

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

Table 4: Sources of Portfolio Investment
Data not available.

Mamouda Mbemap
Economic Specialist, Political and Economic Section
6050, Avenue Rosa Parks, Yaounde, Cameroon
TELEPHONE NUMBER: +237 222514000
EMAIL ADDRESS: mbemapm@state.gov

Policies Towards Foreign Direct Investment

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 DRC government (GDRC) can impose and follow through on favorable FDI policies.  Favorable FDI laws exist, but the judicial system is slow to protect investors’ rights and is susceptible to political pressure and corruption.  Investors hope Tshisekedi can create a more favorable enabling environment by business climate reform, better rule of law, and tackling corruption. The DRC’s rich endowment of natural resources, large population and generally open trading system provide significant potential opportunities for U.S. investors.

The major regulations governing FDI are found in the Investment Code Act (No. 004/2002 of 21 February 2002). Current regulations reserve the practice of small retail commerce in DRC to nationals and ban foreign majority-ownership of agricultural concerns.  The ordinance of August 8, 1990, clearly stipulates that “small business can only be carried out by Congolese.”  Foreign investors should limit themselves to import trade as well as wholesale and semi-wholesale trade. Investors have expressed concern that the ban on foreign agricultural ownership will stifle any attempts to kick-start the agrarian sector.

The National Investment Promotion Agency (ANAPI) is the official investment agency, which provides investment facilitation services for initial investments over USD 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 which speak to the government on the investment climate in specific sectors.  In 2019 President Tshisekedi created the business climate cell (CCA) to monitor the improvement of the economic environment and the business climate in the DRC, and to interface with the business community.  The CCA in June 2020 presented a roadmap for reform.  The public-private Financial and Technical Partners (PTF) mining group represents countries with significant mining investments in the DRC. The Federation of Congolese Enterprises (FEC), which is a privileged partner of the government and the workers’ unions, has a dialogue on business interests with the government.  The FEC has relayed information to the government about the effects of the COVID-19 pandemic on the private sector.  The FEC is also tracking post-Covid-19 investment sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

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.

The DRC law reserves small commerce exclusively for Congolese nationals and does not allow foreign investors to own more than 49 percent of an agribusiness.  Many investors note that in practice the GDRC requires foreign investors to hire local agents and participate in a joint venture with the government or local partners.

The GDRC promulgated a mining code in 2018 which increased royalty rates from two to ten percent, raised tax rates on “strategic” metals, and imposed a surcharge on “super profits” of mining companies.  The government unilaterally removed a stability clause contained in the previous mining code protecting investors from any new fees or taxes for ten years.  Removal of the stability clause may deter future investment in the mining sector.  The Tshisekedi government has indicated that it is willing to reopen discussions on the new mining code.

The GDRC does not maintain an organization to screen inbound investment.  The Presidency and the ministries serve this purpose de facto.

Other Investment Policy Reviews

The DRC has not undergone a World Trade Organization (WTO), Organization for Economic Cooperation and Development (OECD), or a United Nations Conference on Trade and Development (UNCTAD) Investment Policy Review in the last three years.  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.)

Business Facilitation

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.  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/.

At the one-stop-shop, companies fill in a “formulaire unique” in order to register with the: Commercial Registry (GUCE); tax administration (Direction Générale des Impots); Ministry of Labor; and National Institute for Social Security (Institut National de Sécurité Sociale (“INSS”)).  The Labor Inspection Department and the National Office of Employment (l’Office National de l’Emploi (“ONEM”)) are also to be notified of the establishment of the company.  Companies may also need to obtain an operating permit, as required from some municipal councils.  The registration process now officially takes three days, but in practice it can take much longer.  Some businesses have reported that the GUCE has considerably shortened and simplified the overall process of business registration.

Outward Investment

The GDRC does not prohibit outward investment, nor does it particularly promote or incentivize it.

There are no current government restrictions preventing domestic investors from investing abroad, and there are no currently blacklisted countries with which domestic investors are precluded from doing business.

The U.S. DRC Bilateral Investment Treaty (BIT) was signed in 1984 and entered into force in 1989.  The BIT guarantees reciprocal rights and privileges to each country’s investors and provides that, should a claim arise under the treaty, it can be submitted to a dispute resolution mechanism through international arbitration.  U.S. companies have at times reported difficulties with the tax authorities from arbitrary enforcement of the taxation code.

The DRC has bilateral investment treaties in force with France, Germany, Switzerland, and the United States.  Treaties have been signed with Belgium-Luxembourg Economic Union, China, Egypt, Greece, India, Italy, Jordan, Portugal, Republic of Korea, South Africa, and Ukraine but these have not yet entered into force.  Kenya is currently negotiating a BIT. Lebanon, Côte d’Ivoire, and Burkina Faso have negotiated, but not signed, BITs with the DRC.  In October 2016, the DRC and Rwanda signed an agreement on a simplified trade regime covering only small-scale commerce between the countries.

The AfCFTA is a continent-wide free-trade agreement brokered by the African Union (AU) that began on 1 January 2021, but hard work lies ahead.  The DRC signed the African Continental Free Trade Agreement (AfCFTA) in March 2018 and ratified it in April 2021.  The Presidency will enact the law in 2021.  The agreement aims to facilitate imports and exports among member countries – with lower or no tariffs, free access to the market and market information, and the elimination of trade barriers – and offer numerous benefits to SMEs.

On January 1, 2021, the DRC again became eligible for benefits under the African Growth and Opportunity Act (AGOA), after a 10-year exclusion due to concerns over human rights violations. AGOA provides African countries with duty-free access to the U.S. market for over 1,800 products for 20 years. Congo’s main exports of copper, and cobalt were tariff-free under the United States’ Generalized System of Preferences trade program.

There is no bilateral taxation treaty between the United States and the DRC.  In 2015, Zambia and the DRC signed a bilateral taxation treaty that abolished customs taxes across their common border.

Transparency of the Regulatory System

Passed in 2019, the Law on Pricing, Freedom and Competition (the “Competition Act”) created a new Competition Commission charged with limiting control by one party over a market.  DRC law mandates review if the turnover achieved is equal to or exceeds the amount determined by Decree of the Prime Minister upon proposal of the Minister of the Economy; if the parties hold 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. It is unclear what penalties apply if there is no pre-notification.

The DRC is a member of the regional competition bodies, COMESA and OHADA. OHADA does not have an operational merger control regime in place, while COMESA does have merger control. Merger activities in the DRC should be conducted with COMESA in mind.

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 code on local content as discriminatory against foreign investment.

The GDRC authority on business standards, the Congolese Office of Control (OCC), oversees and develops regulations relevant to foreign businesses engaged in the DRC.

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

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 provisions systematically employed by the GDRC to impede foreign investment.  Companies often complain of facing administrative hurdles as laws and regulations are often poorly or unevenly applied.

By implementing the OHADA system, the GDRC strengthened its legal framework in the areas of contract, company, and bankruptcy law and set up an accounting system better aligned to international standards.  For this purpose, a Coordination Committee was established internally in the GDRC to monitor OHADA implementation.

Tshisekedi created the Business Climate Unit (CCA) by a presidential order issued in February 2020. The mission of the CCA is to monitor the national business climate and enact regulatory reforms.  The CCA announced a roadmap for reform in June 2020, but has yet to implement the recommended reforms.

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

The roadmap details priority and urgent reforms and awaits action by the Prime Minister and the new cabinet. In the long term, the first Special Economic Zone will promote exports and create 3,500 direct jobs.

The DRC is a member of the Extractive Industries Transparency Initiative (EITI), a multi-stakeholder initiative to increase transparency in transactions between governments and companies in the extractive industries.  The DRC’s validation process for compliance with the EITI Standard commenced in November 2018.  The initial report published by the International EITI Secretariat in April 2019 stated that the DRC EITI failed to adequately address 13 of the requirements of the EITI Standard, with two of these assessed as unmet with inadequate progress.  The report also stressed the need to clarify the financial flows of state-owned enterprises (SOEs) in the DRC’s extractive sector.

In 2020, the DRC failed to meet the minimum requirements of fiscal transparency according to the State Department’s Fiscal Transparency report.  While the DRC publishes budgets that are publicly available and timely, the published budgets were not reliable indicators of actual government spending.

International Regulatory Considerations

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).

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).

Legal System and Judicial Independence

The DRC is a civil law country, and the main provisions of its private law can be traced to the Napoleonic Civil Code.  The general characteristics of the Congolese legal system are similar to those of the Belgian system.  Various local customary laws regulate both personal status laws and property rights, especially the inheritance and land tenure systems in traditional communities throughout the country.  The Congolese legal system is divided into three branches: public law, private law, and economic law.  Public law regulates legal relationships involving the state or state authority; private law regulates relationships between private persons; and economic law regulates interactions in areas such as labor, trade, mining, and investment.

The DRC has written commercial and contractual law.  In 2018, the DRC established thirteen commercial courts located in DRC’s 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.  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/index.htm.

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.

Laws and Regulations on Foreign Direct Investment

The 2002 Investment Code governs most foreign direct investment (FDI), providing for the protection of investments.  In practice, an inadequate legal system has insufficiently protected foreign investors in the event of a dispute.  Mining, hydrocarbons, finance, and other sectors have sector-specific investment laws.

ANAPI is the DRC agency with the mandate to simplify the investment process, make procedures more transparent, assist new foreign investors, and improve the image of the country as an investment destination (www.investindrc.cd).

The GDRC has a “Guichet Unique,” which is a one-stop shop to simplify business creation, cutting processing time from five months to three days, and reducing incorporation fees from $3,000 to $120. (www.guichetunique.cd ). A “one-stop-shop” also exists for import-export business, covering aspects such as the collection of taxes and transshipment operations. (https://segucerdc.cd/ ).

Competition and Antitrust Laws

There is no national agency that reviews transactions for competition or antitrust-related concerns.  As a member of COMESA, the DRC follows the COMESA Competition Regulations and rules, and the COMESA competition body regulates competition.  In May 2020, Tshisekedi instructed the cabinet to better defend the GDRC’s interests in outstanding investor disputes, including if necessary, by agreeing to a settlement.  This decision followed the announcement of two international court decisions unfavorable to the GDRC, which put the government liable for hundreds of millions of dollars.

Expropriation and Compensation

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.

Companies report that the GDRC levies heavy fines in a form of financial expropriation.  A government agency imposes fines due to a company’s failure to pay a tax, though often the tax regime is unclear and multiple government bodies impose different taxes.  Companies that appeal these fines through the courts often encounter a long wait.  There has not been an expropriation of property in the past three years, but there are a number of existing and long-standing claims made against the GDRC.

Some claims have been taken to arbitration, though many arbitral judgments against the GDRC are not paid in a timely manner, if at all.

Dispute Settlement

ICSID Convention and New York Convention

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

There is no specific domestic legislation providing for the enforcement of awards under the New York Convention.  It is important to note that the New York Convention does not apply toward disputes relating to immovable property, which includes mining rights.

Investor-State Dispute Settlement

The DRC is subject to international arbitration.  A U.S. mining company sued under the BIT to recover losses suffered when FARDC troops sacked its mine in Kasai Central Province in 1995. The arbitration courts ruled the GDRC liable for damages totaling $13 million, and the GDRC started paying back the awarded amount plus interest to the U.S. Company.

There have been charges of extrajudicial action against foreign investors, including levying fines and imprisonment.  In one case an investor left the country after being jailed on charges of corruption.

International Commercial Arbitration and Foreign Courts

The DRC adopted the OHADA Uniform Act on Arbitration (the UAA).  The UAA sets out the basic rules applicable to any arbitration where the seat of arbitration is located in an OHADA member state.  The requirements set out under Article 5 of the New York Convention for the recognition and enforcement of foreign awards applies where the seat of any arbitration is outside an OHADA member state, or where the parties choose arbitration rules outside the UAA.

OHADA‘s UAA offers an alternative dispute resolution mechanism for settling disputes between two parties where the place of arbitration is situated in a Member State.  Disputes must be submitted to the Common Court of Justice and Arbitration (CCJA) in Abidjan in accordance with the provisions of the OHADA Treaty and the OHADA Arbitration Rules.

The UAA, while not directly based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law, is similar in that it provides for the recognition and enforcement of arbitration agreements and arbitral awards and supersedes the national laws on arbitration to the extent that any conflict arises.  Arbitral awards with a connection to an OHADA member state are given final and binding status in all OHADA member states, on par with a national court judgment.  Support is provided by the CCJA which can rule on the application and interpretation of the UAA.

Arbitral awards rendered in any OHADA Member State are enforceable in in the domestic courts of any other OHADA member state, subject to obtaining an exequatur (a legal document issued by a sovereign authority allowing a right to be enforced in the authority’s domain of competence) of the competent court of the State in which the award is to be made.  Exequaturs are granted unless the award clearly affects public order in that State.  Decisions granting or refusing to grant an exequatur may be appealed to the CCJA.

In general, companies which fail to find a favorable judgment in domestic courts go to international courts for relief.  This often drags the judicial process on for years.  For domestic cases involving SOEs the courts often rule in favor of the SOEs.  One attorney estimated that  about five percent of cases have any transparency.

Bankruptcy Regulations

The OHADA Uniform Act on Insolvency Proceedings provides a comprehensive framework not only for companies encountering financial difficulties and seeking relief from the pressing demands of creditors, but also for creditors to file their claims.  The GDRC judiciary system has agreed to enforce the OHADA Insolvency Act.  Bankruptcy is not criminalized.

According to the World Bank’s Doing Business Report, there were no foreclosure, liquidation or reorganization proceedings filed in the country in 2020, making it impossible to assess the time, cost or outcome for an insolvency proceeding.  According to the World Bank, the DRC ranked 168th out of 190 countries on ease of resolving insolvency.

Investment Incentives

Investment incentives can range from tax breaks to duty exemptions, and are dependent upon the location and type of enterprise, the number of jobs created, the degree of training and promotion of local staff, and the export-producing potential of the operation.  Investors who wish to take advantage of customs and tax incentives in the 2002 Investment Code must apply to ANAPI, which submits applications to the Ministries of Finance and Planning for final approval.  The government does not have a history of providing guarantees or jointly financing FDI projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The DRC does not have any designated free trade areas or free port zones.  President Tshisekedi has signaled that he will revive stalled efforts to join the East African Community (EAC).  In March 2021, the DRC Parliament ratified  the African Continental Free Trade Area (AfCFTA).  The Treaty awaits enactment by the executive branch.

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

Performance and Data Localization Requirements

Foreign investors must negotiate many of the conditions of their investments with ANAPI.  Performance requirements agreed upon with ANAPI typically include a timeframe for the investment, use of OHADA accounting procedures and periodic authorized GDRC audits, protection of the environment, periodic progress reports to ANAPI, and the maintenance of international and local norms for the provision of goods and services.  The investor must also agree that all imported equipment and capital will remain in-country for at least five years.

The Ministry of Labor controls expatriate residence and work permits.  For U.S. companies, the BIT assures the right to hire staff of their choice to fill some management positions, but companies agree to pay a special tax on expatriate salaries.  Visa, residence, or work permit requirements are not discriminatory or excessively onerous and are not designed to prevent or discourage foreigners from investing in the DRC.

In response to private sector complaints, in June 2020 the GDRC repealed a law on subcontracting in the private sector that mandated the use of local companies and restricted using foreign entities.

The DRC does not have specific legislation on data storage or limits on the transmission of data.  The GDRC does not force IT companies to hand over encryption data.

Real Property

The DRC’s Constitution protects private property ownership without discriminating between foreign and domestic investors.  Despite this provision, the GDRC has acknowledged the absence of enforcement protecting property rights.  Congolese law related to real property rights enumerates provisions for mortgages and liens.  Real property (buildings and land) is protected and registered through the Ministry of Land’s Office of the Mortgage Registrar.  Land registration may not fully protect property owners, as records are often incomplete and legal disputes over land deals are common.  Many owners lack a clear registered title to the land.  In addition, there is no specific regulation of real property lease or acquisition.

Less than 10 percent of land have 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

Intellectual property rights (IPR) are legally protected in the DRC, but enforcement of IPR regulations is limited.  The DRC’s intellectual property laws date from the 1980s and remain in force.  However, enforcement is weak, and IPR theft is common.  The country is a signatory to a number of relevant 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).  Despite being officialy party to several international agreements that set minimum standards for IP, enforcement is lax due to low capacity, and a lack of awareness among consumers and businesses.  The government does not keep a record of IPR violations.

The DRC is not included in the U.S. Trade Representative (USTR) Special 301 Report or Notorious Markets List.

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

Capital Markets and Portfolio Investment

Portfolio investment is nonexistent in the DRC and there is no domestic stock market.  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.

Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  Further reforms are needed to strengthen the financial system, support its expansion, and spur economic growth.  Inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposit undermine the shock resilience of the financial system.

The Central Bank of Congo (BCC) refrains from payments and transfers on current international transactions.  The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  In 2019, the BCC issued its first domestic bond in 24 years, which was oversubscribed.  Most of the buyers were local Congolese banks.

It is possible for foreign firms to borrow from local banks, but their options are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates are typically around 16-21 percent.  The inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).

Money and Banking System

The Congolese financial system is improving but remains fragile.  The BCC controls monetary policy and regulates the banking system.  Banks are concentrated primarily in Kinshasa, Kongo Central, North and South Kivu, and Haut Katanga provinces. Banking rate penetration is roughly 7 percent or about 4.1 million accounts, which places the country among the most under-banked nations in the world.  Mobile banking has the potential to greatly increase banking customers as an estimated 35 million Congolese use mobile phones.

There is no debt market. The financial health of DRC banks is fragile, reflecting high operating costs and exchange rates. The situation improved in a weak economic environment in 2019 as deposits have increased, which could point to a better year in 2020 considering the asset quality measures taken by the BCC, allowing banks to absorb the economic impact of the covid-19 pandemic.  Fees charged by banks are a major source of revenue.

The financial system is mostly banking-based with aggregate asset holdings estimated at USD 5.1 billion.  Among the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total banks assets, about $3.1 billion.  There are no statistics on non-performing loans, as many banks only record the balance due instead of the total amount of their non-performing loans.

Citigroup is the only correspondent bank. All foreign banks accredited by the BCC 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 foreigners establishing an account in a DRC bank.

Foreign Exchange and Remittances

Foreign Exchange

The international transfer of funds is permitted when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.  The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a $10,000 limit on the amount an individual can carry when entering or leaving the DRC.

The GDRC requires the BCC to license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and offers exchange rates slightly more favorable than the official rate.  BCC regulations set the Congolese franc (CDF) as the main currency in all transactions within the DRC, required for the payment of fees in education, medical care, water and electricity consumption, residential rents, and national taxes.  Exceptions to this rule occur where both parties involved, and the appropriate monetary officials, agree to use another currency.  The CDF exchange rate floats freely, but the BCC carefully monitors the rate and intervenes to shore up the exchange rate.

Remittance Policies

There are no legal restrictions on converting or transferring funds.  Exchange regulations require a 60-day waiting period for in-country foreigners to remit income.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC does not have any reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund to be capitalized by a percentage of mining revenues.

There are 20 DRC state-owned enterprises (SOEs) operating in the mining, transportation, energy, telecommunications, finance, and hospitality sectors.  In the past, Congolese SOEs have stifled competition and have been unable to provide reliable electricity, transportation, and other important services over which they have monopolies.  Some SOEs and other Congolese parastatal organizations are in poor financial and operational state due to indebtedness and the mismanagement of resources and employees.  The list of SOEs can be found at: http://www.leganet.cd/Legislation/Droit%20Public/EPub/d.09.12.24.04.09.htm

There is limited reporting on the assets of SOEs and other parastatal enterprises, making valuation difficult.  DRC law does not grant SOEs an advantage over private companies in bidding for government contracts or obtaining preferential access to land and raw materials.  The government is often accused of favoring SOEs over private companies in contracting and bidding.

The DRC is not a party to the WTO’s procurement agreement (GPA), but nominally adheres to the OECD guidelines on Corporate Governance for SOEs. The DRC is a Participating Country in the Southern Africa SOE network, with the Ministry of Portfolio and the Steering Committee for SOE reforms designated as Regularly Participating Institutions.

Privatization Program

The DRC has no official privatization program.

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 businesses to protect the environment.  The Global Compact Network DRC, a public-private consortium affiliated with the United Nations, encourages locally operating businesses to adopt sustainable and socially responsible policies.  In 2016, the DRC issued the Guide on Corporate Social Responsibility (CSR Guide) for the mining sector in Haut Katanga.

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.  Development pressures have resulted in reports of threats against environmental activists.  The DRC has adopted OECD due diligence guidelines on responsible mineral supply chains 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.  The DRC participates in the Extractive Industries Transparency Initiative (EITI), and publishes reports on its revenue from natural resources, although in recent years the reports have been late or incomplete.

The 2018 Mining Code provides domestic transparency measures requiring the disclosure of payments made to government entities.  PROMINES, a technical parastatal body financed by the GDRC and the World Bank, works to improve transparency in the artisanal mining sector.  Amnesty International, Pact Inc., Global Witness, and the Carter Center have published reports on RBC in the DRC mining sector.  The Dodd-Frank Act mandated companies publicly listed in the United States to declare their supply chains for DRC-sourced “3Ts” (tin, tungsten, and tantalum) and gold.  Many U.S. multinationals appear to be complying voluntarily to avoid possible reputational damage.

The DRC has a private security industry but does not support 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).

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/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 (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf)

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings ) and;
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods).
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

The Tshisekedi government has used public prosecutions of high-level officials and the creation of an anti-corruption unit to improve the DRC’s reputation on corruption.  DRC’s 2020 Corruption Perception Index score—170th out of 180—underlines the deep roots of corruption in the country.  The DRC constitution includes laws intended to fight corruption and bribery by all citizens, including public officials.  Anti-corruption laws extend to family members and political parties.  Private companies have applied their own controls to limit corruption and have in the past been more effective at controlling it.

In March 2020, President Tshisekedi created the National Agency for the Prevention and Fight Against Corruption.  Currently corruption investigations are ongoing for three Managing Directors of SOEs.  In June 2020, the court convicted Tshisekedi’s former Chief of Staff Vital Kamerhe of embezzlement and public corruption and sentenced him to 20 years in prison.  Accused of having embezzled funds allocated to Primary, Secondary and Technical Education (EPST), the General Inspector of EPST and General Director of the Service for Control and Payment of Teachers (SECOPE) were sentenced in March 2021 to 20 years of hard labor by the Court of Appeal of Kinshasa/Gombe.

The DRC is a signatory to both the UN Anticorruption Convention 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.

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.

Resources to Report Corruption

Official government agency:

Agence de Prévention et de Lutte contre la Corruption (APLC)
Tel: +243 893 302 819

Nongovernmental organization:

Transparency International
Ligue Congolaise de Lutte contre la Corruption (LICOCO)
Avenue Luango No14, Quartier 1, N’djili
Kinshasa
+243 81 60 49 837
licocordc@gmail.com
http://www.licocordc.org

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”, the former Prime Minister stepped down in February 2021.  On February 15, a week after he was sworn in as Head of the African Union, President Tshisekedi appointed Jean-Michel Lukonde as Prime Minister.  Maintaining public support for the Tshisekedi government will ultimately require the administration to deliver on the campaign slogan of “the people first.”

The security situation continues to be a concern and the U.S. Embassy through its travel advisory (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.  Thousands of members of armed groups have been disarming and turning themselves in to the United Nations’ DRC peacekeeping operation (MONUSCO) and the GDRC since President Tshisekedi’s election, according to international observers, with inconsistent demobilization processes and high recidivism rates.  International statistics indicate that over 140 small and medium sized armed groups and organized criminal groups continue to operate in 17 of the DRC’s 26 provinces, primarily in the east of the country.  The foreign terrorist organization-designated ISIS-DRC (a.k.a 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.  ISIS-DRC has been spreading violence throughout the eastern part of DRC fat an increasing pace since 2014 and killed at least 840 people in 2020 President Tshisekedi is cognizant of the important role security plays in attracting foreign investment, and has encouraged the Congolese army to work with MONUSCO to eliminate armed groups.

US citizens and interests are not being specifically targeted by armed groups but 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, http://www.acleddata.com/.  Kivu Security Tracker (www.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 and low-skilled labor force with high youth unemployment.  Expatriates frequently fill jobs requiring technical training in the key mining sector.  About 85 percent of the non-agricultural workforce is in the informal sector.  About 60 percent of the total workforce is in agriculture.

DRC labor law stipulates that for businesses with over 100 employees, 10 percent of all employees should be local.  If the managing director is a foreigner, his or her deputy or secretary general is expected to be a Congolese citizen. The government can waive these provisions depending on the sector of activity and expertise available. There is no onerous conditionality, visa, residence, or work permit requirements inhibiting the mobility of foreign investors and their employees.

The DRC faces a deficit in skilled labor across all sectors. There are few formal vocational training programs, though Article 8 of the labor law stipulates that all employers should provide training to their employees.  To address the high unemployment rate, the GDRC enacted a policy giving Congolese a preference in hiring over expatriates. Laws prevent firms from firing workers under most conditions without compensation. These restrictions have deterred hiring and encouraged the use of temporary contracts in lieu of permanent hiring.  There is no government safety net to compensate laid-off workers.

Congolese law bans collective bargaining in certain sectors, including 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 permission and adhere to lengthy compulsory arbitration and appeal procedures before starting a strike.  Unions often strike for higher wages or the payment of back wages.

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

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.  According to some businesses, the government does not effectively enforce relevant employment laws.

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 146 labor inspectors, but the Labor Inspector General reports that funding is not enough to facilitate the conduct of efficient labor inspections.

There is an active U.S.-DRC Investment Incentive Agreement in force.  The U.S. International Development Finance Corporation (DFC) provides political risk insurance and project financing to U.S. investors and non-governmental organizations.  Though there are currently no DFC projects in the DRC, though DFC is open to working on future projects.

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

Table 4: Sources of Portfolio Investment
Data not available.

Kinshasa Economic Section
Jeremy Chen, Deputy Economic Chief
KinshasaEcon@state.gov

Economic and Commercial Section
310 Avenue des Aviateurs, Kinshasa, Gombe, DRC
Phone: (243) 081 556-0151, Fax: (243) 81 55 60 175
Email:  KinshasaEcon@state.gov

Policies Towards Foreign Direct Investment

The Government of the Republic of Equatorial Guinea is still actively soliciting foreign investments. The government considered 2019 to be the “Year of Energy,” with new licensing rounds for hydrocarbons fields and various events to encourage investment. This was supposed to continue into the 2020 “Year of Investment,” focusing on hydrocarbons, mining exploration, and petrochemicals, which was disrupted by the pandemic. In 2017, the Government started the donor facilitation initiative with the World Bank, as part of a strategy towards membership in the World Trade Organization. The government also passed a law to establish a “Single Window” for investors and simplify the process to register a business, which launched in Malabo in January 2019 but was generally moribund pending identification of priority investment areas from the April 2019 third national economic conference, the final report for which has yet to be published. The government continued to partner with the World Bank on reviewing improvements to the process. A second office was expected to open in Bata in 2020 but was put on hold due to COVID-19

Statutorily, the Minister of Economy, Finance, and Planning approves investment permits. A new state entity, Holdings Equatorial Guinea 2020, was created to help guide diversification efforts. This entity was expected to serve as a hub for foreign investors. For now, however, investors still work with the relevant government ministries to negotiate contracts. The government, including at the highest levels, has regular meetings and conferences with business leaders and investors, though we are unaware of any formal business roundtable. For example, in November 2018, the World Bank and the Singapore Cooperation Programs led a conference in Equatorial Guinea on improving the business climate.

The country’s Minister of Mines and Hydrocarbons, Gabriel Mbaga Obiang Lima, has been leading a campaign to increase investment. In response to the COVID-19 pandemic and its effects on oil prices and African economies, the Minister of Mines and Hydrocarbons granted oil and gas companies a two-year extension on their exploration programs. The Ministry of Mines and Hydrocarbons will also encourage flexibility on the work programs of producing companies to ensure growth and stability in the market. The measure reflects broader efforts to drive global investment into Equatorial Guinea in line with its 2020 Year of Investment campaign. The extensions may particularly aid U.S. companies, which represent the majority of investment in Equatorial Guinea’s energy sector and are currently in the early stages of exploration and seismic interpretation of several new areas in existing offshore blocks. The Year of Investment, which was to include several in-country conferences and a global investment roadshow, was adapted to COVID-19 restrictions by using webinars and video conferencing to connect with investors. In February 2021, a consortium led by Noble Energy/Chevron, Marathon Oil, and EGLNG achieved the first gas flow from the successful execution of the Alen Gas Monetization project, a $475-million investment representing the first phase of Equatorial Guinea’s Gas Mega Hub plan. The Ministry of Mines and Hydrocarbons is currently promoting several capital-intensive projects – including the construction of modular oil refineries, a gold refinery, liquefied petroleum gas strategic tanks, a urea plant, and the expansion of a compressed natural gas project – which are open for investment. In December 2020, the Ministry announced a forecast of $1.1 billion in foreign direct investment in oil and gas activities in 2021.

The government also took several steps to support small and medium enterprises suffering during the pandemic, such as delaying and lowering tax payments, temporarily reducing the cost of electricity, and providing some small grants for micro-enterprises.

The Equatoguinean authorities have been willing to receive and protect all Foreign Direct Investment, including through changes in the country’s legal framework in recent years.

Currently there is no law or practice that discriminates against investors based on their origin, sex, age, race, political creed, or religion. The Law on the Investment Regime of the country establishes in Article 12 that the State commits itself to fair and equitable treatment for all investors. Decree No. 72/2018, dated April 18, 2018, and amended Article 2 of Decree No. 127/2004, dated September 14, 2004, eliminates the requirement of having an Equatoguinean partner to invest in the country’s non-oil sector.

Law 7/1992 and Law 54/1994 provide for the creation of an Investment Promotion Center, which must advise the government on investment policies, promote investments and support investors with information and in the resolution of conflicts. These Laws also provide for the creation of a National Investment Commission. Neither the Center nor the Commission is currently operational. Given the need for these types of organizations, in 2015, through Decree No. 134/2015, the Government mandated the Ministry of Commerce and Business Promotion to create and start up an agency to promote, integrate and coordinate the national policy of attraction of investors. In April 2021, this task was still in process and expected to start operating in 2023.

In November 2018, the Government organized a high-level seminar on the business climate in Equatorial Guinea with participation of the public and private sectors and development partners. For three days, they reflected on the position of Equatorial Guinea in each of the parameters of the Ease of Doing Business Ranking and the International Competitiveness Index of the World Economic Forum. As a result of the recommendations of this seminar, the government issued Decree 109/2019, creating a committee in charge of improving the national business environment, bringing together representatives of the government, private sector, and civil society to debate and propose reforms. The World Bank has subsequently partnered with the government to create and implement a plan to improve the business climate.

Even though the country does not currently have an investment promotion agency, the Ministry of Commerce has prioritized the implementation of a national agency for investment promotion within its Enhanced Integrated Framework program with World Trade Organization. The ministry has plans to establish a Foreign Trade Single Window to complement the existing one for domestic businesses.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government is generally supportive of foreign direct investment. The Foreign Investment Law (Decree 72/2018 of April 2018) modified the provisions of Decree 127/2004 stipulating that shareholder capital firms and companies operating in the petroleum sector must have Equatoguinean shareholders. The government requires that Equatoguinean partners hold at least 35 percent of share capital of foreign companies or companies created by foreigners in the hydrocarbons sector only. Equatoguinean partners must also account for one third of the representatives on the Board of Directors. Apart from the hydrocarbons sector, investments must not be part of public-private partnerships with a government entity. The Minister of Mines and Hydrocarbons generally approves any major deal in the hydrocarbons sector. Decisions regarding larger investment deals may rise to the presidential level. U.S. investors may reach out to the Equatoguinean Embassy in the United States for guidance regarding connection to the appropriate ministry for outreach efforts.

The Hydrocarbons Law and the National Content Regulation establish various requirements for international oil and gas companies that wish to operate in Equatorial Guinea. These include a minority partner stake for either the state oil company (GE Petrol) or the state gas company (Sonagas). In addition, there are national content requirements, many established in 2014 by the then-Ministry of Mines, Industry, and Energy, which apply to both producers and service companies, including that 70% of staff must be Equatoguinean, 50-100% of services (depending on category) must be procured from national company partners, and a percentage of the company’s revenue must be allocated to corporate social responsibility projects approved by the Ministry of Mines and Hydrocarbons (the Ministry was divided into two in 2017, including a separate Ministry of Industry and Energy). Ministerial Order 1/2020 (April 2020) established that companies can employ foreign laborers in the oil and gas sector for a maximum period of three years, though companies may apply for extensions in exceptional cases, with compliance overseen by the Ministry’s Director General of National Content. Minister of Mines Gabriel Mbaga Obiang Lima was quoted as saying, “With the release of this new order, the Ministry of Mines and Hydrocarbons intends to enhance the capacity of local service companies while guaranteeing the creation of local jobs for our trained and educated youth.” While Equatorial Guinea sought foreign direct investment in several of its capital-intensive energy and petrochemicals projects through its 2020 Year of Investment campaign, the country simultaneously prioritized the procurement of local goods and services and the stimulation of local jobs. The legislation follows the completion of capacity building and training programs, particularly at the gas and oil industry-supported National Technological Institute for Hydrocarbons in Mongomo. Given the generally low quality of education in the country, international companies complain about the difficulty of recruiting qualified locals.

Equatorial Guinea belongs to the Organization for the Harmonization of Business Laws in Africa (OHADA) and falls under the OHADA Uniform Act on the law of commercial companies and economic interest groups of January 30, 2014.

Law 4/2009 on the Land Ownership Regime in Equatorial Guinea establishes that foreigners cannot own land but rather purchase a lease with a maximum duration of 99 years.

The foreign investor is required to justify the origin of the funds used for the creation of a company in Equatorial Guinea.

In 2019, the government began its second attempt to join the Extractive Industries Transparency Initiative (EITI), submitting an incomplete application and meeting with civil society and other interested organizations. By 2020, the government established two EITI commission offices in Malabo and Bata — the largest cities — and published gas and oil contracts on its EITI website.

Other Investment Policy Reviews

In the past three years, the Government of the Republic of Equatorial Guinea has not conducted an investment policy review through any institutions, such as the Organization for Economic Cooperation and Development, the World Trade Organization, or the United Nations Conference on Trade and Development. In October 2019, the World Bank presented its Diagnostic Trade Integration Study (DTIS) that analyzed various sectors of the Equatoguinean economy and prospects for increased economic development and trade.

Business Facilitation

According to the World Bank’s Doing Business Report 2020, starting a business in Equatorial Guinea requires 16 procedures and usually takes 33 days, the same as in 2019. Equatorial Guinea was ranked 183 of 190 in the World Bank’s Doing Business Report 2020 for ease of “starting a business.” In 2017, the Government of the Republic of Equatorial Guinea passed Decree No. 67/2017, published in September 2017, to establish a “Single Window” or “single window” to simplify the process to register a business and speed the process to seven business days. The “single window” was launched in January 2019, after the Government of the Republic of Equatorial Guinea equipped facilities for processing applications, and trained staff. There is a webpage with information, https://www.ventanillaempresarialge.com/en/welcome/ , but businesses cannot yet register online. Generally, business must register with various agencies at the national level and some local offices. The Single Window does not eliminate steps, but it does consolidate visits to five offices into one. The below chart illustrates the steps that an entrepreneur can complete at the Single Window:

The country does not have a business facilitation mechanism for equitable treatment of women and underrepresented minorities in the economy. There are laws that make it illegal to discriminate against women. There is an ongoing effort from the government to include people with disabilities in public administration, including with internship programs and contracts.

By Presidential Decree No 45/2020 from April 24, 2020, the government reduced the paid-in minimum capital requirement for Limited Liability Companies to operate in the country from 1,000,000 XAF to 100,000 XAF. In 2019, the Government established a committee to monitor the country’s performance on the main indicators of ease of doing business, as well as to propose reforms to improve the national business climate. The committee — comprised of several CEOs, the private sector, business organizations and civil society — developed a roadmap with actions to be implemented to facilitate the establishment of companies in the country. While not possible to register online, the government is exploring the option for a business to register by phone.

In February 2020, registration of trade certificates and businesses were included in the Single Window. Currently, would-be investors can access government websites for information on setting up businesses in the country. This includes websites for:

• Single Window [I https://www.ventanillaempresarialge.com/en/welcome/]
• Ministry of Finance, the Economy and Planning [https://minhacienda-gob.com /]

Currently, work is being done to include records from the Single Window in the Ministry of Labor and in the National Institute of Social Security. A Ministerial Order is under discussion to include data of the Ministry of Labor in the Single Window.

The National Institute for Business Promotion and Development launched an entrepreneurship training program with financing available. The program teaches entrepreneurs – with a focus on microbusinesses — how to develop business plans around their ideas, with the best project selected for investment. The United Nations Development Program (UNDP) is one of the donors, with an emphasis on supporting female entrepreneurship.

Outward Investment

Although Equatoguinean citizens may legally invest outside the country, the government of the Republic of Equatorial Guinea does not promote foreign investment. The government and media do not praise or showcase Equatoguineans with business interests abroad. While there are no known restrictions on foreign investment, some individuals and companies have faced delays when transferring money overseas or converting local currency into foreign exchange, exacerbated by new CEMAC rules on foreign currency reserves enacted in 2019.

With technical assistance from UNDP, Equatorial Guinea is currently implementing the WTO Enhanced Integrated Framework program. This multilateral partnership is dedicated to assisting least developed countries (LDCs) use trade as an engine for growth, sustainable development, and poverty reduction. EG’s Action Plan through the Ministry of Commerce prioritizes promoting national products in the subregional and international markets. To encourage agricultural production, the Ministry plans to establish a national food certification institute within the Chamber of Commerce, pending funding from the government. The project was delayed by the pandemic.

After pausing all timber exports and firing the Minister of Agriculture, Timber, Livestock, and the Environment in the fall of 2020, the government lifted the export ban in October via Decree 93/2020. This authorized export of round wood, an industry dominated by Chinese companies. The previous decree had authorized only exports of transformed wood, with the goal of promoting the wood transformation industry in the local economy.

Transparency of the Regulatory System

The Government of the Republic of Equatorial Guinea publicly publishes labor laws; officials, however, do not consistently apply laws or regulations. While foreign companies are expected to follow every detail of the labor law or face penalties, there is reportedly less strict enforcement of local companies. U.S. businesses have complained that bureaucratic procedures are neither streamlined nor transparent and can be extremely slow for those without the proper political or familial connections. Many regulations are created within ministries, while others are the result of laws passed by the legislature. Although most regulations are created at the national level, some decisions may be taken at the municipal level (such as those for construction permits).

Proposed laws and regulations are not published in draft form for public comment, but there have been reports of informal sharing with representatives of specific industries for comment. Regulations and laws are generally not published online but are available in hardcopy for a fee.

Private industry representatives report that accounting, legal, and regulatory procedures are generally neither transparent nor consistent with international norms.

According to the 2020 Fiscal Transparency Report, Equatorial Guinea does not meet the minimum requirements of fiscal transparency but has made substantive improvements. More information is available at: https://www.state.gov/2020-fiscal-transparency-report/.

The government recently made some progress on transparency of its public finances and debt obligations. Although not available to the public several months until after the start of the fiscal year, the 2018 budget included information on debt obligations for the first time in several years, including both public and private debt obligations. The 2019 budget also included debt obligations. The government has been working on fiscal transparency as part of its International Monetary Fund (IMF) program and another program with the African Development Bank that began in 2019. The Ministry of Finance, the Economy, and Planning announced plans to move customs to an electronic system to improve transparency and prevent corruption. The Automated Customs System (Sistema Aduanero Automatizado or SIDUNEAWorld) was implemented on April 30, 2020, upon the Ministry’s announcement. By late May 2020, it had already registered 49 shipping manifests via http://siduneage.com:8080/asycuda/index.jsf and continues to work with the World Bank on implementation.

Regulations are generally not reviewed on the basis of scientific or data-driven assessments.

The government is set to implement a national agency to centralize public contracts. In 2019, the World Bank conducted a diagnostic study of public contracting in EG, the results of which were presented to the Ministry of Finance. The presentation led to an agreement with the World Bank to provide technical assistance to draft EG’s law on public procurement. The law will widen the spectrum for potential contractors through public tender offers, representing a significant step toward fiscal transparency.

In October 2020, the Ministry of Finance published a tax payment manual and launched an information office to provide taxpayers with comprehensive information on taxes and tax filling processes. To further transparency, the Ministry implemented a physical and virtual library allowing anyone to access tax-related laws and regulations in person or through the Ministry of Finance’s website.

In April 2020, the Ministry of Finance issued a communiqué on restructuring internal arrears, with an audit to evaluate the government’s obligations to construction companies. The African Legal Support Facility financed the process of regulating those arrears, carried out by McKinsey law firm.

International Regulatory Considerations

Equatorial Guinea is a member of the Central African Monetary and Economic Union (CEMAC), which includes a regional central bank (the Bank of Central African States, or BEAC) and various regulations including lower tariffs on intra-regional trade.

Equatorial Guinea is not a signatory to the Trade Facilitation Agreement (TFA). The country is not a member of the World Trade Organization (WTO) but has been an observer since 2002. In 2007, EG submitted its application for membership to the WTO’s general council, which established a working group in February 2008 to review the application. To date, Equatorial Guinea’s accession process to the WTO is pending the Memorandum on the Foreign Trade Regime (MFTR). In 2020, the Ministry of Commerce confirmed that full membership to the WTO remains a priority for the government. The Ministry is implementing a Strategic Action Plan for EG’s accession, including hiring an international consultant to prepare a memorandum on the country’s trade regime, which was under review by the legislature in early 2021.

The Constitution establishes the separation of powers, though the same law grants the Head of State the ability to appoint and remove members of the judicial branch. According to the new National Development Strategy, the judicial system requires a profound reform. Any Supreme Court decision on commercial matters can be appealed in the Organization for the Harmonization of Business Law in Africa (OHADA) Commercial Court, based in Abidjan, Ivory Coast.

Legal System and Judicial Independence

Equatorial Guinea’s legal system is a mix of civil and customary law. Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts. Either party can also submit the dispute to international arbitration. Foreign investors are asked to declare their desired international arbitration venue in their initial application to invest in the country. Arbitration must take place in a neutral location and Spanish will be the official language of the arbitration.

Equatorial Guinea was ranked 105 of 190 in the World Bank’s Doing Business Report 2020 for “enforcing contracts.”

Labor law is meant to protect workers, including a requirement for written contracts and regulation of child labor. Labor courts adjudicate matters related to employment. Several companies have complained that cases are rarely decided on the merits, with most judgements favoring labor, and penalties are excessive. Appeals generally proceed to the supreme or constitutional court. The court system and staff are generally considered under-resourced and unprepared, according to companies and public statements by President Teodoro Obiang Nguema Mbasogo. Both the Labor Law and the Penal Code were set to be updated in 2020, with drafts submitted to the Legislature, which was suspended amid the COVID-19 pandemic.

The judicial system is not independent of the executive branch as the president is officially the head of the court system, with the power to appoint or remove judges at will.

Laws and Regulations on Foreign Direct Investment

Most investment is focused in the extractive industries and infrastructure development. Laws No. 7/1992 and 2/1994 and Decrees No. 54/1994 and 127/2004 regulate foreign investment. Certain industries have additional regulations. The enforcement of laws and judicial decisions has not been reliable nor consistent, according to investors. The executive branch heavily influences the judicial branch, as the president is also the chief magistrate of the Republic of Equatorial Guinea. While the government has made efforts to streamline foreign investment procedures and simplify business registration processes, these processes have not all been implemented. Decree No. 72/2018 of April 2018 revised No. 127/2014 of September 2014, eliminating the mandatory 35% national participation in foreign companies, except in the hydrocarbons sector. The implementation of the “Single Window” for business registration in January 2019 was intended to simplify the registration process and reduce the time necessary to complete the process to seven business days, according to the government. The centralized Single Window also clarified the rates to be paid and the procedures to follow. The Ministries of Commerce and Finance, the Economy, and Planning were planning to evaluate the system in 2020 to determine its effectiveness, though this was disrupted by the pandemic. There is a webpage with information ( https://www.ventanillaempresarialge.com/en/welcome/ ) but businesses cannot yet register online. Investors must work with the relevant government ministries to negotiate contracts.

The government published Decree 45/2020 in April 2020, reducing the minimum capital needed to register a limited-liability company from 1 million XAF (USD 1713) to 100,000 XAF (USD 171).

Competition and Antitrust Laws

Equatorial Guinea does not have an agency that actively enforces any competition laws. Equatorial Guinea became a member of the Organization for the Harmonization of Business Laws in Africa (OHADA) in 1999, and any OHADA competition laws should apply in Equatorial Guinea. OHADA legislation is a civil legal system that aims to provide a common business and legal framework across all 17 member states, while enhancing the legal certainty and predictability of international transactions in the region. One important law affecting international project financing, the 2010 “Uniform Act Organizing Securities,” created a uniform, modern security law for OHADA nations. It allowed the possibility of appointing a security agent, acting in its own name on behalf of lenders, and reinforced lenders’ rights by enabling them to use new, efficient security enforcement mechanisms, such as out-of-court appropriation (“pacte commissoire”).

Other new and revised laws for the OHADA region followed, including:

• Uniform Act related to general commercial law act, revised in December 2010
• Uniform Act related to commercial companies and economic interest groups, revised in January 2014 and effective May 2014
• Uniform Act organizing collective proceedings for clearing debts, revised in September 2015 and effective December 2015
• Uniform Act on the harmonization of accounting, adopted in January 2017 and effective January 2018.

A new “Uniform Act on Mediation,” adopted in 2017, provides an enhanced legal framework for all aspects of mediation in OHADA’s 17 member states. This new alternative dispute resolution mechanism aims to achieve more rapid and easier enforcement of agreements in the OHADA zone. Although the sophistication and reliability of OHADA’s legal regime in certain specific business law areas offers a degree of comfort to investors in the region, other aspects of transactions remain subject to the national laws of the relevant countries. For example, the determination of tax registration fees remains the strict prerogative of individual nations. Thus, the amount of tax registration fees varies from one member state to another, even in the same cross-border transaction. This encourages forum shopping and contradicts OHADA’s goals of harmonizing business regulations.

The government can expropriate a property for public use when the general interest prevails over the individual. The process consists of notifying the owners of the future public utility, as well as the amount of the compensation. If the government does not follow due process, the property owner can sue, once they have exhausted administrative remedies, through the Supreme Court of Justice.

Expropriation and Compensation

Law No. 7/1992 states that the government will not expropriate foreign investments except when acting in the public interest with fair, just, and proper compensation. The Government of the Republic of Equatorial Guinea does not generally nationalize or expropriate foreign investments, although a Spanish investor had his property confiscated in 2013. The Government of the Republic of Equatorial Guinea has an extensive record, however, of expropriating locally owned property, frequently offering little or no compensation. The government has also withdrawn blocks for hydrocarbons exploration when companies failed to invest within an allotted period, though this generally appears to follow the terms of published tenders.

Dispute Settlement

ICSID Convention and New York Convention

Equatorial Guinea is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention — also known as the Washington Convention), although Law No. 7/1992 states that international arbitration may be based on ICSID. Equatorial Guinea is party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. OHADA’s Uniform Act of Collective Procedures for the Realization of Liabilities should be applied but is not enforced in practice.

In the government-approved roadmap to improve the business climate, Equatorial Guinea must accede to the ICSID.

For members of OHADA, disputes are resolved in the Court of Abidjan using the OHADA Uniform Arbitration Law. The country does not have a bilateral investment treaty nor a free trade agreement with the United States. There are no public statistics on penalties and judgments, but the judiciary is reportedly working on a website where this information will be published. For now, the judiciary does not publish sentencing statistics.

Investor-State Dispute Settlement

Equatorial Guinea is not a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

In October 2018, Equatorial Guinea announced the resolution of litigation begun in 2014 over Orange Group’s ownership stake in the incumbent fixed line and mobile operator Guinea Ecuatorial de Telecomunicaciones Sociedad Anonima (Getesa). Agence Ecofin cited a statement from the Embassy of Equatorial Guinea in France, confirming that on September 26, 2018, the government signed an agreement with Orange Middle East & Africa under which it paid EUR 50 million (USD 57.5 million) to the French-based telecoms giant in return for relinquishing Getesa shares. The final payment followed Equatorial Guinea’s initial share payment to Orange of EUR 45 million in October 2016, thereby settling the balance of an agreed EUR 95 million-redemption price for Orange’s 40% stake. TeleGeography’s GlobalComms Database says that Equatorial Guinea’s government lost a Paris Court of Appeal case against a fine imposed in July 2014 by the International Court of Arbitration for reneging on a 2011 agreement to buy Orange’s Getesa stake in the event of a new entrant launching (a clause it failed to honor after the 2012 launch of majority state-owned cellular company GECOMSA). In October 2018, the government agreed to pay EUR 150 million, including interest, to Orange.

A Spanish businessperson signed a joint venture agreement with President Obiang in 2009 to build 36,000 homes in Equatorial Guinea. President Obiang allegedly pulled support for the project at the last minute, leaving the Spanish citizen ruined and bankrupted. In March 2012, the Spanish citizen submitted a claim before the ICSID, which ruled in favor of Equatorial Guinea in 2015. In August 2017, Madrid’s provincial court ordered a magistrate to revise the claim, acknowledging the Spanish competency to rule the case because of the bilateral investment treaty between the countries. The case was ongoing at the start of 2020, but it is unclear if it will continue as the claimant died of COVID-19 in April 2020.

In 2021, the Embassy received information about a U.S. company that has done a few projects in Equatorial Guinea in the past three years. The company reported that the government made an initial payment, but the second payment was more than a year overdue. Government officials reported they were working to resolve the issue.

International Commercial Arbitration and Foreign Courts

The Organization for the Harmonization of Corporate Law in Africa (OHADA) Uniform Act on arbitration rules would apply at the Court headquarters in Abidjan, but it may be unapplicable in any one of the seventeen Member States of the Organization. The Court has already held hearings in several OHADA member states in recent years. In March 2019, the Common Court of Justice and Arbitration of the OHADA included an Equatoguinean lawyer on the list of arbitrators in its Arbitration Center of the Common Court of Justice and Arbitration. He is the first Equatoguinean added to the OHADA list.

Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts. Either party can also submit the dispute for international arbitration. In their initial application to invest in the country, foreigners must declare their desired international arbitration venue. Arbitration must take place in a neutral location with Spanish as the official language.

Firms have alleged that court actions are sometimes discriminatory, not transparent, tending to favor local parties rather than foreigners or foreign companies.

In 2015, the government closed a microfinance institution founded by a member of an opposition party. He reportedly appealed to the CEMAC court, which recommended arbitration. We have no information on the outcome.

Bankruptcy Regulations

The Government of the Republic of Equatorial Guinea adopted the business laws of the Organization for the Harmonization of Business Laws of Africa (OHADA), including that pertaining to bankruptcy.

The Republic of Equatorial Guinea ranks 168 on the World Banks’s 2020 Doing Business Report for “Resolving Insolvency.” The Republic of Equatorial Guinea received the World Bank’s “no practice mark” due to the lack of cases over the past five years involving judicial reorganization, judicial liquidation, or debt enforcement. This suggests that creditors are unlikely to recover their money through a formal legal process.

Investment Incentives

Law No. 2/1994 of June 6, 1994, offers investment incentives in the form of deductions from taxable income: 50 percent of the amount paid to Equatoguinean staff in wages and 200 percent of the cost of training Equatoguinean staff. It also extends/maintains previous license exemptions for imports and exports, allows conversion of sales into foreign currency, and permits transfers abroad of company profits. Decree No. 67/2017 of September 2017 created the “Single Window” business portal to promote investment and economic activity by significantly reducing the time needed to register a new company. According to the government, registering a company through the Single Window – launched in January 2019 — takes approximately seven days. Decree no. 72/2018 of April 2018 revised decree 127/2014 of September 2014 to foster foreign direct investments. The revised investment law eliminated the need to have a local business partner in foreign companies, except for the hydrocarbons sector. The government sometimes jointly finances foreign direct investment projects, such as construction of social housing.

Other laws provide financial incentives, such as for the promotion of non-traditional exports, and maintain or broaden the exemptions allowed under the previous licenses for imports and exports and for regional or local development. Companies involved with rural projects are exempt from some tax payments.

Official Equatoguinean investment incentives through Law No. 7/1992 on the Investment Regime are mostly tax-related, although Decree No. 71/2014 from May 2014 created the Holding Guinea Equatorial 2020 (State Investment Company) to invest in profitable projects chosen among proposals to national authorities.

The government subsidizes electricity, partly to encourage investment, as well as fuel by selling to enterprises at a fixed price. This may have motivated Cameroon’s Tradex to invest in EG; Tradex launched a three-year initiative in 2019 to invest approximately $25 million in Equatorial Guinea, building a network of 10 service stations over the same period. Tradex’s first service station opened in February 2021.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no known laws, policies, or practices for any areas designated as Free Trade or Duty-Free Zones. Three entities have tax-free status: Luba Free Port, the Port of Bata, and the K5 Free Port Oil Centre.

Equatorial Guinea belongs to the African Continental Free Trade Area (AfCFTA).

In January 2021, the government promulgated Decree 002/2021 introducing new regulations on cross-border trade with neighboring Cameroon and Gabon, including establishment of an import-export office. Goods imported from third countries will not be taxed if properly cleared through a CEMAC member country.

Performance and Data Localization Requirements

Equatorial Guinea does not require visas for U.S. citizens. Visas for third-country nationals can be difficult to obtain, requiring a letter of invitation, although the government created new visa categories in 2019 in an effort to speed the process. Residency and work permits can be similarly difficult to obtain and renew. In March 2018, as part of an overall effort to improve transparency and ease the conditions of entry and residence in the country, the cost of a residency permits from USD 700 to USD 343 per year. In December 2019, the government agreed to lower the cost of residency permits to conform with the cost of a business visa (H1B) to the United States (USD 160). Some companies have reported delays in the residency permit process. Work permits, often a pre-requisite for a residency permit, are also difficult and time consuming to obtain. Some businesses report that they have been unable to obtain the annual permits for over five years. There are some reports that certain officials have asked for “expediting” fees that are beyond established government fees and occasionally ask for bribes directly. This is especially problematic at the airport and at customs, according to various accounts and the experiences of Embassy staff. Residency and work permits were not issued regularly between 2017 and 2021, requiring expatriates to leave the country every 90 days or risk fines/deportation.

The Government of the Republic of Equatorial Guinea used to require a minimum percentage of employees and subcontractors to be Equatoguinean, ranging from 70 to 90 percent. Presidential Decree 72/2018 of April 18, 2018, revised Presidential Decree 127/2014 of September 14, 2014, eliminating this requirement, except for the hydrocarbons sector, for which certain management positions must be held by Equatoguineans. Foreign investors in the hydrocarbons sector are required to have a significant percentage of domestic content in goods and technology. Companies are supposed to send a list of vacancies to the Ministry of Labor, Employment Promotion, and Social Security. If the Ministry is unable to find a qualified candidate within 30 days, the company may hire an expatriate worker.

The Ministries of Mines and Hydrocarbons and of Labor, Employment Promotion, and Social Security, among others, make regular inspections of companies and may apply fines. The Ministry of Mines and Hydrocarbons has fined, suspended, and expelled companies perceived to not comply with regulations or laws, especially regarding “local content” (staffing with Equatoguinean nations).

The Government of the Republic of Equatorial Guinea requires internet service providers, whether local or foreign, to turn over source code or provide access to surveillance. According to article 15 of the Telecommunication Law 7, dated November 7, 2015, Equatoguinean government offices are supposed to report any information concerning official communication lines and networks to the Regulating Organ of Telecommunications (ORTEL). The Government of the Republic of Equatorial Guinea has no requirements regarding locating data storage within the country. The Ministry of Transports, Telecommunications, and Mail reduced the cost of internet in 2019 and 2020 as part of a strategy towards openness and increased access, and both the Telecommunications Regulator (ORTEL) and the Telecommunications Infrastructure Administrator (GITGE) promoted implementation of the new strategy. While the government had announced that internet would be available in all public places, such as airports, banks, and cultural centers, by 2020, this was delayed by the COVID-19 pandemic. Internet is already available in some locations, such as the Paseo Maritimo in Malabo. Although the government claims that 95% of municipalities have access to a fiber optic network, only 26.2 percent of the population used the internet in 2017 according to the International Telecommunication Union.

Real Property

The Government of the Republic of Equatorial Guinea selectively enforces property rights. While the government has laws on the books regarding the rights of property owners, the government can use the judicial system to seize land in the interest of the country with little to no due process. Mortgages exist under a “Social Housing Program” in which payments are made to the government via the commercial CCEI Bank. The mortgage length varies and can be more than 20 years. Interest rates are high, ranging from 12 to 18 percent. Non-payment for six months results in the foreclosure of the property. According to the World Bank’s Doing Business Report for 2020, registering property in Equatorial Guinea required six procedures and usually took 23 days, ranking the country 163 of 190.

Intellectual Property Rights

Equatorial Guinea is a member of the African Intellectual Property Organization (AIPO) and joined the World Intellectual Property Organization (WIPO) in 1997. Intellectual property rights (IPR) protections fall under the Council of Scientific and Technological Research of Equatorial Guinea. Equatorial Guinea does not report on seizures of counterfeit goods. Legal structures are weak, and IPR protection and enforcement are rare to non-existent. The government does not maintain publicly available statistics on law enforcement or judicial actions. Equatorial 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 http://www.wipo.int/directory/en/ . Equatorial Guinea is a party to the Bangui Agreement on Intellectual Property. There is a national office that is the link between CICTE and the African Intellectual Property Organization (AIPO). The application to register a product is sent to the central office in Yaoundé, Cameroon, which in turn shares it with other offices to verify the product’s originality. If confirmed, AIPO grants the patent. (AIPO’s office in Equatorial Guinea can also handle case rather than processing through Yaoundé.) An internal copyright law was promulgated after the signing of the Bangui Agreement. The Ministry of Cultural, Tourism and Artisanal Promotion sporadically applies IPR regulations, for which clear information is unavailable. In cases of alleged IPR violations, the injured party must file a complaint with the Ministry of Justice, which refers the complaint to CICTE.

Capital Markets and Portfolio Investment

The banking sector provides limited financing to businesses. The government claims two microfinance institutions operating in country, with a government-backed microcredit program for small- and medium-sized enterprises (SMEs). The country does not have its own stock market. According to investors, capital markets are non-existent. Credit is available but interest rates are high, ranging from 12 to 18 percent for mortgages and about 15 percent for personal loans. Business loans generally require significant collateral, limiting opportunities for entrepreneurs, and may have rates of 20 percent or greater. It is unclear if foreigners could obtain credit on the local market. The Single Window office assumes investors have already secured all financing.

Equatorial Guinea is a member of CEMAC, which has a stock market common to all member states. The Central Africa Banking Commission (COBAC) regulates the region’s banking system. The BEAC and the COBAC regulate transfer limits. Commercial banks follow BEAC requirements. To attract investment and promote economic diversification, the government offers facilities for granting loans, including through the National Institute of Promotion and Development (INPYDE), which has an investment fund for entrepreneurs.

The National Bank of EG (BANGE), in which the government has a 51% stake, plans to launch the country’s first brokerage business to facilitate foreign investment, negotiating equity and even debt for major companies operating in Equatorial Guinea. BANGE falls under the Central African Financial Market Surveilling Committee and includes such customers as supermarket chains Martinez Hermanos and EGTC. Additionally, BANGE inaugurated the BANGE Business School in 2020 to train students to work in the banking sector and facilitate underwriting, syndication, and funding. In November 2020, BANGE announced it first capital increase through an initial public officering directly through its offices. In April 2021, the institution announced the second capital increase of $75 million, which was open to individual investor (nationals and foreigners).

Money and Banking System

BANGE has the most branches of any bank in EG and estimated that 60% of the population used formal financial services. BANGE estimates that its clients are 26% of the population.

Banking revenues have been deteriorating over the last five years as the government gradually reduced or stopped infrastructure projects due to the economic recession. The government established the Partial Guarantee Fund to insure non-performing loans through the National Institute for Businesses Promotion (INPYDE). Demand for loans was supported by specific budget allocations each fiscal year, mostly from BANGE. In 2020, INPYDE negotiated an agreement to include other banks and to enlarge the Guarantee Fund.

While banks have branches throughout the country, they are concentrated in urban centers. There is little information available about the assets and health of the banking system. BANGE leads with 29 branches throughout the country. CCEI/CCIW Bank de Guinea Ecuatorial, a subsidiary of First Bank Afriland (Cameroon), has four branches in the largest cities. BGFI Bank Guinée Equatoriale operates as a subsidiary of BGFI Holding Corporation (Gabon). Pan-African EcoBank (Togo) and Societe Générale (France) also operate in Equatorial Guinea. If a bank does not have a branch in the location where an individual wants to do business, they would not have access to their funds there. ATMs are in limited locations.

The Government of the Republic of Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC) and shares a regional Central Bank with other CEMAC members. Members have ceded regulatory authority over their banks to CEMAC, but also are entitled to national BEAC branches. Ebibeyin, Bata and Malabo each have a branch. The government of the Republic of Equatorial Guinea is also a member of the Banking Commission of Central African States (COBAC) within CEMAC.

Foreigners must provide proof of residency to establish a bank account.

The country’s economy is an almost entirely cash based, with credit cards available but not widely used by the general population, confined to foreigner or wealthy citizens using at international hotels, international airlines, and major supermarkets. In April 2020, partly in response to the COVID-19 pandemic’s social distancing measures, the government encouraged banks to increase electronic payment mechanisms. The Ministry of Finance, the Economy, and Planning also continued to expand electronic payments for government employees. In May 2020, the Government of the Republic of Equatorial Guinea endorsed the guiding principles of the United Nations’ “Better than Cash” Alliance, a partnership of governments, companies, and international organizations to accelerate the transition from cash to digital payments as part of the United Nation’s Sustainable Development Goals. The Alliance has 75 member countries committed to digitizing payments to boost efficiency, transparency, and women’s economic participation and financial inclusion.

The banking sector is affected by relatively lengthy bureaucratic procedures and a lack of computerized record keeping. Customers have reported that currency is not always available on demand, and delays for transfers or exchanges of local currency into foreign denominations have increased since the BEAC instituted new banking and foreign currency regulations in 2019.

The National Economic and Financial Committee publishes a semi-annual report on the evolution of banks in the country. The CEMAC establishes the requirements for any bank that wants to operate in a member country, which COBAC can grant. COBAC also publishes information on the banking system of each member country. There are no restrictions, but there are requirements that applicants must meet to open an account, whether or not they are a resident. The country is currently starting the use of mobile banking; financial services are mainly limited to banking and microfinance.

The government’s failure to repay loans has increased interest rates and reduced access to credit for the private sector, especially households. Banks in EG have the lowest ratio of loans to savings within the subregion. During the economic expansion (2009-2014), the government developed a line of credit with CCEI Bank to finance infrastructure development projects with construction companies. Loan defaults rose rapidly as the government failed to meet its legal obligations with CCEI Bank, prompting the government to nationalize the bank in January 2021 by acquiring Afriland First Group’s shares.

Foreign Exchange and Remittances

Foreign Exchange

Decree No. 54/1994 provides the right to freely transfer convertible currency abroad at the end of each fiscal year, but in practice many businesses report that limited financial services create barriers to successfully executing international transfers. On April 1, 2019, the Bank of Central African States (BEAC) published a regulation to enforce an existing requirement to maintain bank accounts in Central African francs (CFA) rather than foreign currency, with a six-month grace period until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process, but it is unclear if this applies to all accounts in the region. Following pushback from the extractive industry, which accounts for over 80% of EG government revenues, CEMAC exempted gas and oil companies from the regulation through December 31, 2021. Many other businesses and individuals have reported lengthy delays to convert currency and make international bank transfers under the new rules. The BEAC announced that regulations were intended to usher in reforms that redefine BEAC’s role, and the role of the Bank’s control bodies, to ensure compliance with IMF guidance and currency stabilization, including a 30-day waiting period to withdraw foreign currency. Other reforms included: reinforcement of the regulatory framework for manual exchanges; assuring the flexibility of certain operational arrangements as instructed by the BEAC governor; adapting foreign exchange regulations to new methods of payment and transfer institutions; and simplifying procedures to increase compliance. In September 2020, the BEAC instituted an online “e-transfer” application to ensure credit establishments comply with the new regulation. The online application automates the entire process of transfer requests and monitors in real time the progress of each request through an e-tracking site. Foreign currency is not widely available in the Central African Franc zone but can be obtained in the Republic of Equatorial Guinea in small quantities.

Equatorial Guinea does not engage in currency manipulation as the CFA franc currently has a fixed exchange rate to the euro: 100 CFA francs = 1 former French (nouveau) franc = 0.152449 euro or 1 euro = 655.957 CFA francs exactly. The exchange rate fluctuates with the value of the euro.

Remittance Policies

On April 1, 2019, the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a six-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process. It is unclear if this applies to all accounts in the region. Companies in the hydrocarbons and mining sectors received an exemption on implementation through 2021.

Sovereign Wealth Funds

The Government of the Republic of Equatorial Guinea established a sovereign wealth fund, the Fund for Future Generations, in 2002. The fund receives 0.5% of all oil revenues and is governed and managed by the Bank of Central African States (BEAC). The Sovereign Wealth Fund Institute (SWFI) estimates assets under management of USD 165.5 million ( https://www.swfinstitute.org/profile/598cdaa50124e9fd2d05b002 ). There is no publicly available information on its allocations.

The Republic of Guinea Equatorial has at least eight state-owned enterprises (SOEs) in the energy, housing, fishing, aerospace and defense, and information and communication sectors. Sonagas is the national natural gas company and GEPetrol is the national oil company. The energy SOEs report to the Ministry of Mines and Hydrocarbons and hold monopolies in their respective sectors. SEGESA is the national electricity company. GECOMSA and GETESA are the national telecommunication service providers. SONAPESCA focusses on the promotion of fishing and reports to the Minister of Fisheries and Water Resources. ENPIGE is the SOE that oversees the government’s affordable housing program. Ceiba Intercontinental is the main airline and is currently near bankruptcy, facing internal structural crisis, after the termination of a joint venture with Ethiopian Airlines in 2020. The budget includes allocations to and earnings from SOEs. Large SOEs lacked publicly available audits. According to some companies, there is little evidence of oversight of SOEs. A requirement of the IMF’s 2018 staff monitored program, however, is that the government contract an internationally reputable firm to audit the accounts of the state-owned oil (GEPetrol) and gas (Sonagas) companies, which the government hired at the start of 2019. (The audits were still ongoing in mid-2020, with no report of completion.) All oil and gas projects must include a partnership with state-owned companies GEPetrol or Sonagas.

Equatorial Guinea’s oil and gas sector scored 22 of 100 points in the 2017 Resource Governance Index (RGI), ranking 85th among 89 assessments. Its overall failing performance can be attributed to the enabling environment component, which scores 17 of 100 points and ranks 79th among 89 assessments, along with an equally low score for revenue management. For more information, see https://resourcegovernance.org/ .

Privatization Program

The Ministry of Finance, the Economy, and Planning discussed plans to involve the private sector in the management of state-owned assets, including through privatization. The initiative was a recommendation from the Third National Economic Conference (April-May 2019), which included discussion of options to improve management of state assets. The government envisages three paths: (i) restructuring autonomous agencies and state-owned enterprises; (ii) concession of assets to the private sector; and (iii) sale of public assets to private operators (privatization). The authorities also plan to open to competition sectors where public enterprises operate, with the aim of limiting monopolistic practices and passing on efficiency gains to the rest of the economy. The Ministry will present a substantive list of state assets to be privatized, as well as a list of entities that will be restructured or placed under a concession regime with the private sector for the approval of the Council of Ministers (structural benchmark, end of June 2020). Once the Council of Ministers approves this plan, the authorities will present an action program for privatization (planned for the second half of 2020). To generate revenue, they plan to prioritize privatization, with the proceeds going to pay down validated domestic arrears and rebuild EG’s foreign currency reserves at the BEAC. Sales and concessions will be carried out through open, international tenders. The sale of the listed assets may be delayed so that their prices are not negatively affected by the current global slowdown. Information is likely to be announced on the Ministry’s website:    https://minhacienda-gob.com/.

Many U.S. firms operating in Equatorial Guinea have well-developed corporate social responsibility (CSR) programs. The Ministry of Mines and Hydrocarbons has established industry-specific regulations that mandate minimum rates of CSR contributions. The Government of the Republic of Equatorial Guinea is considering a regulation that would increase those rates. U.S. and UK oil and gas companies tend to exceed those rates. Most firms from other countries have limited CSR programs. The government has expressed their appreciation for the U.S. companies’ efforts and recognized the positive role of U.S. firms. CSR projects have included support for various initiatives, including conservation, education, health, and awareness campaigns on sensitive subjects like trafficking in persons. The government has final approval of all CSR programs, offering explicit support, and occasionally also provides additional in kind or financial support. There are several non-governmental organizations operating in the country that work in fields supported by CSR projects, often as partners with the companies, but they do not fulfill a monitoring role.

In November 2019, the Ministry of Mines and Hydrocarbons published the first informative booklet on CSR in the oil sector. The pamphlet compiles key achievements in corporate social responsibility — like the Bioko Island Malaria Control Project (BIMCP) and Bioko Biodiversity Protection Program (BBPP) — and was distributed during GECF 5TH as summit 2019 in Malabo.

Equatorial Guinea applied in 2019 to join the Extractive Industries Transparency Initiative (EITI), after being delisted during its first attempt to join in 2010 for missing its validation deadline. The application was withdrawn in fall 2020 for being incomplete. Application to join EITI was a condition of the IMF staff monitored program.

In 2020, EG was upgraded from Tier 3 to Tier 2 Watchlist on the State Department’s annual report on trafficking in persons in recognition of increased efforts to identify and assist victims. Concerns remain regarding forced labor, sex trafficking, and ineffective enforcement of laws to prevent trafficking.

EG is not a signatory of the Montreux Document on Private Military and Security Companies. EG is not a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA), although several companies in the country are members.

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

There is no publicly designated contact at a government agency responsible for combating corruption. Various ministries, including the office of the Prime Minister, nominally have responsibility for combatting corruption either within their own ministry or in the government at large. A commission to combat corruption was formed in 2019 and worked with the legislature to pass a new law on corruption in April 2021. There are no “watchdog” organizations operating in country.The Government of the Republic of Equatorial Guinea has laws and regulations against corruption, but many businesses have complained that they are not often enforced, and as a result, corruption is very common. There are no specific laws about conflict of interest or nepotism. Numerous foreign investigations continued into high-level official corruption.

In December 2020, the International Court of Justice ruled that a Paris mansion at the center of a dispute between France and Equatorial Guinea could not be unilaterally designated a diplomatic outpost. French authorities seized the building on Paris’ Avenue Foch in 2012 as they investigated Teodoro Nguema Obiang Mangue, the Vice President of Equatorial Guinea, for misuse of public funds and money laundering. In 2017 Vice President Mangue was tried in absentia in a French court for allegedly embezzling public funds. He was given a three-year suspended sentence and fined $32 million. The International Court of Justice found that France did not violate the Vienna Convention on Diplomatic Relations when it raided the building because the Parisian mansion was not a diplomatic residence for Equatorial Guinea and thus France had a right to seize it.

Obiang Mangue has publicly committed to eradicate corruption and promote fiscal transparency. In September 2020, the government established an anti-corruption audit commission, for which the port administrations of Bata and Malabo became the primary focus. The commission seized significant amounts of money allegedly siphoned off through those ports. As a result, the Director General for Customs was dismissed after more than twenty years on the job, though he was not charged. During 2020 and 2021, executives of state-owned enterprises have faced prosecution on embezzlement charges following surprise government audits as part of the anticorruption strategy. Those under investigation included the deputy director of the national power company (SEGESA) and the regional director of the National Institute of Social Security (INSESO).

U.S. companies operating in Equatorial Guinea are required to adhere to the U.S. Foreign Corrupt Practices Act. Some U.S. firms report concern about corruption in government procurement, the award of licenses and concessions, the customs process, and dispute settlement. Major U.S. firms have internal controls, ethics, and compliance programs to detect and prevent bribery of foreign officials. It is unclear what controls exist at smaller companies and other foreign and domestic firms.

The country’s greatest concerns in terms of money laundering and terrorism financing are cross-border currency transactions and the illegal international transfer of money by companies or corrupt individuals. Some report that widespread corruption, at times involving members of the government, is a primary catalyst for money laundering and other financial crimes. Certain businesses have noted that diversion of public funds and corruption are widespread in both commerce and government, particularly as regards the use of proceeds from the extractive industries, including oil, gas, and timber, and infrastructure projects.

Equatorial Guinea became a signatory to the United Nations Convention against Corruption on May 30, 2018. Equatorial Guinea is a member of the Task Force against Money Laundering in Central Africa, an entity in the process of becoming a Financial Action Task Force-style regional body. The country is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

On July 13, 2020, President Obiang Nguema Mbasogo approved Decree-Law No. 1/2020 on the prevention and fight against corruption in Equatorial Guinea as an interim measure pending approval of anti-corruption legislation in Parliament. The legislation passed in April 2021.

Resources to Report Corruption

Decree-Law No. 1/2020 stablished the National Commission for Prevention and Fight against Corruption as the primary source to report corruption. However, this Legal Entity of Public Law is not yet operational.

There is not a history of civil unrest in Equatorial Guinea. Some report this is due to a severe limitation of political opposition and civil society, including freedom of assembly and expression. There have been, however, examples of politically motivated violence. An opposition party member and civil society activist was arrested at his home in February 2019 following his advocacy of labor rights at the national university. He was then charged of plotting to kill the president and tried for defamation and threats against the President on November 21, 2019. His sentence was never announced, and he was released on February 14, 2020, after almost a year in prison – longer than the maximum penalty for the charge against him.

President Teodoro Obiang Nguema Mbasogo has been in office since taking power in a 1979 coup. Equatorial Guinea does not have an established record of democratic transfer of power. In the week leading up to President Obiang’s re-election on April 24, 2016, there were reports that government security forces forcibly entered the headquarters of political opposition party Citizens for Innovation (CI) and seriously injured several opposition party members. Opposition activists arrested before the election were subsequently released, although some remained in jail for over a year. Opposition members continue to report arrest, torture, and harassment, despite President Obiang securing another seven years in office.

In 2017, Equatoguinean authorities detained a large group of over one hundred CI opposition party members in the cities of Bata, Akonibe, and Malabo during the campaign period for municipal and legislative elections; thirty-one of them were sentenced to 41 years in prison in February 2018. They were subsequently released by a Presidential pardon in October 2018. A well-known Equatoguinean cartoonist and political activist was also detained in Malabo for six months after being falsely accused by the police of counterfeiting and money laundering. He was released from prison on March 8, 2018, after being acquitted. A foiled coup plot led to massive arrests throughout the country from December 2017 to March 2018. The ruling Democratic Party of Equatorial Guinea (PDGE) announced on November 3, 2018, that it had expelled 42 of its members for alleged involvement in the coup. A total of 132 individuals were tried in the mainland city of Bata between March and May 2019, of which 112 were convicted.

Government officials and members of the private sector have noted an increase in crime, including drug use and violent robberies, as the country’s recession continues. Piracy in the Gulf of Guinea also increased from 2018 to 2021, including within Equatorial Guinea’s territorial waters. Security forces often used excessive force when implementing government restrictions designed to combat COVID-19 in 2020.

Equatorial Guinea has a consistent shortage of skilled labor. Unskilled labor is readily available. Youth unemployment is considered widespread, but statistics are scarce. According to the government’s 2015 census, released in 2018, about 40% of the population were not formally working and about 16% were unemployed. Officials estimate that close to 50% of the country’s workforce participates in the informal economy. Foreign laborers make up an important segment of all sectors of the economy, but generally dominate skilled labor positions, including engineers, pilots, and doctors. Labor laws apply to both foreign and domestic laborers, though in practice rulings tend to favor locals over foreigners when resolving disputes.

The gas and oil industry reports a shortage of trained individuals. Companies in the oil and gas sector sponsor training programs, and the government sponsors a limited number of students for short- and long-term international training and academic programs. The industry and the government also run a National Technological Institute of Hydrocarbons, which has 50 students per cohort in a three-year program. The government and companies inaugurated a new building in Mongomo in 2019, after alternating study in previous years between Malabo and Bata.

The agriculture and fishing sectors have shrunk in past decades as the rural population declined 42% from 2001 to 2015, according to the government census, and some businesses claim to have a shortage of laborers. Cattle ranchers have brought in migrant workers from the Sahel region of Africa to work with imported cattle.

Despite challenges in finding skilled labor, various laws require hiring nationals. The National Content Law of Equatorial Guinea requires that 70% of oil company employees are Equatoguinean. Companies must go through the Ministry of Mines and Hydrocarbons to fill a position, demonstrating an effort to find a suitable domestic applicant within 30 days before hiring a foreigner. Employers must make extensive severance payments to separated employees, even when employment demands fluctuate due to market conditions. Currently there is neither unemployment insurance nor other social safety net programs to assist laid-off workers, though the EG government has stated that this has been its goal for several years.

Compared to the United States, labor laws in the Republic of Equatorial Guinea are generally favorable toward the employee. Labor disputes may be heard by the Legislature or in the courts, and the decisions typically favor the employee. Aside from a union of small farmers and the taxi association, the Government of the Republic of Equatorial Guinea has not recognized any labor unions. Small collectives and associations are allowed to register with the government but do not carry out labor advocacy efforts. Collective bargaining is not common. There have not been any strikes during the last year that posed an investment risk; the government typically restricts strikes or protests.

Labor laws include provisions such as regulating industries in which minors may work, as well as requiring written contracts. Short-term contracts are limited to 24 months. Local government enforcement of labor laws is mostly focused on preventing companies from employing and exploiting unauthorized migrants. The Government of the Republic of Equatorial Guinea has regulations to monitor health and safety standards and an inspection force, but some have criticized the effectiveness of their enforcement.

Labor laws differentiate between layoffs and firing (with severance). In Equatorial Guinea, it is imperative for the company to understand all the legal obligations a decision to dismiss entails before deciding to do so. The law favors employees. Dismissals can take a broad range of forms from justified dismissals, dismissals for economic reasons and null dismissals. Dismissal is considered void when the legal process for dismissal has not been followed. Cases hereof would be when the employee has not received proper notice in the form of a dismissal letter or has been dismissed in specific circumstances that the law prohibits, for example, when a woman is on maternity leave. Unemployment insurance or other social safety net programs do not exist for workers laid off for economic reasons.

There are gaps in compliance in both law and practice with international labor standards. Although the Republic of Equatorial Guinea does not actively enforce internationally recognized labor rights, employees are generally not subjected to abusive work conditions. The government has been ranked Tier 2 watchlist in the 2020 Trafficking in Persons (TIP) Report. The government made key achievements during 2021 TIP reporting period. These achievements included investigating and—for the first time since 2010–prosecuting a possible trafficking case; developing and implementing formal screening procedures to identify victims within vulnerable populations; proactively identifying a potential trafficking victim; funding and partnering with an international organization to deliver training for more than 700 officials and civil society actors; expanding its awareness campaign to reach all seven of the country’s districts; and providing funding for its 2019-2021 national action plan. Despite these achievements, the government has never convicted a trafficker under its 2004 anti-trafficking law. Additionally, the government’s victim services remained inadequate. Official awareness of trafficking remained low and the government’s anti-trafficking law did not criminalize all forms of trafficking.

In 2020, a new labor law was drafted but it remained under review by the legislature in 2021.

Economic-Commercial Section
+240 333 095 741
MalaboPol-Econ@state.gov 

Policies Towards Foreign Direct Investment

Gabon’s 1998 investment code conforms to the Central African Economic and Monetary Community’s (CEMAC) investment regulations and provides the same rights to foreign companies operating in Gabon as to domestic firms.

Gabon’s domestic and foreign investors are protected from expropriation or nationalization without appropriate compensation, as determined by an independent third party. Certain sectors, such as mining, forestry, petroleum, agriculture, and tourism, have specific investment codes, which encourage investment through customs and tax incentives.

Gabon established the Investment Promotion Agency (ANPI-Gabon) with the assistance of the World Bank in 2014. Its mission is to promote investment and exports, support SMEs, manage public-private partnerships (PPPs), and help companies establish themselves. It is designed to act as the gateway for investment into the country and to reduce administrative procedures, costs, and waiting periods.

Gabonese authorities have made efforts to prioritize investment. In 2017, the High Council for Investment was established to promote investment and boost the economy. This body provides a platform for dialogue between the public and private sectors, and its main objectives are to improve the economy and create jobs.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors are largely treated in the same manner as their Gabonese counterparts regarding the purchase of real estate, negotiation of licenses, and entering into commercial agreements. There is no general requirement for local participation in investments (see local labor requirements below). Many businesses find it useful to have a local partner who can help navigate the subjective aspects of the business environment.

There are no limits on foreign ownership or control. However, Gabon Oil Company, a state-owned enterprise (SOE) created in 2011, has an automatic right to purchase up to a 15 percent share in any hydrocarbon contract at market price. The standard practice is for the Gabonese President to review foreign investment contracts after ministerial-level negotiations are completed. In certain cases, the President has appeared to intervene to keep negotiations stalled at the ministerial level, even when the deal was on track to a mutually satisfactory solution.

The President takes an active interest in meeting with investors. The lack of a standardized procedure for new entrants to negotiate deals with the government can lead to confusion and time-consuming negotiations. Moreover, the centralization of decision-making by a few senior officials who are exceedingly busy can delay the process. As a result, new entrants often find the process of finalizing deals time-consuming and difficult to navigate.

Other Investment Policy Reviews

Gabon has been a World Trade Organization (WTO) member since 1995. In June 2013, Gabon conducted an investment policy review with the WTO. The government has not conducted any investment policy reviews through the Organization for Economic Co-operation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) since 2017.

Business Facilitation

The government encourages investments in those economic sectors that contribute the greatest share to gross national product (GNP), including oil and gas, mining, and wood harvesting and transformation through customs and tax incentives. For example, oil and mining companies are exempt from customs duties on imported machinery and equipment specific to their industries. The Tourism Investment Code, enacted in 2000, provides tax incentives to foreign tourism investors during the first eight years of operation. The SEZ at Nkok offers tax incentives to industrial investors; the government has mused on the possibility of increasing the number of SEZs in a move to attract further investment.

ANPI-Gabon covers more than 20 public and private agencies, including the Chamber of Commerce, National Social Security Fund (CNSS), and National Health Insurance and Social Security (CNAMGS). It aims to attract domestic and international investors through improved methods of approving and licensing new companies and to support public-private dialogue. It has a single window registration process that allows domestic and foreign investors to register their businesses in 48 hours. There are, however, no special mechanisms for equitable treatment of women and underrepresented minorities in Gabon.

ANPI-Gabon’s website address is: https://www.investingabon.ga/

Outward Investment

One of ANPI-Gabon’s primary goals is to promote outward investments and exports. The Gabonese government does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

Government policies and laws often do not establish clear rules of the game, and foreign firms can have difficulty navigating the bureaucracy. Despite reform efforts, hurdles and red tape remain, especially at the lower and mid-levels of the ministries. Lack of transparency in administrative processes and lengthy bureaucratic delays occasionally raise questions for companies about fair treatment and the sanctity of contracts.

Rule-making and regulatory authority rests at the ministerial level. There are no nongovernmental organizations or private sector associations that manage informal regulatory processes. The government of Gabon has not exhibited any recent tendency to discriminate against U.S. investments, companies, or representatives.

The government does not publish proposed laws and regulations in draft form for public comment. There are no centralized online locations where key regulatory actions or their summaries are published. Key regulatory actions are published in the government’s printed Official Journal. It is not uncommon for legislative proposals to be provided “off the record” to the press.

Gabon is affiliated with the Organization for the Harmonization of Corporate Law in Africa (Organisation pour l’harmonisation en Afrique du droit des affaires, OHADA, http://www.ohada.com/).

The Transformation Acceleration Plan (PAT) is a new structure of enforcement of mechanisms to ensure governments follow administrative processes and was launched in January 2021 in response to a request by the IMF for a transparency enforcement mechanism. The PAT will monitor the implementation of administrative processes, and regularly transmit the monitoring information necessary for decision-making to the President of the Republic and the Prime Minister.

No new regulatory systems have been announced in the last year, and no new reforms have been implemented in the last year.

Gabon lacks transparency on public finances and debt obligations or explicit contingent liabilities.

International Regulatory Considerations

Gabon is a member of CEMAC, along with Cameroon, the Central African Republic, the Republic of Congo, Equatorial Guinea, and Chad. Gabon is also a member of the larger Economic Community of Central African States (ECCAS), which is headquartered in Gabon and has 11 members: Gabon, Angola, Burundi, Cameroon, Central African Republic, Chad, the Republic of Congo, Democratic Republic of Congo, Equatorial Guinea, Rwanda, and São Tomé and Príncipe. Both CEMAC and ECCAS work to promote economic cooperation among members.

Gabon is a member of OHADA, which includes nine validated Uniform Acts: General Commercial Law, Commercial Companies and Economic Interest Groups, Secured Transactions Law, Debt Resolution Law, Insolvency Law, Arbitration Law, Harmonization of Corporate Accounting, Contracts for the Carriage of Goods, and Cooperatives Companies Law.

Gabon has been a member of the WTO since January 1, 1995. It fulfills its duties on notification of all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

Gabon’s legal system is based on French Civil Law. Regular courts handle commercial disputes in compliance with OHADA’s standards. Courts do not apply the law consistently, however, and delays are frequent in the judicial system. A lack of transparency in administrative processes and lengthy bureaucratic delays call into question the country’s commitment to fair treatment and the sanctity of contracts. Judicial capacity is weak, and many government contacts underscore the need for specialized training in technical issues, such as money laundering and environmental crimes. Foreign court and international arbitration decisions are accepted, but enforcement may be difficult.

Gabon has a written code of commercial law.

Gabon’s judicial system is not independent from its executive branch, making them subject to political influence, which creates uncertainty around the fair treatment and the sanctity of contracts. Regulations or enforcement actions are appealable and are adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

Gabon’s 1998 investment code, which gives foreign companies operating in Gabon the same rights as domestic firms, allows foreign investors to choose freely from a wide selection of legal business structures, such as a private limited liability company or a public limited liability company. The distinctions arise primarily from the minimum capital requirements and the conditions under which shares may be re-sold. Foreign investment in Gabon is subject to local law that is in many instances unsettled or unclear, and in certain cases, Gabonese law may require local majority ownership of businesses. The state reserves the right to invest in the equity capital of ventures established in certain sectors (e.g., petroleum and mining). There are no known systemic practices by private firms to restrict foreign investment, participation, or control.

No major laws have come out this past year.

ANPI-Gabon’s website contains most of the information on investing in Gabon: https://www.investingabon.ga/.

Competition and Antitrust Laws

There are no specific ministries in charge of reviewing transactions and conduct for competition-related concerns. That responsibility lies with the ministry that is party to a contract.

The Gabonese Law No. 14/1998 of July 23, 1998, on the Establishment of the Competition Regime of Gabon on Competition covers all aspects of competition and anti-trust measures.

Expropriation and Compensation

Foreign firms established in Gabon operate on an equal legal basis with national companies. Businesses are protected from expropriation or nationalization without appropriate compensation, as determined by an independent third party.

The Gabonese government has not exhibited a tendency to expropriate, nor have there been any indications or reports of incidences of indirect expropriation.

Dispute Settlement

ICSID Convention and New York Convention

Gabon is a member state of the International Centre for the Settlement of Investment Disputes (ICSID) and a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The 1965 Code of Civil Procedure provides for various means of enforcement of judgments (both foreign and domestic), depending on the nature of the decree or decision.

Investor-State Dispute Settlement

Gabon does not have a BIT with the United States. Post is not aware of any investment dispute involving a U.S. company. However, in 2018, there was a foreign arbitral award issued against the government. The Société d’Energie et d’Eau du Gabon (SEEG), a subsidiary of the Veolia Group, a French transnational company, filed a request for conciliation against Gabon at ICSID. Veolia and the Gabonese government signed an agreement to settle the case in February 2019. Gabon agreed to buy Veolia’s 51 percent stake in SEEG and Veolia agreed to withdraw its arbitrage case once the agreement is finalized.

International Commercial Arbitration and Foreign Courts

No alternative dispute resolution options exist within Gabon. Investment disputes are generally negotiated directly with the governmental entity involved. There is no domestic arbitration body within the country. Local courts recognize foreign arbitral awards, but enforcement may be difficult.

Post is not aware of any cases of SOEs being involved in investment disputes in the court system.

Bankruptcy Regulations

Gabon has a bankruptcy law, but it is not well developed. In the World Bank’s Doing Business Report 2020 (http://documents.worldbank.org/curated/en/134861574860295761/pdf/Doing-Business-2020-Comparing-Business-Regulation-in-190-Economies-Economy-Profile-of-Gabon.pdf), Gabon ranks 130 out of 190 economies on the ease of resolving insolvency.

Gabon’s bankruptcy law is based on OHADA regulations. According to Section 3: Art 234-239 of OHADA’s Uniform Insolvency Act, creditors and equity shareholders, collectively or individually, may designate trustees to lodge complaints or claims to the commercial court. These laws criminalize bankruptcy, and the OHADA regulations grant Gabon the discretion to apply its own remedies.

Investment Incentives

Some of Gabon’s main industries (oil and gas, mining, and timber) enjoy investment preferences through customs and tax incentives. For example, oil and mining companies are exempt from customs duties on imported machinery and equipment specific to their industries making capital investments more affordable. The government implemented a new tourism code passed in February 2019 that provides tax exemptions to foreign tourism investors during the first eight years of operation.

President Bongo outlawed the export of unprocessed wood in 2009 to boost Gabon’s value-added wood products industry and increase domestic consumption. The government and Singapore-based firm Olam partnered to set up an SEZ at Nkok to process timber, and later expanded its mandate to a broader range of businesses. The SEZ provides a single-window business service to participants and provides new investors with beneficial fiscal incentives, including tax-free operation for 25 years, no customs duties on imported machinery and parts, and 100 percent repatriation of funds.

Gabon’s agriculture code of 2008 gives tax and customs incentives to agricultural operators, with a particular focus on SMEs. Land used for agriculture and farm exploitation is exonerated from fiscal tax. All imported fertilizers and animal feed are also exempt from customs duties.

As a member of CEMAC, Gabon’s trade with other member countries (Cameroon, Central African Republic, Chad, Republic of Congo, and Equatorial Guinea) is subject to low or no customs duties.

Foreign Trade Zones/Free Ports/Trade Facilitation

Inaugurated in 2011, the SEZ at Nkok is a PPP between the government of Gabon and Arise, a recently formed company that plans to operate many similar industrial facilitation zones in the region based on expected success in Gabon. Singapore-based Olam completed the infrastructure phase for the Nkok SEZ, and multiple companies are actively operating there. All SEZs offer tax and customs incentives to attract foreign investors. In 2017, the GSEZ inaugurated the New Owendo International Port. With a surface area of 18 hectares, the terminal has annual capacity of three million tons. Gabon has plans to expand the number of SEZ facilities.

Performance and Data Localization Requirements

Gabon mandates local employment.

In 2010, the Gabonese government agreed to National Organization of Petroleum Workers demands to limit foreign workers in the oil sector to 10 percent of a company’s workforce and to require that Gabonese occupy all executive posts.

Firms are required to obtain authorization from the Ministry of Labor before hiring foreigners. Foreign workers must obtain permits before working in Gabon, and the availability of a permit for a job depends on the availability of Gabonese nationals to fill the job in question.

There is no specific requirement imposed as a condition on investment.

Labor inspectors are in charge of following the implementation by companies of the “forced localization” rules under Gabonese labor laws regarding foreign workers.

There are no performance requirements for investors, nor are there any requirements for foreign IT providers to turn over source code and/or provide access to encryption. There are no measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory. No mechanisms exist to enforce rules on local data storage.

In September 2011, Gabon adopted Law No. 001/2011 on the Protection of Personal Data (available in French at http://www.afapdp.org/wp-content/uploads/2012/01/Gabon-Loi-relative-%C3%A0-la-protection-des-donn%C3%A9es-personnelles-du-4-mai-20112.pdf), which defines all the rules on data storage for the following agencies: the Gabon data protection authority (‘CNPDCP’);

• the Gabon data protection authority (‘CNPDCP’);
• the Electronic Communications and Postal Authority (‘ARCEP’); and
• the General Population and Housing Census (‘the GPHC Order’).

Real Property

Secured interest in property is recognized, and the recording system is relatively reliable.

There are no specific regulations for foreign and/or non-resident investors regarding land lease or acquisition. Laws in Gabon for private and commercial property do not provide any restrictions on nationality for the possession and ownership of property in Gabon.

Almost 85 percent of Gabon’s area (and possibly 95 percent or more) is legally owned by the state. Only 14,000 private land titles, mostly tiny urban parcels, appear to have been registered in Gabon according to a 2012 report (the most recent year for which such records exist). Urban areas constitute no more than one percent of total land area. The government created the National Agency for Urban Planning, Surveys, and the Land Registry in 2011.

If legally purchased property is unoccupied by the owner, property ownership can revert to others.

Intellectual Property Rights

The Ministry of Commerce manages patents and copyrights in Gabon. Gabon is a member of the African Intellectual Property Office (OAPI), based in Yaoundé, Cameroon. OAPI aims to ensure the publication and protection of patent rights, encourage creativity and technology transfer, and create favorable conditions for research. As a member of OAPI, Gabon acceded to international agreements on patents and intellectual property (IP), including the Paris Convention, the Bern Convention, and the Convention Establishing the World Intellectual Property Organization.

During the past year, no IP related laws or regulations were enacted concerning IP rights protection. Gabon does not report on seizures of counterfeit goods, so data is not available on enforcement. Gabon is not in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

Capital Markets and Portfolio Investment

There is no law prohibiting or limiting foreign investment in Gabon. Aside from the preference in employment given to Gabonese workers, from a general corporate law perspective, there are no specific legislative requirements. Regardless of the type of company, there must be one resident representative on the management board of all Gabonese companies. However, this resident representative can be a non-Gabonese citizen.

However, in the oil and gas industry, the state is entitled to hold a mandatory participating interest in a petroleum contract of up to 20 percent. Any acquisition by the sate in excess of the 20 percent must be purchased at market price.

In addition to this, the Gabon Oil Company (i.e., the national oil and gas company) is also entitled to acquire at market price a participating interest in any petroleum contract of up to 15 percent.

The contracting company can assign its rights and obligations under any hydrocarbons contracts to a third party, subject to the prior approval of the Ministry of Oil and Hydrocarbons and the Ministry of Economy. The state is entitled to right of first refusal on application to assign these rights to a third party, excluding assignments between the contracting company and its affiliates.The Gabonese government encourages and supports foreign portfolio investment, but Gabon’s capital markets are poorly developed. Gabon has been home to the Central Africa Regional Stock Exchange, which began operation in August 2008. Additionally, the Bank of Central African States is in the process of consolidating the Libreville Stock Exchange into a single CEMAC zone stock exchange to be based in Douala, Cameroon; this process began in July 2019.

On June 25, 1996, Gabon formally notified the IMF that they accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement. These sections provide that members shall not impose or engage in certain measures, namely restrictions on making payments and transfers for current international transactions, discriminatory currency arrangements, or multiple currency practices, without the approval of the IMF.

Foreign investors are authorized to get credit on the local market and have access to a variety of credit instruments offered by local banks without restriction.

Money and Banking System

The banking sector is composed of seven commercial banks and is open to foreign institutions. It is highly concentrated, with three of the largest banks accounting for 77 percent of all loans and deposits. The lack of diversification in the economy has constrained bank growth in the country, given that the financing of the oil sector is largely undertaken by foreign international banks. Access to banking services outside major cities is limited.

According to data from the Gabonese General Directorate for the Economy and Fiscal Policy, the term resources of the banking sector, mainly made up of accounts payable. term, and special regime deposit accounts (cash certificates), fell by 8% in the first half of 2020, due in particular to the negative impact of COVID-19 on economic activity. These resources stood at 552.1 billion FCFA at the end of June 2020, compared to 600 billion a year earlier.

The Gabonese banking sector remains weak due to its difficulty in financing the private sector due to unreliable and often incomplete documentation presented by new companies. In addition, loan rates offered by banks are very high – around 15 percent – discouraging individuals and businesses.

BGFI Bank Gabon is the largest Gabonese bank in both deposits and loans with approximatively 45 percent of the market share and a balance sheet total of over 3,000 billion FCFA, according to the Professional Association of Gabon Credit Institutions (APEC). The Bloomfield Investment Corporation financial rating agency gave the BGFI Bank a mark of A+ in recognition for its financial strength and management system.

Gabon shares a common Central Bank (Bank of Central African States) and a common currency, the Communauté Financière Africaine (CFA) Franc, with the other countries of CEMAC. The CFA is pegged to the euro.

Foreign banks are allowed to establish operations in the country. There is one U.S. bank (Citigroup) present in Gabon. There are no restrictions on a foreigner’s ability to establish a bank account in the local economy.

Gabon’s financial system is shallow and financial intermediation levels remain low. Basic documents are required for applying for a residency permit in Gabon.

Foreign Exchange and Remittances

Foreign Exchange

The Bank of Central African States’ policy on foreign exchange requirements is in flux. Please contact the Embassy for additional information.

Funds associated with any form of investment to be freely converted into any world currency now have to go through the Bank of Central African States’ new process related to foreign and exchange currency rules.

Gabon’s currency is the FCFA, which is convertible and is tied to the Euro (EUR 1:FCFA 656). As of March 2021, 1 U.S. dollar is roughly equivalent to CFA 535

Remittance Policies

The Gabonese government recently changed investment remittance policies to tighten access to foreign exchange for investment remittances. There is no time limitation on capital inflows or outflows.

Sovereign Wealth Funds

Gabon created a Sovereign Wealth Fund (SWF) in 2008. Initially called the Fund for Future Generations (Fonds des Génerations Futures) and later changed to the Sovereign Funds of the Gabonese Republic (Fonds Souverains de la République Gabonaise), the current iteration of Gabon’s SWF is referred to as Gabon’s Strategic Investment Funds (Fonds Gabonaises d’Investissements Stratégiques, or FGIS). As of September 2013, the most recent FGIS report, the FGIS had USD 2.4 billion in assets and was actively making investments. Further details are not available.

Gabon’s sovereign wealth fund does not follow the Santiago principles, nor does Gabon participate in the IMF-hosted International Working Group on SWFs.

Government-appointed civil servants manage Gabonese state-owned enterprises (SOEs), which operate primarily in energy, extractive industries, and public utilities. SOEs generally follow OECD guidelines on corporate governance, which usually consists of a board of directors under the authority of the related ministry. That ministry chooses the board members, who may be government officials or members of the general public. The SOEs often consult with their ministry before undertaking any important business decisions. The corresponding ministry in each sector prepares and submits the budget of each SOE each year. Independent auditors examine the SOEs’ activities each year, conducting audits according to international standards. Auditors do not publish their reports, but rather submit them to the relevant ministry.

There is no published list of SOEs.

There are no specific laws or rules that offer preferential treatment to SOEs. However, although private enterprises may compete with public enterprises under open market access conditions, SOEs often have a competitive advantage in the industries in which they operate.

Privatization Program

Gabon does not have an active privatization program. However, when there is a privatization program foreign investors are usually invited to participate. The bidding process for these programs are easy to understand, non-discriminatory, and transparent. No links are available, as there are currently no active privatization programs.

There is a general awareness of responsible business conduct (RBC) among both producers and consumers; however, there are no formal rules or regulations pertaining to RBC in Gabon. There has been no high-profile private sector impact on human rights in recent years.

Gabon has several NGO’s working primarily in the environment, human rights, and mining sectors. The political labor unions in Gabon have taken the lead in promoting and monitoring RBC, and they are able to work freely. With a push from these labor unions, Gabon fairly enforces labor rights laws and regulations intended to protect individuals from adverse business impacts. However, Gabon has not effectively enforced consumer protection laws and regulations.

While Gabon is widely praised as a leader in environmental protection and has been praised as a positive example in Africa, it still experiences significant issues with of pollution where prosecution is weak and penalties insufficient. All the same, the President is highly environmentally-minded, and Gabon is known for its beautiful nature parks and beaches.

Gabon has not put in place corporate finance, accounting, and executive compensation standards to protect shareholders. There are no domestic measures requiring supply chain due diligence for companies that source minerals.

Gabonese authorities state that they are committed to Extractive Industries Transparency Initiative (EITI) principles. Gabon was a candidate for the EITI beginning in 2007. By December 2012, Gabon was required to have completed an EITI validation that demonstrated compliance with the initiative’s rules. However, due to the non-respect of deadlines and the non-performance of Gabon’s National EITI Committee, the International Council of the EITI voted on February 27, 2013 to exclude Gabon from the application process. Under the current IMF program, Gabon was expected to submit an application to EITI by September 30, 2019 which is still not done.

On December 11, 2020 a new President of the EITI Interest Group of Gabon was appointed by the Gabonese authorities with her main objectives being to re-launch the membership process by fully meeting the requirements and criteria on data collection for requested sectors and activities and on the management of natural resources.

There is no information on national legislation regarding private security companies. Gabon is not a signatory of The Montreux Document on Private Military and Security Companies. Little information is available on the private security industry in Gabon. An estimate from 2015 nevertheless indicated that the private security sector in Gabon employs around 7,000 PSC personnel, indicating that it is a significant actor in the Gabonese security landscape.

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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 Gabonese Penal Code criminalizes abuse of office, embezzlement, passive and active bribery, trading in influence, extortion, offering or accepting gifts, and other undue advantages in the public sector, yet enforcement remains limited and official impunity is a problem. Private sector corruption is criminalized whenever a given company is related to a public entity. Punishments for public officials found guilty of soliciting or accepting bribes include prison sentences ranging from two to 10 years, and a fine of CFA 5 million (USD 8,572). Corruption is rarely prosecuted in Gabon, except in limited high-profile cases. In 2020, Transparency International listed Gabon at 129 of 179 countries.

The government established the Commission to Combat Illicit Enrichment (CNLCEI) in 2004; however, in the summer of 2018, the CNLCEI’s five year mandate was not renewed. Its regulations did not extend to the family members of civil servants or to political parties.

There are no known laws or regulations to counter conflicts of interest in awarding contracts or government procurement. There is no information about any action on the part of the government to encourage or require private companies to establish codes of conduct that prohibit the bribery of public officials. Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

Gabon is a signatory to the United Nations Convention against Corruption and is a member of the Task Force on Money Laundering in Central Africa (Groupe d’action contre le blanchiment d’argent en Afrique Centrale, or GABAC). However, no international or regional watchdog organizations operate in Gabon. Local civil society lacks the capacity to play a significant role in highlighting cases of corruption.

Companies contend with a high risk of corruption when dealing with the Gabonese extractive industries. Gabon has vast oil, manganese, and timber resources; however, contracting and licensing processes lack transparency.

Resources to Report Corruption

National Financial Investigations Agency
Tel : +241 01176 1773
Agence Nationale d’Investigation Financière
Immeuble Arambo, Boulevard Triomphal
BP :189
Libreville, Gabon contact@anif.ga 

Violence related to politics is relatively rare in Gabon. Elections, however, can lead to heightened tensions or violence.

While the 2018 legislative and local elections took place without major incident, violence did break out on August 31, 2016, after the National Electoral Commission announced that the incumbent ABO defeated his opponent Jean Ping in the presidential election by a margin of less than 2%. Protestors took to the streets, attempting to burn the National Assembly building. Non-governmental organizations stated the government’s use of excessive force to disperse demonstrators resulted in approximately 20 deaths and over 1000 arrests; the opposition claimed at least 50 people were killed.

The COVID-19 pandemic has had a major impact on Gabon’s economy since March 2020. Measures to contain cases included closing several economic sectors, which increased the unemployment rate, with around 12,500 Gabonese losing their jobs (Minister of Labor announcement, January 2021). The social tension was high in February 2021 when further restrictions were announced, including a 6PM to 5AM curfew; this led to peaceful protests, occasionally marked by riots, during which two people were killed in Libreville and Port-Gentil.

Gabon has a population of approximately 2.2 million; third country nationals (TCNs) make up roughly one-third of the population. Many young Gabonese are unable to acquire vocational skills and are thus excluded from the labor market. A report in October 2018 indicated that 60% of Gabonese under 30 are unemployed. This is due to the bad quality of the basic education system, insufficient output of technical and vocational training, and a lack of resources and effectiveness in the education sector.

Foreign firms report a shortage of highly skilled Gabonese labor. Chinese industrial companies, in particular, import the majority of their workers from China. Authorization from the Ministry of Labor is required to hire foreigners. Reforms adopted in 2010 in the education and research system represent a step towards developing service training and encouraging PPPs. For example, the Petroleum and Gas Institute, located in Port Gentil and supported by the Gabonese government and oil industry, has been training engineers specialized in oil-related technical areas since 2014.

When hiring workers, firms must give priority to Gabonese nationals. If no Gabonese worker with the appropriate qualifications can be found, a firm is expected to hire a Gabonese to work along with the foreigner and, within a reasonable time, the Gabonese worker should replace that foreigner.

Labor laws differentiate between layoffs and firing. There is no unemployment insurance or other social safety net program for workers laid off for economic reasons. However, the GSEZ is not subject to the same foreign labor restrictions as the rest of the country.

Collective bargaining is common in Gabon. Gabon’s French-inspired labor code recognizes the right of workers to form and join independent unions and bargain collectively, and prohibits antiunion discrimination. The government observes the resolution of labor disputes and takes an active interest in labor-management relations. Unions in each sector of the economy negotiate with employers over pay scales, working conditions, and benefits.

However, the right to strike is limited or restricted. Strikes may be called only after eight days’ advanced notice and only after arbitration fails. Public sector employees are not allowed to strike if public safety could be jeopardized. The law does not define essential services sectors in which workers are prohibited from striking. Nevertheless, public and private sector strikes are frequent and disruptive. From February-June 2018, Gabon court clerks were on strike, limiting the functions of the justice system. The civil servants in the financial authorities initiated strikes several times in the past few years, slowing customs processing and work done in the tax, custom, treasury, and hydrocarbons sectors.

The Gabonese government strictly enforces the labor code’s mandatory retirement age of 65.

Gabon has ratified most of the International Labor Organization (ILO) laws and conventions. There are no gaps in compliance in law or practice with international labor standards that may pose a reputational risk to investors.

A new Gabonese Labor Code is working its way through the legislative process and is expected to be implemented by the end of 2021. The draft reforms concern several key issues, including the strengthening of protections for workers’ rights, fighting against discrimination and eliminating gender inequalities, opening up the formal labor market to new categories of work and codifying telework. The new code should also improve the employability of young people and simplify work authorization procedures for large projects. It will affect trade union representative and other professional elections. It will also strengthen apprenticeship, which brings the world of vocational training closer to that of employment and promotes professional integration and retraining.

* Source for Host Country Data:  Gabon 2021 budget; the World Bank 2019-2020 report; the IMF country report; the website for the Gabonese Ministry of Economy.

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

Table 4: Sources of Portfolio Investment
Data not available.

Christopher Tremann
Deputy Chief of Mission
U.S. Embassy Libreville
Tel: (241) 11.45.71.30 tremannce@state.gov
tremannce@state.gov
LibrevillePE@state.gov

Policies Towards Foreign Direct Investment

Mauritius actively seeks foreign investment.  According to several surveys and metrics, Mauritius is among the freest and most business-friendly countries in Africa.  For the 12th consecutive year, the World Bank’s 2020 Doing Business report ranked Mauritius first among African economies, and 13th worldwide, in terms of overall ease of doing business.  It also outperforms all other African countries on the Human Development Index where, in 2020, it ranked 67 out of 189 countries.  The 2021 Index of Economic Freedom, published by the Heritage Foundation, ranked Mauritius first among 47 countries in the Sub-Saharan Africa region and 13th globally, compared to being 21st in 2020.  However, the index said that the government would need to reverse its negative trend in government integrity, which registered at a level typical of countries that were ranked lower in economic freedom.

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

In terms of investor retention policy, the EDB provided aftercare services that considered future business environment requirements for survival and/or expansion.  The EDB has a customer service unit that took investor suggestions and complaints.  EDB also organized workshops and roundtable sessions to inform investors about changes in investment policies.

Limits on Foreign Control and Right to Private Ownership and Establishment

A non-citizen can hold, purchase, or acquire real property under the Non-Citizens (Property Restriction) Act (NCPRA), subject to government approval.  A foreigner can acquire residential property and apartments under the government-regulated Property Development Scheme (PDS).  The NCPRA was amended in December 2016 to allow foreigners to purchase certain types of properties, as long as the amount paid is over 6 million Mauritian rupees (approximately 172,000 USD).  A non-citizen is eligible for a residence permit upon the purchase of a house under the PDS if the investment made is more than 500,000 USD.  More information is available at http://dha.pmo.govmu.org/English/Mandate/Pages/Non-Citizens-Property-Restriction.aspx.

No government approval is required in certain situations provided under the NCPRA, namely: (i) holding of immoveable property for commercial purposes under a lease agreement not exceeding 20 years; (ii) holding of shares in companies that do not own immoveable property; (iii) holding of immoveable property by inheritance or effect of marriage to a citizen under the “régime legal de communauté;” (iv) holding of shares in companies listed on the Stock Exchange of Mauritius; and (v) through a unit trust scheme or any collective investment vehicle as defined in the Securities Act.  More information is available at www.dha.govmu.org.

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

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

In the sugar sector, no foreign investor is allowed to make an investment that would result in 15 percent or more of the voting capital of a Mauritian sugar company being held by foreign investors.  However, foreign investors may be exempt from this rule subject to authorization by the Financial Services Commission.

In the tourism sector, there are conditions on investment by non-citizens in the following activities: (i) guesthouse/tourist accommodation; (ii) pleasure craft; (iii) diving; and (iv) tour operators.  Generally, the conditions include a minimum investment amount, number of rooms, or a maximum equity participation, depending on the business activity.

In the construction sector, foreign consultants or contractors are required to register with the Construction Industry Development Board (CIDB).  Details on registration procedures are available on   http://cidb.govmu.org/English/Consultants-Contractors/Pages/default.aspx.

The Investment Office of the EDB screens foreign investment proposals and provides a range of services to potential investors.  The EDB is a useful resource for investors exploring business opportunities in Mauritius and provides assistance with occupation permits, licenses, and clearances by coordinating with relevant local authorities.  In 2020, the U.S. Embassy in Port Louis did not receive negative comments from U.S. businesses regarding the fairness of the government’s investment screening mechanisms.

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

In response to the Covid-19 crisis, the GoM relaxed investment terms and conditions for foreign investors in 2020.  For instance, the minimum investment amount for obtaining an occupation permit was halved to 50,000 USD.  The minimum turnover and minimum amount invested for the Innovator Occupation Permit was removed.  Professionals with an occupation permit and foreign retirees with a residence permit were able to invest in other ventures without any shareholding restrictions.  The permanent residence permit validity was doubled to 20 years.  Non-citizens who had a residence permit under the various real estate schemes were no longer required to hold an occupation or work permit to invest and work in Mauritius.

The conditions relating to the acquisition of property developed under the Property Development Scheme (PDS) and Smart City Scheme (SCS) were also loosened.  The minimum price of a property that buyers could use to then apply for a residence permit dropped to 375,000 USD from 500,000 USD.

In 2020, the Non-Citizens (Employment Restriction) Act was amended to enable the following categories of individuals to engage in any occupation without the need for a permit: (a) the holder of an occupation permit issued under the Immigration Act; (b) the holder of a residence permit issued under the Immigration Act; (c) a non-citizen who has been granted a permanent resident permit under the Immigration Act; and (d) a member of the Mauritian diaspora under the Mauritian Diaspora Scheme.

Other Investment Policy Reviews

In 2018, the United Nations Conference on Trade and Development (UNCTAD) published its 2017 Report on the Implementation of the Investment Policy Review (IPR) for Mauritius. The GoM also requested UNCTAD’s assistance to craft a strategic investment plan.

UNCTAD worked with the GoM on the Industrial Policy Strategic Plan, launched in December 2020, found here:  https://unctad.org/system/files/official-document/gdsinf2020d5_en.pdf.

Mauritius’ other most recent third-party investment policy reviews through multilateral organizations were completed in 2014.  In June 2014, the Mauritius Government conducted an investment policy review with the Organization for Economic Cooperation and Development (OECD).  The review concluded that, while policies and legislation in Mauritius support private sector development, incentive schemes tend to bias investment towards real estate and property development.  In October 2014, the Mauritius Government also conducted a trade policy review with the World Trade Organization (WTO).  A new trade policy review was expected to start in May 2020.

In February 2020, the Financial Action Task Force (FATF) placed Mauritius on the list of jurisdictions under increased monitoring concerning anti-money laundering/combating the financing of terrorism (AML/CFT).  The European Union also concluded that Mauritius had strategic deficiencies in its AML/CFT regime under Article 9 of its 4th Anti-Money Laundering Directive and in October 2020 added Mauritius to its list of high-risk countries.

Business Facilitation

The Mauritian government recognizes the importance of a good business environment to attract investment and achieve a higher growth rate.  In 2019, the Business Facilitation (Miscellaneous Provisions) Act entered into force.  The main reforms brought about by this legislation were expediting trade fee payments, reviewing procedures for construction permits, reviewing fire safety compliance requirements, streamlining of business licenses, and implementing numerous trade facilitation measures.

The incorporation of companies and registration of business activities falls under the provisions of the Companies Act of 2001 and the Business Registration Act of 2002.   All businesses must register with the Registrar of Companies. In 2020, the Business Registration Act was amended to highlight that the Registrar of Companies shall be the Central Repository of business licenses and information. Accordingly, every public sector agency shall electronically forward a copy of any permit, license, authorization or clearance to the Registrar for publication in the Companies and Businesses Registration Integrated System (“CBRIS”). As a general rule, a company incorporated in Mauritius can be 100 percent foreign owned with no minimum capital.  According to the World Bank 2020 Doing Business report, while the procedure for registering a company takes one day, actually starting a business takes 4.5 days.

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

In partnership with the Corporate and Business Registration Department (a division of the Ministry of Finance and Economic Development), the Mauritius Network Services (MNS) has implemented the Companies and Business Registration Integrated System, a web-based portal that allows electronic submission for incorporation of companies and application for the Business Registration Number, file statutory returns, pay yearly fees, register businesses, and search for business information.

In March 2019, the National Electronic Licensing System (NELS), which is co-financed by the European Union, was officially launched.  NELS is a single point of entry for the processing of permits and licenses needed to start and operate a business. The submission of business licensing (including Building and Land Use Permit, Occupation Certificate, etc.) can now be done electronically with the implementation of the National Electronic Licensing System.

In 2020, the Economic Development Board Act was amended to allow companies to log any obstacles relating to obtaining licenses, permits, authorizations, or other clearances; to enquire about any issue and make recommendations to government agencies; and to report and publish any actions taken.

Mauritius also implemented the e-Registry System, where a national register of real estate properties and statistics on land dispute resolutions were publicly available.  A mechanism for filing of complaints was also implemented.  The e-Registry System featured an electronic dashboard for registry searches, submission of documents, online payment of registration fees, and electronic copies of registered documents.

Outward Investment

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

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

In 2019, the most recent figures available from the Bank of Mauritius, gross direct investment flows abroad (excluding the offshore sector) amounted to 96 million USD.  The top three sectors for outward investment were financial and insurance activities (24 percent), accommodation and food service activities (18 percent), and real estate activities (8 percent).  Investment abroad was focused mainly on developing countries, particularly in Africa, which received 32 million USD.  Seychelles was the top recipient country, receiving 15 million USD.

In 2006, Mauritius and the United States signed a Trade and Investment Framework Agreement (TIFA) aimed at strengthening and expanding trade and investment ties between the two countries.  The United States has not signed a bilateral investment treaty or a free trade agreement with Mauritius.  Mauritius benefits from duty free and quota free access to the United States on approximately 6,500 tariff lines through the African Growth and Opportunity Act (AGOA).  This trade preference is valid until 2025 unless Mauritius graduates out of AGOA before then by moving up to high-income country status as defined by the World Bank.  In 2020, even though the World Bank upgraded Mauritius to high-income status, the U.S. government did not put Mauritius on track to graduate from AGOA.

Mauritius has been a member of the World Trade Organization since 1995 and has signed trade agreements with several regional blocs and countries.  These include the Common Market for Southern and Eastern Africa Free Trade Area (COMESA), the Indian Ocean Commission (IOC – only Madagascar offers trade preferences under the IOC), the interim Economic Partnership Agreement with the European Union (EU), the Southern African Development Community Free Trade Area (SADC), a free trade agreement with Turkey, and a preferential trade agreement with Pakistan.

In January 2021, the free-trade agreement between China and Mauritius, the first free-trade agreement between China and an African country, took effect.  Also in January 2021, the African Continental Free Trade Area Agreement (AfCFTA) took effect.  India and Mauritius signed their Comprehensive Economic Cooperation Partnership Agreement (CECPA) in February 2021, and it took effect in April 2021.

The UK-ESA EPA also entered into force in January 2021 after the Brexit transitional period ended on the last day of 2020.  This EPA, which Mauritius, Seychelles, and Zimbabwe signed in January 2019, was a continuity agreement based on the EU-ESA interim Economic Partnership Agreement (iEPA).

Mauritius has signed Investment Promotion and Protection Agreements (IPPA) with 45 countries.  The following 30 IPPAs have been ratified and are in force:  Barbados, Belgium/Luxemburg Economic Union, Burundi, China, Czech Republic, Egypt, Finland, France, Germany, Indonesia, Kuwait, Madagascar, Mozambique, Pakistan, Portugal, Cabo Verde, Republic of Congo, Romania, Senegal, Singapore, South Africa, South Korea, Sweden, Switzerland, Tanzania, Turkey, United Arab Emirates, United Kingdom, and Zambia.  The following 15 IPPAs have been signed but await ratification:  Benin, Cameroon, Chad, Comoros, Cote d’Ivoire, Gabon, Ghana, Guinea, Kenya, Mauritania, Nepal, Rwanda, Eswatini, Sao Tome and Principe, and Zimbabwe.

In 2013, Mauritius signed a Tax Information Exchange Agreement (TIEA) and an Inter-Governmental Agreement (IGA) with the United States to implement the Foreign Account Tax Compliance Act (FATCA).

Mauritius has also signed TIEAs with Australia, Austria, Denmark, Faroe Island, Finland, Greenland, States of Guernsey, Iceland, South Korea, and Norway.  TIEAs with Argentina, Greece, and Isle of Man await signature. Updated information on TIEAs can be accessed via the following link:  https://www.mra.mu/index.php/taxes-duties/international-taxation/double-taxation-agreements.

Mauritius has concluded 46 Double Taxation Avoidance Agreements (DTAAs) and is party to a series of treaties under negotiation. The treaties currently in force are:  Australia (Partial), Belgium, Botswana, Cape Verde, Congo, Croatia, Cyprus, Egypt, France, Germany, Ghana, Guernsey, India, Italy, Jersey, Kuwait, Lesotho, Luxembourg, Madagascar, Malaysia, Malta, Monaco, Mozambique, Namibia, Nepal, Oman, Pakistan, Bangladesh, China, Rwanda, Seychelles, Singapore, Sri Lanka, South Africa, Qatar, Eswatini, Sweden, Thailand, Tunisia, Uganda, United Arab Emirates, United Kingdom, and Zambia.  Six treaties await ratification: Gabon, Comoros, Kenya, Morocco, Nigeria, and Russia.  Six treaties await signature:  Cote d’Ivoire, Estonia, Gibraltar, Malawi, the Gambia and Angola.   Another 21 treaties were being negotiated: Algeria, Burkina Faso, Canada, Czech Republic, Greece, Hong Kong, Lesotho, Montenegro, Sudan, Portugal, Iran, Saudi Arabia, Senegal, Spain, St. Kitts & Nevis, Tanzania, Vietnam, Yemen, Zambia, Mali, and Turkey.

Mauritius has adopted the OECD’s Standard for Automatic Exchange of Financial Account Information (Common Reporting Standard – CRS), which sets a global benchmark that participating countries will adhere to in a proactive fiscal-information world.  The first reporting under this standard was undertaken in September 2018.

Transparency of the Regulatory System

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

Regulatory agencies do not request comments on proposed bills from the general public.  Both the notice of the introduction of a government bill and a copy of the bill are distributed to every member of the Legislative Assembly and published in the Government Gazette before enactment.  Bills with a “certificate of urgency” can be enacted with summary process.  All proposed regulations are published on the Legislative Assembly’s website and are publicly available.

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

Budget documents, including the executive budget proposal, enacted budget, and end-of-year report, are publicly available and provide a substantially full picture of Mauritius’ planned expenditures and revenue streams.

International Regulatory Considerations

Mauritius is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) The Mauritius Government implements its commitments to these regional economic institutions with domestic legal and regulatory adjustments, as appropriate).  Mauritius is a signatory to the Tripartite Free Trade Area and the African Continental Free Trade Area (AfCFTA).  AfCFTA took effect in January 2021.  Negotiations are still ongoing regarding the Tripartite FTA.

Mauritius has been a member of the World Trade Organization (WTO) since 1995.  The GoM notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade to the extent possible.  In July 2014, Mauritius notified its category A commitments to the WTO, among the first African countries to do so.  Mauritius was the fourth country to submit its instrument of acceptance for the Trade Facilitation Agreement (TFA).   Mauritius notified its category B & C commitments and its corresponding indicative dates of implementation in 2015.  It also indicated its requirements to implement category C measures.  With the coming into force of the WTO Trade Facilitation Agreement (TFA) in February 2017, Mauritius is implementing all of its category A commitments.

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

To coordinate efforts to implement the TFA, in 2015 Mauritius set up a National Committee on Trade Facilitation co-chaired by representatives from government and the private sector.  Members include MRA Customs, the Ministry of Agro-Industry and Food Security, the Ministry of Finance and Economic Development, the Mauritius Chamber of Commerce and Industry and the Economic Developments Board, amongst others.   The committee meets twice a year and discussion topics include identification of sources of financing for category C commitments and resolution of non-tariff barriers in Mauritius.

Mauritius is also part of the Cotonou Agreement, a 2000 treaty between the European Union and the African, Caribbean and Pacific Group of States.  The Cotonou Agreement was extended until November 2021 and negotiations were held to finalize a post-Cotonou Agreement.  This new agreement was finalized in December 2020 and was expected to take effect in December 2021.  It will focus on human rights, democracy, and governance; security; human and social development; environmental sustainability and climate change; sustainable growth; and migration and mobility.

Legal System and Judicial Independence

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

In 2020, the Courts Act was amended to provide for the creation of a Financial Crimes Division within the Supreme Court and the Intermediate Court.  An amendment to the Courts Act provided for the establishment of a Land Division court at the Supreme Court to expedite land dispute resolutions.

The Mauritian government as well as the judiciary are supportive of arbitration. Mauritius is a party to the New York Convention 1958, the United Nations Convention on Transparency in Treaty-based Investor State Arbitration, and has two arbitration centers.

Contracts are legally enforceable and binding.  Ownership of property is enforced with the registration of the title deed with the Registrar-General and payment of the registration duty.  Mauritian courts have jurisdiction to hear intellectual property claims, both civil and criminal.  The judiciary is independent, and the domestic legal system is generally non-discriminatory and transparent.

The Embassy is not aware of any recent cases of government or other interference in the court system affecting foreign investors.

Laws and Regulations on Foreign Direct Investment

The Economic Development Board Act of 2017 governs investment in Mauritius, while the Companies Act of 2001 contains the regulations governing incorporation of businesses.  The Corporate and Business Registration Department (CBRD) of the Ministry of Finance and Economic Development administers the Companies Act of 2001, the Business Registration Act of 2002, the Insolvency Act of 2009, the Limited Partnerships Act of 2011, and the Foundations Act of 2012.

Competition and Antitrust Laws

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

The institutional design of the Competition Commission houses both an adjudicative and an investigative organ under one body.  While the Executive Director has power to investigate restrictive business practices (the Investigative Arm), the commissioners determine the cases (the Adjudicative Arm) on the basis of reports from the Executive Director.  Any party dissatisfied with an order or direction of the commission may appeal to the Supreme Court within 21 days.

Since it began operations, the Competition Commission has undertaken 55 investigations, of which 45 have been completed and 10 are ongoing as of March 2021.  To date, it has also conducted 281 enquiries, which are preliminary research exercises prior to proceeding to investigations.  The Competition Commission has also assessed 143 mergers across the Common Market for Southern and Eastern Africa Free Trade Area (COMESA) member states that affected Mauritius.

Since 2018, the Competition Commission has initiated a process to review and amend the Competition Act of 2007 to enable more effective enforcement.  The process is expected to be completed in 2021.

Expropriation and Compensation

The Constitution includes a guarantee against nationalization.  However, in 2015, the government passed the Insurance (Amendment) Act to enable the Financial Services Commission (FSC) to appoint special administrators in cases where there is evidence that the liabilities of an insurer and its related companies exceed assets by 1 billion rupees (approximately $25 million) and that such a situation “is likely to jeopardize the stability and soundness of the financial system of Mauritius.”  The special administrators are empowered to seize and sell assets.  The government enacted this law in the immediate aftermath of the financial scandal explained below.

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

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

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

Dispute Settlement

Mauritius is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), and a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act.  Mauritius is also a member of the Multilateral Investment Guarantee Agency of the World Bank.  In 2014, it became a signatory of the United Nations Convention on Transparency in Treaty-based Investor State Arbitration 2014, also known as the Mauritius Convention as it was first signed in Mauritius.  In August 2019, it signed the United Nations Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention.

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 2004 is the domestic legislation providing for the enforcement of awards under the 1958 New York Convention.  Because Mauritius is a party to the New York Convention without any reciprocity reservation, all foreign arbitral awards are enforceable in Mauritius.  The 1969 Investment Disputes (Enforcement of Awards) Act is the domestic legislation providing for enforcement of disputes under the Washington Convention.

Investor-State Dispute Settlement

The Mauritian government is party to several investment agreements recognizing international arbitration of investment disputes.  Most Investment Promotion and Protection Agreements (IPPA) include an arbitration clause referring to the ICSID dispute settlement mechanism.

While Mauritius has a Trade and Investment Framework Agreement with the United States, it does not have a specific bilateral investment treaty or free trade agreement with the United States.

The embassy is aware of a dispute between a U.S. company that operates in Mauritius and a parastatal partner.  After an apparent commercial impasse, in early 2020 the parastatal board filed a criminal complaint against the CEO of the U.S. company, who is a U.S. citizen.  The accused, whom police did not take into custody but forbade to leave the country pending investigation, alleged that the parastatal filed the complaint to gain leverage in the commercial dispute.  Both the commercial and criminal disputes continued through early 2021.

Recent investor-state disputes involving Mauritius and heard before ICSID include the following:

The Doutremepuich v. Mauritius arbitration began in 2018 due to an investment dispute over the ownership of three locally incorporated enterprises for the construction and operation of a forensic DNA and paternity testing laboratory in Mauritius.  The investor claimed that the GoM terminated the project after approving it.  The arbitral tribunal decided in favor of the GoM because the court lacked jurisdiction to hear the claims.

The Gosling and Others v. Mauritius arbitration began in 2016 and was related to a dispute over investments in two tourist resorts.  The investors claimed that GoM policies, namely changes to its planning guidance policy and the designation of one area as an UNESCO World Heritage Site, rendered the investments worthless.  In February 2020, the arbitration panel decided in the GoM’s favor.

The Rawat v. Mauritius arbitration, linked to the BAI case outlined above, started in 2015.  The claimant alleged that the GoM illegally appointed special administrators to take control over two insurance and banking companies as well as related companies in which the claimant held interests, and later sold or transferred assets to state-owned companies and third parties.  In April 2018, the arbitral tribunal decided in favor of the GoM on jurisdictional grounds.

In 2017, the Supreme Court ruled on an unfair competition case lodged in 2005 by Emtel, a local telecommunications firm, against state-owned Mauritius Telecom and the former Telecommunications Authority.  The court awarded over $16 million in damages to Emtel.

Another dispute involved Mauritian company Betamax against the State Trading Corporation (STC) for breach of contract.  STC is a public body and trading arm of the GoM.  In 2009, it entered into a contract with Betamax to transport petroleum products to Mauritius.  The contract provided for arbitration under the rules of the Singapore International Arbitration Centre.  In 2015, following a change of government, the cabinet terminated the contract alleging that it violated the 2006 Mauritian Public Procurement Act.  Betamax initiated arbitration proceedings against STC.  In 2017, the arbitrator decided in favor of Betamax and awarded damages for STC’s failure to perform its obligations under the contract.  STC then petitioned the Supreme Court of Mauritius to set aside the verdict, arguing that the Singapore tribunal lacked jurisdiction.  In 2019, the Supreme Court set aside the arbitral award on the grounds that the contract violated the Public Procurement Act, was illegal and unenforceable, and therefore the arbitral award was contrary to the public policy of Mauritius under the Mauritian International Arbitration Act 2008.  In June 2019, Betamax appealed to the UK Privy Council, which in June 2021 decided in favor of Betamax and enforcement of the arbitration decision.  The Privy Council ruled that the Supreme Court was not entitled to review the arbitration decision and that the contract did not breach public procurement laws.

In October 2017, the Association des Hoteliers et Restaurateurs of Mauritius (AHRIM) and the Sea Users Association (SUA) challenged the GoM’s issuance of a license to Growfish International to develop aquaculture farms.  The groups feared the fish farms would negatively impact tourism and the marine environment.  The Environment and Land Use Appeal Tribunal ruled in favor of AHRIM and SUA.  The Ministry of Environment and Growfish appealed to the Supreme Court and proceedings were ongoing.

A Malaysian power company, CT Power, challenged the GoM’s decision to cancel a proposed energy project that it had been negotiating with the previous government. The Supreme Court ruled in favor of the Malaysian company, and the GoM appealed to the Judicial Committee of the Privy Council.  In June 2019, the Privy Council decided in favor of the GoM.

Local courts recognized and enforced foreign arbitral awards issued against the government or a public body.  The Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 2004 is the domestic legislation providing for the enforcement of awards under the 1958 New York Convention.  Because Mauritius is a party to the New York Convention without any reciprocity reservation, all foreign arbitral awards are enforceable in Mauritius.  The 1969 Investment Disputes (Enforcement of Awards) Act is the domestic legislation providing for enforcement of disputes under the Washington Convention.

There is no known or reported extrajudicial action taken against foreign investors in Mauritius.

International Commercial Arbitration and Foreign Courts

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

Additionally, the Mauritius Chamber of Commerce and Industry (MCCI), which pioneered institutional arbitration in Mauritius, set up the MCCI Permanent Court of Arbitration in 1996. In 2012, it was rebranded as the MCCI Arbitration and Mediation Center (MARC).   As from July 2020, MARC was operating under the Mediation and Arbitration Center (Mauritius) Ltd.  More information is available via the following link:  https://www.marc.mu/en.

Bankruptcy Regulations

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

According to the World Bank’s 2020 Doing Business report, Mauritius ranks 28th out of 190 countries in terms of resolving insolvency, with a rating of 12 over 16 in the World Bank’s strength of insolvency framework index.

There were no special procedures that foreign creditors must comply with when submitting claims in insolvency proceedings.  The law provides that foreign creditors have the same rights regarding the commencement of, and participation in, an insolvency proceeding as Mauritian creditors.  The Second Schedule to the Insolvency Act applies to foreign creditors with respect to the procedures for proving their debts.

The creditor must send to the liquidator of the company an affidavit, sworn by the creditor or an authorized person, that verifies the debt and contains a statement of account showing the particulars of the debt.  The affidavit must also state whether the creditor is a secured creditor.  Section 132 of the Act outlines the conditions under which a liquidator may be appointed for a foreign company and related procedures.

In 2020, the Insolvency Act was amended to give the Bankruptcy Division of the Supreme Court power to order that a deed of company arrangement be binding on the company and all classes of creditors where there are at least two classes of creditors and one of the classes resolves that the company executes the deed.

Investment Incentives

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

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

Additionally, the government has established a Property Development Scheme (PDS) to attract high net worth non-citizens who want to acquire residences in Mauritius.  Buyers of a residential unit valued over 500,000 USD in certain projects are eligible to apply for a residence permit in Mauritius.  The residential unit can be leased or rented out by the owner.

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

Foreign Trade Zones/Free Ports/Trade Facilitation

The Mauritius Freeport, a free trade zone, was established in 1992 and is a customs-free zone for goods destined for re-export.  The freeport has grown dramatically in its 26-year history:  developed space of cold and dry warehouses, processing units, open air storage facilities, and offices increased from 5,000 square meters in 1993 to over 350,000 square meters in 2020.  Trade volume increased to 517,000 metric tons in 2019 from 347,000 metric in 2013, and trade value to 29 billion rupees from 23 billion rupees during the same time period.  That said, both trade value and volume in 2019 decreased from 2018, which was 542,000 metric tons worth 44 billion rupees.

As of 2021, there were eight third-party freeport developers, three private freeport developers, and 220 freeport operators, representing over 3,500 jobs.  Top trading partners for import in 2019 were the United Kingdom, India, Taiwan, Malaysia, and China.  Top trading partners for export in 2019 were Reunion (France), South Africa, Kenya, Seychelles, and United Arab Emirates.  Top goods traded through the freeport included mineral products, live animals, foodstuffs and beverages, and plastic and metal products.

The government’s objective is to promote the country as a regional warehousing, distribution, marketing, and logistics center for eastern and southern Africa and the Indian Ocean rim. Through its membership in COMESA, SADC, and the IOC, Mauritius offers preferential access to a market of over 600 million consumers, representing an import potential of 100 billion USD.  Companies operating in the freeport are exempt from corporate tax.  Foreign-owned firms operating in the freeport have the same investment incentives and opportunities as local entities.

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

Performance and Data Localization Requirements

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

The Data Protection Act (DPA) 2017 is the law that governs the protection of personal data in Mauritius.  The Government of Mauritius established the Data Protection Office (http://dataprotection.govmu.org/English/Pages/default.aspx) in 2009.  The Data Protection Commissioner is responsible for upholding the rights of individuals set forth in the DPA and for enforcing the obligations imposed on data controllers and processors.  In 2016, Mauritius ratified the Council of Europe’s Convention for Protection of Individuals with regard to Automatic Processing of Personal Data (Convention 108).  Mauritius is the second non-European country and the first African country to sign the convention.  The agreement gives individuals the right to protection of their personal data.

Mauritian data protection law tracks the European Union’s Regulation on the Protection of Natural Persons with regards to the Processing of Personal Data and on the Free Movement of such Data, commonly known as the General Data Protection Regulation.  Mauritius’ DPA applies only when processing of personal data is concerned.  Failure to comply with Section 28 of the DPA, which establishes the lawful purposes for which personal data may be processed, can result in a fine and up to five years imprisonment.  Section 29 sets requirements for processing special categories of data, such as ethnic origin, political adherence, and mental health condition.

There are no enforcement procedures for investment performance requirements.

Real Property

Real property rights are respected in Mauritius.  A non-citizen can hold, purchase, or acquire immovable property under the Non-Citizens (Property Restriction) Act, subject to the government’s approval.  Ownership of property is memorialized with the registration of the title deed with the Registrar-General and payment of the registration duty. The recording system of mortgages and liens is reliable.  Traditional use rights are not an issue in Mauritius as there were no indigenous peoples present at the time of European colonization.  According to the World Bank’s 2019 Doing Business Report, Mauritius ranks 35th out of 190 countries for the ease of registering property.

Intellectual Property Rights

Intellectual property rights (IPR) in Mauritius are protected by two pieces of legislation, namely the Patents, Industrial Designs and Trademarks Act of 2002 and the Copyrights Act of 2014.

The Mauritius Parliament passed the Industrial Property Bill in July 2019.  The act consolidates all industrial property-related issues in one statute.  The protection framework covers patents, utility models, patent cooperation treaty; layout-designs of integrated circuits; protection of new varieties of plants; industrial designs governed by the Hague Agreement; and trademarks, trade names, geographic indications, and the Madrid Protocol.

The act allows international filing of trademarks under the Madrid Protocol, international filing of industrial designs under the Hague Agreement, and for the filing of patent applications under the Patent Cooperation Treaty.  The process of accession to these international conventions will be initiated by the GoM once the law takes effect.

In 2017, the Copyright Act was amended to redefine and better safeguard the interests of copyright owners and to put in place a new regulatory framework for the Mauritius Society of Authors (MASA).  MASA is responsible for collection of copyright fees and for administering the economic rights of copyright owners.

Mauritius is a member of the World Intellectual Property Organization (WIPO) and party to the Paris and Bern Conventions for the protection of industrial property and the Universal Copyright Convention.  Trademark and patent laws comply with the WTO’s Trade Related Aspects of Industrial Property Rights (TRIPS) agreement.  A trademark is initially registered for 10 years and may be renewed for successive periods of 10 years.  A patent is granted for 20 years and cannot be renewed.  While IP legislation in Mauritius is consistent with international norms, enforcement is relatively weak.  According to a leading IP law firm, police will normally only take action against IP infringements in cases where the IP owner has an official representative in Mauritius because the courts require a representative to testify that the products seized are counterfeit.

The Customs Department of the Mauritius Revenue Authority is the primary agency responsible for safeguarding Mauritian borders against counterfeit goods and piracy.  The Customs Department requires owners or authorized users of patents, industrial designs, collective marks, marks or copyrights to apply in writing to the Director General to suspend clearance of goods suspected of infringing intellectual property rights.  Once an application is approved, it remains valid for two years.  There are no administrative costs to pay for an application.  An application can also be filed as a preventive measure.  Customs may act upon its own initiative to suspend clearance if there is evidence that IP rights are being infringed.  Customs will then contact the owner or authorized user for follow-up actions.  Owners of IP rights are recommended to join the Interface Public Members (IPM) which allows Customs officers to access operational data input by right owners concerning their products, thus facilitating the identification of counterfeit goods.

The Customs Department keeps a record of counterfeit goods seized.  Customs has authority to seize and destroy counterfeit goods.  In 2019, the Customs Department carried out seizures of a total of 261,267 goods valued at 2.3 million USD.  The infringing party is responsible for paying for the storage and/or destruction of the counterfeit goods.  Mauritius is not listed in the U.S. Trade Representative (USTR) Special 301 Report or the Notorious Market List.

Embassy Contact for IPR:

Anjana Khemraz-Chikhuri
Economic/Commercial Section
U.S. Embassy Port Louis, Mauritius
Tel: +230 202 4400; Fax: +230 208 9534
Email: ChikhuriA@state.gov

IPR Law Firms in Mauritius*

Sanjeev Ghurburrun
Director, Geroudis
River Court, St Denis Street
Port Louis, Mauritius
Tel: +230 210 3838; Fax: + 230 210 3912
Email: sanjeev@geroudis.com
www.geroudis.com

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

Michael Hough
CEO, Eversheds Sutherland
Suite 310, 3rd Floor Barkly Wharf, Le Caudan Waterfront
Port Louis, Mauritius
Tel: +230 5726 3941; fax: +230 211 0780
Email: michaelhough@eversheds-sutherland.mu
www.eversheds-sutherland.com

*Law firms listed for convenience and should NOT be taken to imply U.S. Government endorsement.

Capital Markets and Portfolio Investment

The Mauritian government welcomes foreign portfolio investment.

The Stock Exchange of Mauritius (SEM) was created in 1989 and was opened to foreign investors following the lifting of foreign exchange controls in 1994.  Foreign investors do not need approval to trade shares, except for when doing so would result in their holding more than 15 percent in a sugar company, a rule detailed in the Securities (Investment by Foreign Investors) Rules of 2013.  Incentives to foreign investors include no restrictions on the repatriation of revenue from the sale of shares and exemption from tax on dividends for all resident companies and for capital gains of shares held for more than six months.

The SEM currently operates two markets: the Official Market and the Development and Enterprise Market (DEM).  As of December 2019, the shares of 58 companies (local, global business, and foreign companies) were listed on the Official Market, representing a market capitalization of 7.4 billion USD, a fall of 15.8% from the previous financial year. This fall is mainly attributed to the impact of the Covid 19 pandemic.  Unique in Africa, the SEM can list, trade, and settle equity and debt products in U.S. dollars, Euros, Pounds Sterling, South African Rand, as well as Mauritian Rupees.  A variety of new asset classes of securities such as global funds, depositary receipts, mineral companies, and specialist securities including exchange-traded funds and structured products have also been introduced on the SEM.  The DEM was launched in 2006 and the shares of 39 companies are currently listed on this market with a market capitalization of 1.1 billion USD as of June 2020, falling by 24.4 percent during the financial year 2019-2020.  Foreign investors accounted for 26.4 percent of the trading volume on the exchange for the financial year 2019-2020, compared to 39.5 percent for the financial year 2018-2019.  Standard & Poor’s, Morgan Stanley, Dow Jones, and FTSE have included the Mauritius stock market in a number of their stock indices.  Since 2005, the SEM has been a member of the World Federation of Exchanges.  The SEM is also a partner exchange of the Sustainable Stock Exchanges Initiative.  In 2018, in line with its strategy to digitalize its investor services, SEM launched the mySEM mobile application.

In 2020, the slowdown in domestic economic activity resulting from the Covid-19 pandemic caused many listed companies to publish reduced earnings and defer dividend payments.  After a strong decline between March and April 2020, the SEMDEX and SEM-10 continued a downward trend during the rest of the year. Stocks associated with tourism were the hardest hit.

The government respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.

A variety of credit instruments is available to local and foreign investors through the banking system.

Money and Banking System

Mauritius has a sophisticated banking sector.  As of the end September 2020, 19 banks were licensed to undertake banking business, of which eight were local banks, eight were foreign-owned subsidiaries, and three are branches of foreign banks. The license of one bank was revoked in August 2020.  Another bank is currently under conservatorship.  One bank conducts solely Islamic banking.  Further details can be obtained at https://www.bom.mu/financial-stability/supervision/licensees/list-of-licensees.

The Mauritian banking sector historically accounts for about 7 percent of GDP (excluding bank-owned leasing businesses) and is the main component of financial services, which contribute 12 percent of GDP.  The total assets of the sector represented around 393.8 percent of GDP at the end of September 2020, compared to 319.3 percent at the end of March 2020.  The banking landscape is relatively concentrated, with the two, long-established domestic entities:  the Mauritius Commercial Bank (MCB) and the State Bank of Mauritius (SBM), which together constitute about 40 percent of the total domestic market.  Maubank, the third-largest bank in the country, became operational in 2016 following a merger between the Mauritius Post & Cooperative Bank and the National Commercial Bank.  The Bank of China started operations in Mauritius in 2016.  Other foreign banks present in Mauritius include HSBC, Barclays Bank, Bank of Baroda, Habib Bank, BCP Bank (Mauritius), Standard Bank, Standard Chartered Bank, State Bank of India, and Investec Bank.  Per the Bank of Mauritius, total banking assets as of January 2021 amounted to 43.5 billion USD).

Mauritian banks are compliant with international norms such as Basel III, IFRS 9, US Foreign Account Tax Compliance Act (FATCA), and the OECD’s Common Reporting Standard (CRS).

At the end of September 2020, non-banking, deposit-taking institutions, comprising leasing companies and finance companies, held assets equivalent to 15 percent of GDP, an increase of about 2 percent since April 2020.  Further details can be obtained at https://www.bom.mu/sites/default/files/financial_stability_report_-_december_2020_0.pdf.

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

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

As part of its Covid-19 response, the BoM has made 132 USD million available through commercial banks as special relief funds to help meet cash flow and working capital requirements.  The cash reserve ratio applicable to commercial banks was reduced to 8 percent from 9 percent.  The BoM also put on hold the Guideline on Credit Impairment Measurement and Income Recognition, which took effect in January 2020.

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

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

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

In October 2020, the European Commission added Mauritius to its list of AML-CTF high-risk jurisdictions.  As of April 2021, Mauritius was still on the EU and FATF lists.

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

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

In June 2020, the BoM announced that it was creating a central Know Your Client registry.

Foreign Exchange and Remittances

Foreign Exchange 

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

The government’s stated policy is to act as a facilitator to business, leaving production to the private sector.  The government, however, still controls key services directly or through parastatal companies in the power and water, television broadcasting, and postal service sectors.

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

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

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

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

Privatization Program 

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

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

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

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

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

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/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 (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf).

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings );
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

The prevalence of corruption in Mauritius is low by regional standards, but graft and nepotism nevertheless remain concerns and are increasingly a source of public frustration. Several high-profile cases involving corruption have reinforced the perception that corruption exists at the highest political levels, despite the fact that Mauritian law provides for criminal penalties for corruption by officials.  According to Transparency Mauritius, the absence of a law regulating the financing of political parties fuels corruption.  A former prime minister was arrested in 2015 on allegations of money laundering, though courts have since dismissed all charges.  The state prosecutors appealed the last dismissal in late 2019 and the appeal is pending.  A minister in the previous government stepped down in 2016 after allegations of bribery.  In March 2017, allegations surfaced concerning possible political interference in the Financial Services Commission’s issuance of an investment banking license to Angolan billionaire Alvaro Sobrinho, who is being investigated for alleged corruption in Portugal.  In March 2018, the president of Mauritius resigned after press reported that she bought apparel, jewelry, and a laptop computer with a credit card provided by an NGO financed by the same Angolan businessman.    In June 2020, the prime minister dismissed his deputy prime minister following allegations of bribery and corruption in a public energy contract.  In February 2021, the minister of commerce stepped down amid allegations of corruption and abuse of power.

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

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

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

U.S. investors, in conversations with embassy personnel, have not identified corruption as an obstacle to investment in the country.  They have, however, encountered attempts for bribery.

Although the country lacks laws on political party financing, Mauritius has legislation to combat corruption by public officials. These include laws dealing with declaration of assets, asset recovery, prevention of corruption, anti-money laundering, and criminal offences related to abuse of office by public officials.

However, legal loopholes exist and enforcement is weak.  Allegations of corruption and misallocation of government contracts by public entities occurred in 2020, namely the use of emergency procurement procedures during the pandemic to allegedly enrich friends and family of those in power.

According to Transparency Mauritius, more companies have introduced control and risk management protocols, as well as adopting code of ethics and good business conduct, even if these do no target government officials.  The Prevention of Corruption Act targets mainly the public sector, but there is no whistleblower protection law.

Mauritius has ratified the UNCAC, but it has not yet adopted all the recommendations, for instance, the criminalization of corruption in the private sector.  According to Transparency Mauritius, NGOs involved in fighting corruption are not given enough protection and funding.

Resources to Report Corruption 

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

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

Mauritius has a long tradition of political and social stability.  Civil unrest and political violence are uncommon.  Free and fair national elections are held every five years with the last general elections held in November 2019.  Those most recent elections took place without incident.  The current prime minister, Pravind Jugnauth previously served as finance minister, and was appointed prime minister 2017 after his father resigned (in accordance with the constitution). Jugnauth won reelection in 2019.   In August 2020 and February 2021, civilians engaged in mass protests following allegations of corruption and mismanagement by the government.  The protests were orderly and without incident.

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

According to the GoM, total employment stood at 506,300 in September 2020, a decrease from 551,300 in 2019.  The number of unemployed increased to 62,200 in September 2020 from 57,300 in July 2020.  The unemployment rate was estimated at 10.9 percent in September 2020 compared to 10.3 percent in July 2020.

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

In 2017, the National Assembly passed the National Employment Act.  The object of the act was to repeal the Employment and Training Act and introduce a modern legislative framework.  The act provides the labor market with information on supply and demand of skills, job seekers, and training institutions; promotes placement and training of job seekers, including young persons and persons with disabilities; and promotes labor migration and home-based work.

In November 2017, the Equal Opportunities Act was amended to protect prospective employees with criminal records from discrimination when being considered for recruitment or promotion.

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

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

In December 1997, Mauritius signed an investment incentive agreement with OPIC. Mauritius, classified in July 2020 a high-income country, is not a priority for DFC programs, but may be considered for programs that address key agency priorities.   Mauritius is also a member of the World Bank’s Multilateral Investment Guarantee Agency.  Countries with significant government-financed investment in Mauritius include India, China, France, Saudi Arabia, and Japan.

* Source for Host Country Data: Bank of Mauritius. The data provided includes the stock positions of global business companies.

Anjana Khemraz-Chikhuri
Economic and Commercial Assistant
U.S. Embassy Port Louis
+230 202 4400
ChikhuriA@state.gov

Policies Towards Foreign Direct Investment

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 has been limited because of the unresolved challenges to investment and business.

The Nigerian government continues to promote import substitution policies such as trade restrictions, foreign exchange restrictions, and local content requirements in a bid to attract investment that develops domestic production capacity. 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.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign control of investments; however, Nigerian regulatory bodies may insist 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 is allowed in the oil and gas sector. 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 may apply for exemption from incorporating a subsidiary if it meets certain conditions including working on a specialized project specifically for the government, and/or funded by a multilateral or bilateral donor or a foreign state-owned enterprise. 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.

Other Investment Policy Reviews

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://openknowledge.worldbank.org/handle/10986/33596 . 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 .

Business Facilitation

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. Nigeria’s ranking has since jumped from 169 to 131 on the World Bank’s 2020 Doing Business Report and has ranked in the top ten most improved economies in two out of the last three years. Nigeria recorded improvements in eight of the 10 categories with “obtaining construction permits” witnessing the highest increase. The other two categories, “getting credit” and “protecting minority investments” remained static. Despite these improvements, Nigeria remains a difficult place to do business, ranking 179 out of 190 countries in the “trading across borders” category and scoring below its sub-Saharan counterparts in all trading subcategories. Particularly egregious were time to import (border compliance) and cost to import (documentary compliance) which, at 242 hours and $564, respectively, are double the sub-Saharan African average. PEBEC’s focal areas are improving trade, starting a business, registering property, obtaining building permits and electricity, and obtaining credit.

The OSIC co-locates relevant government agencies to provide more efficient and transparent services to investors, although much of its functions have yet to be moved online. 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.

All businesses, both foreign and local, are required to register with the Corporate Affairs Commission (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.

Businesses must also register with the Federal Inland Revenue Service (FIRS) for tax payments purposes. If the business 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 will then assign the nearest 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. 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 other regulatory agencies which supervise the sector within which they operate.

Outward Investment

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 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 domestic 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. 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 introduced a new tax law, colloquially known as the “digital tax,” in 2020 which subjects 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. The local U.S. Chamber of Commerce affiliate has raised concerns about the lack of clarity on profit attribution, scope of the taxes, double taxation, and potential detrimental impact on company profits. The legislature expects to pass the Petroleum Industry Bill in the first half of 2021, which will revise taxes in the oil and gas sector.

Transparency of the Regulatory System

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 develop and make public anticipated regulatory changes or proposals and publish proposed regulations before their application. The general public has opportunity to comment through targeted outreach, including business groups and stakeholders, and during the public hearing process before a bill becomes law. 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.

International Regulatory Considerations

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 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 (MDAs) related to the CET. Nigeria 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 such as palm oil, meat products, dairy, and poultry that the Nigerian government seeks to protect. 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. Legal System and Judicial Independence

Legal System and Judicial Independence

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 World Bank’s publication, Doing Business 2020, ranked Nigeria 73 out of 190 on enforcement of contracts, a significant improvement from previous years. 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.

Laws and Regulations on Foreign Direct Investment

The 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.

Competition and Antitrust Laws

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.

Expropriation and Compensation

The FGN has not expropriated or nationalized foreign assets since the late 1970s, 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.

Dispute Settlement

ICSID Convention and New York Convention

Nigeria is a member of the International Center for Settlement of Investment Disputes and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (also called the “New York Convention”). The Arbitration and Conciliation Act of 1988 provides for a unified and straightforward legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation. The Act created internationally competitive arbitration mechanisms, established proceeding schedules, provided for the application of the United Nations Commission on International Trade Law (UNCITRAL) arbitration rules or any other international arbitration rule acceptable to the parties, and made the New York Convention applicable to contract enforcement, based on reciprocity. The Act allows parties to challenge arbitrators, provides that an arbitration tribunal shall ensure that the parties receive equal treatment, and ensures that each party has full opportunity to present its case. Some U.S. firms have written provisions mandating International Chamber of Commerce (ICC) arbitration into their contracts with Nigerian partners. Several other arbitration organizations also operate in Nigeria.

Investor-State Dispute Settlement

Nigeria’s civil courts have jurisdiction over disputes between foreign investors and the Nigerian government as well as between foreign investors and Nigerian businesses. The courts occasionally rule against the government. Nigerian law allows the enforcement of foreign judgments after proper hearings in Nigerian courts. Plaintiffs receive monetary judgments in the currency specified in their claims.

Section 26 of the NIPC Act provides for the resolution of investment disputes through arbitration as follows:

1. Where a dispute arises between an investor and any Government of the Federation in respect of an enterprise, all efforts shall be made through mutual discussion to reach an amicable settlement.
2. Any dispute between an investor and any Government of the Federation in respect of an enterprise to which this Act applies which is not amicably settled through mutual discussions, may be submitted at the option of the aggrieved party to arbitration as follows:
   1. in the case of a Nigerian investor, in accordance with the rules of procedure for arbitration as specified in the Arbitration and Conciliation Act; or
   2. in the case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the Federal Government and the country of which the investor is a national are parties; or
   3. in accordance with any other national or international machinery for the settlement of investment disputes agreed on by the parties.
3. Where in respect of any dispute, there is disagreement between the investor and the Federal Government as to the method of dispute settlement to be adopted, the International Centre for Settlement of Investment Dispute Rules shall apply.

Nigeria is a signatory to the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards. Nigerian Courts have generally recognized contractual provisions that call for international arbitration. Nigeria does not have a Bilateral Investment Treaty or Free Trade Agreement with the United States.

Bankruptcy Regulations

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 2020. The Embassy is not aware of U.S. companies that have had to avail themselves of the insolvency provisions under Nigerian law.

Investment Incentives

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 added 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 LGAs deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios. For a full list of incentives, refer to the NIPC website at https://www.nipc.gov.ng/investment-incentives/ .

The NEPC administers an 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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. 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 )

Performance and Data Localization Requirements

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/sites/default/files/stages_involved.pdf .

The Nigerian Oil and Gas Content Development Act of 2010 has 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. The Guidelines require original ICT equipment manufacturers, within three years from the effective date of the guidelines, to use 50% local manufactured content and to use Nigerian companies to provide 80% of value added on networks. The Guidelines also require multinational companies operating in Nigeria to source all hardware products locally; all government agencies to procure all computer hardware only from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally, use only locally manufactured SIM cards for telephone services and data, and to use indigenous companies to build cell towers and base stations. 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 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. Others ship their goods to ports in neighboring countries, primarily Benin, after which they transport overland legally or smuggle into the country. The Nigerian government began closing land borders to trade in August 2019, purportedly to stem the tide of smuggled goods entering from neighboring countries. Nigeria began reopening 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, and dairy products, 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 is not effective. 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 county 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. 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 but not expected to be operational before 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. Visa-on-arrival is not valid 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.

Real Property

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.

Intellectual Property Rights

Intellectual property rights (IPR) in Nigeria face challenges in three areas: (1) limited awareness and capacity within the judicial and law enforcement system, (2) a weak statutory regime, (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 enforce most IPR. The areas in which the legislation is deficient include online piracy, geographical indications, and plant and animal breeders’ rights. A draft copyright bill, first circulated in 2017, was re-circulated in 2020 but has yet to be passed. Drafters are working to define technological protection measures (known as TPMs), remuneration rights, the definition of “broadcasting,” and other points. The 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 of 1988, as amended in 1992 and 1999, which provides an adequate basis for enforcing copyright and combating piracy. The Nigerian Copyright Commission, a division of the Ministry of Justice, administers the Act. The International Anti-Counterfeiting Coalition (IACC) has long noted that the Copyright Act should be amended to provide stiffer penalties for violators. Nigeria is a member of the World Intellectual Property Organization (WIPO) and in 2017 passed legislation to ratify two WIPO treaties that it signed in 1997: the Copyright Treaty and the Performances and Phonograms Treaty. These treaties address important digital communication and broadcast issues that have become increasingly relevant in the 18 years since Nigeria signed them.

Violations of Nigerian IPR laws continue to be widespread. Anti-counterfeiting groups report that the Nigerian police work to combat counterfeiting and readily engage with trademark owners but lacks the capacity to fully enforce these laws. The Nigerian Copyright Commission (NCC) has primary responsibility for copyright enforcement but is understaffed and underfunded relative to the magnitude of the IPR challenge in Nigeria. Authorized penalties for offenses remain relatively low for now and rights-holders note that offenses are typically met with non-deterrent, modest fines. Nevertheless, the NCC continues to carry out enforcement actions on a regular basis.

The NCS has general authority to seize and destroy contraband. Under current law, copyrighted works require a notice issued by the rights owner to Customs to treat such works as infringing but implementing procedures have not been developed and this procedure 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.

Nigeria is not listed in the United States Trade Representative (USTR) Special 301Report 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/ .

Capital Markets and Portfolio Investment

The NIPC Act of 1995, amended in 2004, liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions. 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 Stock Exchange (NSE), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments. The NSE was the world’s best performing stock market in 2020, as assessed by Bloomberg. It closed the year at 40,270 points, a 50% increase from the end of 2019. The NSE equity market capitalization increased by 62% to 21 trillion naira ($55.4 billion) from 2019 to 2020 while market turnover increased by 7% to 1 trillion ($2.6 billion). Domestic investors dominated the NSE for the second consecutive year with a 65% share of market turnover by value. Foreign investors had accounted for over 50% of the market in 2018. The NSE’s bond market capitalization increased by 36% to 18 trillion naira ($47.5 billion) from 2019 to 2020. At 92%, the Nigeria government accounted for the majority of issuances raising 2.4 trillion naira ($6.3 billion) in 2020. Much of the growth in the NSE may be attributable to declining rates in Nigeria’s debt market. Treasury bill rates fell below 1% in 2020 with 91-day bills briefly dipping below 0% before settling at a record low of 0.34%. As of March 2021, the NSE had 168 listed companies, 132 listed bonds, and 12 exchange-traded funds. 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 NSE 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 a widening deficit especially as domestic bond rates fell well below Nigeria’s Eurobond rates in 2020, and Nigeria continues to shirk the conditionalities attached to multilateral borrowing. 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 plans to stop offering its lucrative Open Market Operations (OMO) bills to non-residents, a departure from its strategy of attracting hard currency investments to shore up foreign exchange supply. OMO bills have recently provided foreign investors with returns of up to 30% in dollar terms, which has led to issuances being oversubscribed. CBN officials say OMO offerings to foreigners will be phased out once current obligations have been redeemed due to the large debt burden placed on the CBN. The CBN has also placed limits on transactions that can be made in foreign currency due to this foreign currency shortage. The OMO bills’ market was estimated at about $40 billion at the end of 2020, with foreigners holding about a third.

Money and Banking System

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.

Foreign banks and investors are allowed to establish banking business in Nigeria provided they meet the current minimum capital requirement of N25 billion ($65 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.

In addition, any foreign-owned bank in Nigeria desirous of acquiring or merging 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. This provision mandates that the foreign-owned bank 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 22 deposit-taking commercial banks in Nigeria. Following a 2009 banking crisis, CBN officials intervened in eight of 24 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. As of 2019, there were 5,000 bank branches operating in Nigeria and, according to the Nigeria interbank settlement scheme, 40 million Nigerians had a Bank Verification Number (BVN), which every bank account holder is mandated to have.

Before October 2018, only banks and licensed financial institutions were allowed to provide financial services in Nigeria, and about 37% of 100 million adult Nigerians were financially excluded. The CBN reiterated its commitment to enhance the level of financial inclusion in the country and defined a target of 80% financial inclusion rate by 2020 and 95% by 2024. Its revised National Financial Inclusion Strategy was planned to focus on women; rural areas; youth; Northern Nigeria; and micro, small, and medium enterprises. The CBN plans to massively leverage technology with the licensing of mobile money operators and approved some telecom companies to operate as payment service banks because of their huge subscriber base.

The CBN supports non-interest banking. Several banks have established Islamic banking operations in Nigeria including Jaiz Bank International Plc, Nigeria’s first full-fledged non-interest bank, which commenced operations in 2012. A second non-interest bank, Taj Bank, started operations in December 2019. There are six licensed merchant banks: (1) Coronation Merchant Bank Limited, (2) FBN Merchant Bank, (3) FSDH Merchant Bank Ltd, (4) NOVA Merchant Bank, (5) Greenwich Merchant Bank, and (6) Rand Merchant Bank Nigeria Limited.

Many bank branches’ operations were disrupted by the COVID-19 pandemic, and profitability was expected to be impacted. The CBN announced monetary interventions to cushion the impact of the pandemic including the reduction of interest rates on CBN intervention loans from 9% to 5%, a one-year moratorium on CBN loans, and regulatory forbearance to restructure loans in impacted sectors like aviation and hospitality. The banking sector remained resilient despite the operational disruptions, currency devaluation, and monetary policy tweaks. Banking stocks remained top picks for investors and the banking index of the Nigeria Stock Exchange grew by 10% in 2020. Many banks were able to leverage technology to deliver services to customers and therefore earned income on digital channels usage which had grown during the lockdown.

The CBN has continued its system of liquidity management using unorthodox monetary policies. The measures included an increase in 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.

CBN reported that non-performing loans (NPLs) declined marginally to 5.5% in September 2020 from 6.1% in December 2019. Full year NPLs are projected to have remained relatively stable despite the challenges presented by the pandemic in 2020. It is expected that the effect of the pandemic, currency devaluation, and subsidy removal could become more evident in some sectors of the economy which may result in defaults on loans and increasing banks’ NPLs.

The top ten banks in Nigeria control nearly 70% of the banking sector. Twelve out of the commercial banks listed on the NSE (Access Bank, GT Bank, Fidelity Bank, FCMB, Sterling Bank, FBNH, Union Bank, Zenith Bank, UBA, Ecobank, Stanbic IBTC, and Wema Bank) reported a combined total asset of N42.9 trillion ($112.9 billion) as of September 2020. This represents an 12% rise from total assets of N38.4 trillion ($101 billion) in December 2019. The size of their total assets also indicates how much support they can give to the Nigerian economy as their collective total assets represent roughly one-third of Nigeria’s GDP. FBNH and Access Bank lead the pack with N6.9 trillion ($18.1 billion) each in assets, closely followed by Zenith Bank with N6.8 trillion ($17.9 billion) and UBA with N4.8 trillion ($12.6 billion). The CBN reported that total deposits increased by N8.4 trillion or 32% and aggregate credit grew by N3.45 trillion or 13% by December 2020.

In 2013, the CBN introduced a stricter supervision framework for the country’s top banks, identified as “Systemically Important Banks” (SIBs) as they account for a majority of the industry’s total assets, loans and deposits, and their failure or collapse could disrupt the entire financial system and the country’s real economy. The current list, released in 2019, includes seven banks which were selected based on their size, interconnectedness, substitutability, and complexity. These banks accounted for 64% of the industry’s total assets of N35.1 trillion and 65% of the industry’s total deposits of N21.7 trillion. Under the supervision framework, the operations of SIBs are closely monitored with regulatory authorities conducting stress tests on the SIBs’ capital and liquidity adequacy. Moreover, SIBs are required to maintain a higher minimum capital adequacy ratio of 15%.

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.

Foreign Exchange and Remittances

Foreign Exchange

Foreign currency for most transactions is procured through local banks in the inter-bank market, irrespective of investment type. Low value foreign exchange, typically in U.S. dollars, British pounds or the Euro, may also be procured at a premium from foreign exchange bureaus, called Bureaus de Change. In 2020, the COVID-19 pandemic affected foreign currency inflows to Nigeria. In response, the CBN placed some capital restrictions to manage investment outflows. Domestic and foreign businesses frequently express strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment and goods and from repatriating naira earnings. Foreign exchange demand remains high due to the dependence on foreign inputs for manufacturing and refined petroleum products.

In 2015, the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels ( https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ). The list has since been increased to include fertilizer, dairy products, and maize bringing the total number of product categories to 44.

The CBN maintains a managed-float exchange rate regime where the exchange rate is fixed with little room to maneuver. It also maintains several “windows” through which foreign exchange is sold to different clients at different rates. While the CBN had been able to maintain convergence between its various rates in 2019, the forex shortages experienced in 2020 caused a divergence of exchange rates starting March 2020. The CBN devalued the official exchange rate through 2020 from 305 naira to the dollar to 379 naira to the dollar. The Investors and Exporters (I&E) rate, used by businesses to repatriate and trade, has since depreciated to around 408 naira to the dollar while the retail market rate depreciated to 480 naira to the dollar as of December 2020.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10% withholding tax). Companies must provide evidence of income earned and taxes paid before repatriating dividends from Nigeria. Money transfers usually take no more than 48 hours. In 2015, the CBN mandated that all foreign exchange remittances be transferred through banks. Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank. Due to the forex shortages currently being experienced in Nigeria, remittances take longer than usual. The CBN claims to have plans to clear the backlog of demand with targeted forex injections into the market. Transfers of currency are protected by Article VII of the International Monetary Fund Articles of Agreement ( http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) manages Nigeria’s sovereign wealth fund. It was created by the NSIA Act in 2011 and began operations in October 2012 with $1 billion seed capital and received an additional $250 million each in 2015 and 2017 bringing total capital to $1.5 billion. It was created to harness Nigeria’s excess oil revenues toward economic stability, wealth creation, and infrastructure development.

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 for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability. The NSIA does not take an active role in 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 do have enabling legislation that governs their ownership. To legalize the existence of state-owned enterprises, provisions have been made in the Nigerian constitution under socio-economic development in section 16 (1) of the 1979 and 1999 Constitutions respectively. 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.

Nigeria does not operate a centralized ownership system for its state-owned enterprises. The enabling legislation for each SOE stipulates its ownership and governance structure. The boards of directors are usually appointed by the president 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 affiliates.

NNPC is Nigeria’s most prominent state-owned enterprise. 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 largely inoperable. Nigeria’s tax agency receives taxes on petroleum profits, while the Department of Petroleum Resources under the Ministry of Petroleum Resources collects rents, royalties, license fees, bonuses, and other payments. In an effort to provide greater transparency in the collection of revenues that accrue to the government, the Buhari administration requires these revenues, including some from the NNPC, to be deposited in the Treasury Single Account. NNPC began publishing audited financial statements in 2020 for the three prior fiscal years, a significant step toward improving transparency of NNPC operations.

Another key state-owned enterprise is the Transmission Company of Nigeria (TCN), responsible for the operation of Nigeria’s national electrical grid. Private power generation and distribution companies have accused the TCN grid of significant inefficiency and inadequate technology which greatly hinders the nation’s electricity output and supply. TCN emerged from the defunct National Electric Power Authority as an incorporated entity in 2005. It is the only major component of Nigeria’s electric power sector which was not privatized in 2013.

Privatization Program

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 privatization 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. Nevertheless, the government’s long-delayed sale in 2014 of state-owned Nigerian Telecommunications and Mobile Telecommunications shows a continued commitment to the privatization model.

The federal government intends to raise about 205 billion naira ($541 million) from privatization proceeds in 2021. BPE held an International Investors’ webinar in February 2021 to showcase investment opportunities in the two trade fair complexes in Lagos state slated for concession in 2021.

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. There are also regulating agencies which exist to protect the rights of consumers. While 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 Department of Petroleum Resources (DPR) also ensures comprehensive standards and guidelines to direct the execution of projects with proper consideration for the environment. The DPR Environmental Guidelines and Standards of 1991 for the petroleum industry is a comprehensive working document with serious consideration for the preservation and protection of the Niger Delta.

The Nigerian government provides oversight of competition, consumer rights, and environmental protection issues. The 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 have 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. Environmental pollution by multinational oil companies has resulted in fines being imposed locally while some cases have been pursued in foreign jurisdictions resulting in judgments being granted in favor of the oil producing communities.

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

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction. Nigeria ranked 149 out of 175 countries in Transparency International’s 2020 Corruption Perception Index. The Economic and Financial Crimes Commission (EFCC) 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.

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. Since then, the EFCC 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.

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. Since its inauguration, the ICPC has secured convictions in 71 cases (through 2015, latest data available) with nearly 300 cases still open and pending as of July 2018. In 2014, a presidential committee set up to review Nigeria’s ministries, departments, and agencies recommended that the EFCC, the ICPC, and the Code of Conduct Bureau (CCB) be merged into one organization. The federal government, however, rejected this proposal to consolidate the work of these three anti-graft agencies.

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 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 $264,000) 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.

The 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.

Resources to Report Corruption

Economic and Financial Crimes Commission
Headquarters: No. 5, Fomella Street, Off Adetokunbo Ademola Crescent, Wuse II, Abuja, Nigeria. Branch offices in Ikoyi, Lagos State; Port Harcourt, Rivers State; Independence Layout, Enugu State; Kano, Kano State; Gombe, Gombe State.
Hotline: +234 9 9044752 or +234 9 9044753

Independent Corrupt Practices and Other Related Offences Commission:
Abuja Office – Headquarters
Plot 802 Constitution Avenue, Central District, PMB 535, Garki Abuja
Phone/Fax: 234 9 523 8810
Email: info@icpc.gov.ng 

Political, religious, and ethnic violence continue to affect Nigeria. The Islamist group Jama’atu Ahl as-Sunnah li-Da’awati wal-Jihad, popularly known as Boko Haram, and Islamic State – West Africa (ISIS-WA) have waged a violent terrorist campaign to destabilize the Nigerian government, killing tens of thousands of people, forcing over two million to flee to other areas of Nigeria or into neighboring countries, and leaving more than seven million people in need of humanitarian assistance in the country’s northeast. Boko Haram has targeted markets, churches, mosques, government installations, educational institutions, and leisure sites with improvised explosive devices (IEDs) and suicide vehicle-borne IEDs across nine northern states and in Abuja. In 2017, Boko Haram employed hundreds of suicide bombings against the local population. Women and children were forced to carry out many of the attacks. There were multiple reports of Boko Haram killing entire villages suspected of cooperating with the government. ISIS-WA targeted civilians with attacks or kidnappings less frequently than Boko Haram. ISIS-WA employed acts of violence and intimidation to expand its area of influence and gain control over critical economic resources. As part of a violent and deliberate campaign, ISIS-WA also targeted government figures, traditional leaders, humanitarian workers, transportation workers, and contractors.

President Buhari has focused on matters of insecurity in Nigeria and in neighboring countries. While the two insurgencies maintain the ability to stage forces in rural areas and launch attacks against civilian and military targets across the northeast, Nigeria is also facing rural violence in the Nigeria’s north central and northwest states caused by bandits and criminals and by conflicts between migratory pastoralist and farming communities, often over scarce resources. Another major trend is the nationwide rise in kidnappings for ransom and attacks on villages by armed gangs.

Due to challenging security dynamics throughout the country, the U.S. Mission to Nigeria has significantly limited official travel in the northeast, and travel to other parts of Nigeria requires security precautions.

Decades of neglect, persistent poverty, and environmental damage caused by oil spills 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 militants 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. While attacks on oil installations have since decreased due to a revamped amnesty program and continuous high-level engagement with the region, the underlying issues and historical grievances of the local communities have not been addressed. As a result, insecurity in various forms continues to plague the region.

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 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.

Labor organizations in Nigeria remain politically active and are prone to call for strikes on a regular basis against the national and state governments. 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 7 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. Localized strikes occurred in the education, government, energy, power, and healthcare sectors in 2020. 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) to 30,000 naira ($83) per month. 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.

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, 25 states and the FCT have ratified the CRA, with all 11 of the remaining states located in northern Nigeria.

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.

There are two types of visas which may be granted, depending on the length of stay. For short-term assignments, an employer must apply for and receive a temporary work permit, allowing the employee to carry out some specific tasks. The temporary work permit is a single-entry visa and expires after three months. There are no numerical limitations on short-term visas, and foreign nationals who meet the conditions for grant of a visa may apply for as many short-term visas as required.

* 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

Policies Towards Foreign Direct Investment

The ROC government welcomes FDI in most sectors and particularly in the oil sector, which accounts for 90 percent of FDI inflows. The government has stated an urgent need to attract investment outside of the petroleum sector. In conjunction with an International Monetary Fund extended credit facility awarded in July 2019, ROC pledged to undertake legislative, regulatory, and institutional reforms to improve the investment climate.

The United States and ROC signed an investment agreement in 1994. No known laws or practices discriminate against foreign investors, including U.S. investors, by prohibiting, limiting or conditioning foreign investment in a sector of the economy.

ROC’s Agency for the Promotion of Investments (API), established in 2013, promotes economic diversification by seeking to expand the pool of external investors. API provides French-language advisory services to potential investors and maintains a database of government projects seeking private investor partners.

The government has made no significant efforts to retain foreign investments or to maintain dialogue with investors. The High Committee for Public-Private Dialogue, Le Haut Comité du Dialogue Public-Privé, established in 2012, convened one meeting in 2020.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.

ROC has no known limits on foreign ownership or control.

Foreign business entities investing in the petroleum sector must pursue a joint venture with the Congolese National Petroleum Company (SNPC). An ROC executive order of November 15, 2019 requires foreign companies in the hydrocarbons sector to employ Congolese in 80 percent of management positions and 90 percent of all employee positions.

All forestry companies, both foreign- and locally-owned, are required by law to process 85 percent of their timber domestically and export it as furniture or otherwise transformed wood. The law allows timber companies to export up to 15 percent of their wood product as natural timber. In practice, however, the economy exports as much timber as natural timber.

ROC has no formal investment screening mechanism for inbound foreign investment.

Other Investment Policy Reviews

The government has not undertaken any third-party investment policy reviews in recent years.

Business Facilitation

The ROC Agency for Business Creation, or Agence Congolaise Pour la Création des Entreprises (ACPCE), serves as a “one-stop shop” for establishing a business. ACPCE has offices in Brazzaville, Pointe-Noire, N’kayi, Ouesso, and Dolisie.

To establish a business in ROC, investors must provide ACPCE with two copies of the company by-laws, two copies of capitalization documents (e.g. a bank letter or an affidavit), a copy of the company’s investment strategy, company-approved financial statements (if available), and ownership documents or lease agreements for the company’s offices in ROC.

The ACPCE has a website, http://www.acpce.cg/, which serves as an information-only website. Business registration cannot be completed through the website.

Outward Investment

The ROC government does not promote or incentivize outward investment.

The ROC government does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

Lack of transparency poses one of the greatest hurdles to FDI, as investors must navigate an opaque regulatory bureaucracy. Companies routinely find themselves embroiled in tax, customs, and labor disputes arbitrated by court officials who make decisions that do not conform with Congolese law and ROC Ministry of Justice regulations.

ROC has no known informal regulatory processes managed by nongovernmental organizations or private sector associations.

The government develops new regulations internally and rarely requests input from industry representatives. Various ministries have regulatory authority over the individual industries in their area of responsibility, with overall authority coordinated by the Ministry of Economy. The government does not usually offer a formal, public comment period.

ROC’s accounting, legal, and regulatory procedures are transparent. ROC uses Francophone Africa’s OHADA – the Organization for Business and Customs Harmonization, or Organisation pour l’Harmonisation en Afrique du Droit des Affaires – system of accounting, legal, and regulatory procedures.

The government does not normally make draft bills or regulations available for public comment.

The government publishes new laws and regulations in ROC’s Official Journal. The Official Journal is available for download at the website of the Secretary General of the Government maintains the Official Journal online at http://www.sgg.cg.

Most government ministries have an inspector general that conducts oversight to ensure that government agencies follow administrative processes. The office of the president additionally has an inspector general who supervises the entire government.

The government announced no new regulatory system, including enforcement reforms, during the reporting period.

No new reforms were made in the reporting period.

The inspector general process is not legally reviewable and not accountable to the public.

The government makes transparent some public finances and debt obligations, including explicit and contingent liabilities. The Ministry of Finance publishes the arrangements on its website, https://www.finances.gouv.cg/.

International Regulatory Considerations

ROC participates as a member in the Economic Community of Central African States (CEEAC), a regional economic cooperation community, and in the Economic and Monetary Community of Central Africa (CEMAC), a monetary union of six Central African states. These regional economic organizations control much of the national economic and finance regulatory system.

ROC’s regulatory system for business disputes and regulations governing company registration structure and incorporation incorporate Francophone African regulatory norms promulgated by OHADA – the Organization for Business and Customs Harmonization, or Organisation pour l’harmonisation en Afrique du droit des affaires.

ROC participates as a member country of the World Trade Organization (WTO). The government does not provide information as to whether or not it notifies the WTO Committee of all draft regulations relating to Technical Barriers to Trade. ROC signed the WTO Trade Facilitation Agreement but has not begun implementing the agreement.

Legal System and Judicial Independence

The French civil law legal system serves as the basis of the Congolese legal system.

The Organization for the Harmonization of Business Law in Africa (OHADA), or Organisation pour l’harmonisation en Afrique du droit des affaires, provides the basis for ROC’s national commercial law, which also incorporates provisions unique to ROC. A commercial court exists in ROC but has not convened since 2016.

The judicial system remains independent in principle, however, in practice the executive branch has intervened in the judicial system.

Appellate courts exist and receive appeals of enforcement actions. Public Law 6-2003, which established the country’s Investment Charter, states that Congolese law will resolve investment disputes. Judgments of foreign courts are difficult to enforce in ROC. Though the government does not usually deny those judgments outright, it may propose process or procedural delays that prolong the matter indefinitely without resolution.

Laws and Regulations on Foreign Direct Investment

ROC’s Commercial Court has authority over any legal disputes involving foreign investors. Investors may also file legal complaints in the OHADA court – based in Abidjan, Cote d’Ivoire – which has jurisdiction throughout Francophone Africa. ROC’s Hydrocarbons Law and Mining Code of 2016 contain industry-specific regulations for foreign investments.

The government published no major laws, regulations, or judicial decisions related to foreign investment during the reporting period.

The ROC Agency for Business Creation, or Agence Congolaise Pour la Création des Entreprises (ACPCE), serves as a “one-stop shop” for establishing a business. Its website has limited information about laws, rules, and reporting requirements: http://www.acpce.cg/.

Competition and Antitrust Laws

No agencies review transactions for competition-related concerns, either domestic or international in nature. Ministries in general monitor individual industries and review industry-related transactions.

Expropriation and Compensation

The ROC government may legally expropriate property if it finds a public need for a given public facility or infrastructure (e.g. roads, hospitals, etc.).

No recent history of expropriation regarding private companies exists. Historically, however, the ROC government has expropriated private property from Congolese citizens to build roads and stadiums. Law entitles the claimants to fair market value compensation, but the government made such compensation inconsistently.

Beginning in 2012, the ROC government expropriated the land of Congolese private property owners in the Kintele suburb of Brazzaville to build a state-of-the-art sports complex for the 2015 African Games. The government offered little or no compensation to some property owners, and they complained of a lack of legal recourse against the government.

Dispute Settlement

ICSID Convention and New York Convention

ROC is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID). The ROC government has not ratified the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

There is no specific domestic legislation providing for enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement

ROC is a member of the Organization for the Harmonization of Business Law in Africa (OHADA), which includes binding international arbitration of investment disputes.

ROC has a Bilateral Investment Treaty (BIT) with the United States that includes an investment chapter. U.S. investors have made no recent claims under the agreement.

There have been two investment disputes involving U.S. entities in the past ten years.

In one, a company successfully negotiated a settlement with ROC authorities after filing suit in a New York district court. In the second, a company successfully sued ROC in U.S. and French courts over non-payment for goods and services, however, the ROC government refused to recognize the judgements. Congolese courts subsequently issued their own judgements in favor of the ROC government. The ROC government no longer responds to attempts by the company or intermediaries to engage on this dispute.

Local courts have rarely recognized and enforced foreign arbitral awards issued against the government.

There is no known history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

There is no known alternative dispute resolution (ADR) mechanisms available in ROC. ROC inconsistently abides by international arbitration for any treaty, international convention, or organization of which it is a member. In practice, arbitral judgments are difficult to enforce.

Commercial courts constitute the domestic arbitration bodies within the country. The commercial court legislation and structure follows French commercial legislation and structure.

Local courts inconsistently recognize and enforce foreign arbitral awards. ROC law allows for the recognitions of foreign judgments when the relevant laws appear sufficiently similar to Congolese law. Congolese courts have not accepted any foreign arbitral awards in recent years.

There are no known investment disputes involving state owned enterprises in recent years.

Bankruptcy Regulations

ROC has no specific law that governs bankruptcy. As a member of OHADA, the Organization for Business and Customs Harmonization or Organisation pour l’harmonisation en Afrique du droit des affaires, ROC applies OHADA bankruptcy provisions in the event of corporate or individual insolvency.

No laws criminalize bankruptcy.

ROC does not have a credit bureau or other credit monitoring authority serving the country’s market.

Investment Incentives

ROC’s Ministry of Economy, Industrial Development, and Promotion of the Private Sector has overall responsibility for investment promotion. When a potential investor believes its investment will bring substantial investment and job creation to the Congolese economy, it may apply for preferential tax and customs treatment by applying to the Ministry of Finance’s National Committee on Investments. The Minister of Finance chairs this committee, which includes the Minister of Economy and Industrial Development, the Ministry of Planning, as well as the Minister of Budget. The committee reviews applications annually.

Presidential decree No. 2004-30 of February 18, 2004 defines the requirements for foreign and national companies to benefit from incentives offered by the Congolese Investment Charter. The decree promulgates four types of incentives: (1)Incentives to export;

(1)Incentives to export; (2)Incentives to reinvest the company’s profit in ROC; (3)Incentives for businesses in remote areas or areas that are difficult to access; and (4)Incentives for social and cultural investment.

(2)Incentives to reinvest the company’s profit in ROC; (3)Incentives for businesses in remote areas or areas that are difficult to access; and (4)Incentives for social and cultural investment.

Examples of incentives include: reduced or exempted taxes below the corporate tax rate of 30 percent; reduced customs duties over a period of five to 10 years; a 50 percent reduction in business registration fees; and an accelerated depreciation mechanism. For companies owned at least 25 percent by domestic entities, other incentives include a reduced dividend tax rate of 10 percent, capital gains tax reductions, deductions for business expenditures, reduced rents, and deductible remunerations. Businesses may negotiate other incentives during the incorporation process.

Foreign Trade Zones/Free Ports/Trade Facilitation

The ROC government has named four special economic zones (SEZs): in the main economic hub of Pointe-Noire, the capital Brazzaville, and the cities of Ouesso and Oyo. ROC signed memoranda of understanding with the Governments of Mauritius, Singapore, and the People’s Republic of China to advise on the development of the SEZs. The government has also expressed a desire to attract U.S. investment. Little to no activity occurs in the SEZs, and no known timeline exists to render the SEZs operational.

Performance and Data Localization Requirements

Foreign companies must offer local employment to receive tax and investment benefits through the National Committee on Investment. Major foreign direct investment must demonstrate a significant economic windfall for the local community, including increased local employment, to receive an investment agreement from the National Committee on Investment.

ROC’s labor code requires the top manager of all companies to be a Congolese national. The government frequently waives this requirement for multinational companies.

Applications for residence or work permits involve multiple, paperwork-intensive steps. Business have reported that immigration and customs officials solicited bribes during the application process. Visitors require a letter of invitation, approved by the immigration authority, prior to applying for any type of visa. A visitor or an investor must obtain a visa before travel. Authorities do not provide visas on arrival.

The ROC government encourages local purchasing and production but in most cases does not impose requirements. The 2016 Hydrocarbons Law includes local content requirements for companies operating in the energy sector.

The Ministry of Commerce applies price controls on roughly four dozen staple products, including food and fuel. The Ministry of Commerce also subsidizes certain products – such as sugar, for example – to make the domestic market more profitable for companies that might otherwise seek to export additional supply.

ROC enforces water pollution safeguards and forest regeneration requirements in the oil and forestry sectors. All forestry companies, both foreign- and locally-owned, are required by law to process 85 percent of their timber domestically and export it as furniture or otherwise transformed wood, and allows timber companies to export up to 15 percent of their wood product as natural timber. In practice, however, the economy exports much timber as natural timber.The timber industry in ROC increasingly requires international certification, most often Forest Stewardship Council (FSC) certification. 28 of 32 timber companies in ROC operate without FSC certification. FSC-certified companies may benefit from future government incentives as ROC continues to participate in a Voluntary Partnership Agreement with the European Union’s Forest Law Enforcement and Governance Transparency program and with the United Nations’ Reducing Emissions from Degradation and Deforestation program.

The 2016 Hydrocarbons Law includes local content requirements for companies operating in the energy sector.

No known performance requirements exist for foreign or local companies. No known restrictions apply to U.S. or other foreign firms’ participation in ROC government-financed or subsidized research and development programs.

No known procedures for performance requirements exist in the Republic of the Congo.

No requirements for foreign information technology providers exist to provide source code and/or access to encryption.

No known measures prevent companies from transmitting customer or other business data outside the country.

No known rules require local data storage.

Real Property

The government enforces property rights, though companies and individuals cite inconsistent enforcement. Mortgages and liens exist. The recording system is generally reliable.

No known specific regulations regarding land lease or acquisition by foreign investors exist.

The government has no definitive registry of untitled land. There is effort by the government to push property owners to register land titles.

Property ownership can transfer to other owners if the property remains unoccupied for 10 consecutive years while having been simultaneously occupied by another user (squatter).

Intellectual Property Rights

As a member of the Economic and Monetary Community of Central Africa (CEMAC), the ROC participates in the African Intellectual Property Organization (OAPI). OAPI manages a single copyright system for all member states. Additionally, as a member of the World Trade Organization (WTO), ROC is obligated to ensure that intellectual property (IP) legislation conforms to WTO norms and standards. The Ministry of Commerce leads issues related to counterfeit products. Local authorities have historically seized and destroyed contraband items, such as medical supplies and food products. Determining the extent of IP infringement is challenging because the ROC maintains no formal system of tracking and reporting seizures of counterfeit goods. Additionally, the ROC government reportedly uses unlicensed software on its computers.

The government has not enacted any new IP-related laws or regulations in the past year.

ROC is not listed in USTR’s Special 301 Report or the Notorious Markets List.

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

Capital Markets and Portfolio Investment

The ROC government maintains a neutral attitude toward foreign portfolio investment and does not widely practice foreign portfolio investment.

ROC does not have a national stock exchange. ROC-based companies may seek regional listing on the Douala Stock Exchange, which merged with the Economic and Monetary Community of Central Africa (CEMAC) Zone Stock Exchange. The Bank of Central African States (BEAC) determines monetary and credit policies within the CEMAC framework to ensure the stability of the common regional currency.

Existing policies facilitate the free flow of financial resources, though complex products are not widely used.

The government and Central Bank respect IMF Article VIII in principle, however, within the last year the BEAC imposed restrictions on international payments and transfers. Mining and oil companies especially expressed concerns about the new restrictions.

In June 2019, the BEAC issued a number of directives to implement currency exchange controls previously approved by CEMAC on December 21, 2018. The CEMAC regulation provides the framework, terms, and conditions for the regulation of foreign exchange transactions in the CEMAC member States – Cameroon, Central African Republic, Chad, Equatorial Guinea, Gabon, and the Republic of the Congo. The new regulation increases the BEAC’s role in declaring and authorizing international transactions, the control of the compliance with the foreign exchange regulations and the interpretation of the CEMAC Regulation. The regulation was supposed to enter into force on March 1, 2019, however the compliance/application of the regulation is extended to December 31, 2021 referring to the decision of the Governor n°119 /GR/2020.

The BEAC monitors credits and market terms. Foreign investors can obtain credit on the local market as long as they have a locally registered company. ROC, however, offers only a limited range of credit instruments.

Money and Banking System

Banking penetration likely remains in the 10- to 12-percent range, although a government survey conducted in 2015 estimated a rate of 25-30 percent. High intermediation costs and high collateral requirements limit the pool of customers. Microfinance banks and mobile banking remain the fastest growth areas in the banking sector.

The current economic crisis and the government’s consecutive years of fiscal deficits have additionally strained the banking sector over the past five years. Overall loan default has remained around 30 percent in the reporting period due to strained economic conditions.

Non-performing loans amount to approximately 30 percent in 2020.

Fiscal transparency issues limit any estimate of the total assets controlled by ROC’s largest banks. The assets of the largest banks have likely decreased significantly in recent years as a result of the economic crisis.

ROC participates in the Central African Economic and Monetary Community (CEMAC) zone and the Central Bank of the Central African States (BEAC) system. BEAC’s regulatory body, the Banking Commission of Central Africa (COBAC), supervises the Congolese banking sector.

Foreign banks and branches may operate in ROC and constitute the majority of banking operations in ROC. BEAC banking regulations govern foreign and domestic banks in ROC. No banks have left ROC in the past ten years.

No known restrictions exist on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

In 2019, the Bank of the Central African States (BEAC) imposed new restrictions on international payments and transfers that have negatively affected foreign exchange. CEMAC regulations require banks to record and report the identity of customers engaging in transactions valued at over $10,000. The BEAC recently began monitoring closely fund transfers larger than $100,000.

New BEAC restrictions have created difficulties obtaining foreign currencies from commercial banks. No U.S.-based banks operate in ROC but transfers directly to and from the United States are possible.

ROC and other CEMAC member states use the Central African CFA Franc (FCFA, sometimes abbreviated XAF) as a common currency. The CFA is pegged to the Euro as an intervention monetary unit at a fixed exchange rate of 1 Euro: 655.957 CFA Franc.

Remittance Policies

In 2019, the Bank of the Central African States (BEAC) imposed new restrictions on international payments and transfers that have negatively affected remittances.

In June 2019, the Bank of Central African States issued a number of standard operating procedures to implement currency exchange controls. Since the implementation of these regulations, the average waiting period for any fund transfer is 10 days in 2020.

Sovereign Wealth Funds

GROC maintains no formal Sovereign Wealth Fund (SWF). An ROC law envisages the establishment of an SWF at the BEAC and acquiring mostly risk-free foreign assets.

As a former people’s republic, state-owned enterprises (SOEs) dominated the Congolese economy of the 1970s and 1980s. The number of SOEs remains comparatively small following a wave of privatization in the 1990s. The national oil company (SNPC), electricity company (E2C), and water supply company (LCDE) constitute the largest remaining SOEs. SOEs report to their respective ministries.

Constraints on SOEs operating in the non-oil sector appear sufficiently monitored and subject to civil society and media scrutiny. The operations of SNPC, however, continue to present transparency concerns. SOEs must publish annual reports subject to examination by the government’s supreme audit institution. In practice, these examinations do not always occur.

The government publishes no official list of SOEs.

Private companies may compete with public companies and have in some cases won contracts sought by SOEs. Government budget constraints limit SOE’s operations.

Privatization Program

ROC has no known privatization programs.

Corporate Social Responsibility (CSR) remains a well-known concept in ROC that local communities view favorably. Foreign oil companies constitute the primary CSR actors. Telecommunications and transportation companies and banks have increasingly supported CSR initiatives and improved their public images. The government promotes CSR to finance hospitals, education, nutrition programs, and road construction.

The government has not taken any specific measures to encourage responsible business conduct (RBC). The government has not established a national contact point or ombudsman for RBC, nor has it established a national action plan to define and drive its approach to RBC. The government encourages RBC by partnering with or endorsing companies’ CSR initiatives. RBC policies do not factor significantly into government procurement decisions.

There are no known or alleged human or labor rights concerns relating to RBC that foreign businesses should be aware of.

No known high-profile, controversial instances of private sector entities negatively impacting human rights exist.

ROC inconsistently enforces laws related to human rights, labor rights, consumer protection, environmental protections and commerce.

No known corporate governance, accounting, or executive compensation standards exist to protect shareholders.

No independent NGOs, investment funds, worker organizations/unions, or business associations promote or monitor RBC practices. Civil society groups promote individual matters of interest on a case-by-case basis.

ROC does not adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. No domestic measures require supply chain due diligence for companies that source minerals that may originate from conflict-affected areas.

ROC has participated in the Extractive Industries Transparency Initiative (EITI) since 2012 and published reports up to 2019. No domestic transparency measures require the disclosure of payments made to the government and/or of RBC policies or practices.

ROC has a small private security industry and the use of private security companies is becoming widespread for most private companies and well-off individuals. ROC is not signatory of The Montreux Document on Private Military and Security Companies, and/or a supporter of the International Code of Conduct or Private Security Service Providers, and/or a participant in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

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 () and;
• North Korea Sanctions & Enforcement Actions Advisory ().

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 ().

ROC adopted a law against corruption by public officials, “Code de Transparence dans les Finances Publiques,” on March 9, 2017. The ROC government inconsistently enforces the law.

The corruption law applies to elected and appointed officials. It does not extend to family members of officials or to political parties.

No specific laws or regulations address conflict-of-interest in awarding contracts or government procurement.

ROC does not encourage or require private companies to establish internal codes of conduct that prohibit bribery of public officials.

Some private companies, multinationals in particular, use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

ROC serves as a party to the UN Anticorruption Convention.

ROC does not provide protection to non-governmental organizations (NGOs), to include NGOs investigating corruption.

U.S. companies routinely cite corruption as an impediment to investment, particularly in the petroleum sector.

Resources to Report Corruption

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

Emmanuel Ollita Ondongo
Président
Haute Autorité de Lutte contre la Corruption (HALC)
Centre Ville, Brazzaville, République du Congo +242 06 944 6165 or +242 05 551 2229
+242 06 944 6165 or +242 05 551 2229 emmallita2007@yahoo.fr
emmallita2007@yahoo.fr

Contact at a “watchdog” organization (local or nongovernmental organization operating in the country/economy that monitors corruption):

Christian Mounzeo

Président

Rencontre pour la Paix et les Droits de l’Homme (RPDH, the local chapter of “Publish What You Pay” – Publiez Ce Que Vous Payez)
B.P. 939 Pointe-Noire, République du Congo +242 05 019 8501 or +242 05 358 3577
+242 05 019 8501 or +242 05 358 3577 http://www.rpdh-cg.org/

Accueil

Congo has experienced several periods of political violence and civil disturbance since its independence in 1960. The most recent period ended in December 2017, when anti-government forces in the Pool region – which surrounds the capital of Brazzaville – signed a ceasefire agreement with the government.

There are no known examples of damage to commercial projects and/or installations in the past ten years. Civil disturbances have occasionally resulted in damage to high-profile, public places such as police stations.

The political environment is noticeably calmer since the end of the 2017 legislative elections.

ROC held a presidential election in March 2021 that proceeded without any unrest or violence. Authorities inhibited the ability of some organizations to monitor the election and arrested a small number of political activists before and after the election. The country’s internet was shut down from the morning of the election until the announcement of results three days later.

Unemployment in ROC remains high, with youth and women disproportionately affected. Reliable unemployment figures do not exist. Unemployment Rate in Republic of the Congo is expected to reach 11.90 percent by the end of 2021, according to Trading Economics global macro models and analysts’ expectations.

Skilled labor shortages exist in a number of technical areas, including medicine, engineering, math, science, and banking. The government has no specific training programs to address these shortages.

Several laws and government policies including the Hydrocarbon Law, the Local Content Law as well as industry specific bargaining agreements require preferential treatment in the hiring process to Congolese nationals.

Government regulations govern employment adjustments in response to changing market conditions and include a severance requirement. Employers must demonstrate that market conditions have changed and obtain government approval before adjusting employment. Congolese severance laws differentiate between layoffs and firing. An employer must generally document malfeasance in order to terminate an employee for cause. There is no unemployment insurance or other social safety net programs for workers laid off for economic reasons. Most workers laid off for economic reasons rely on their former employer’s unemployment compensation.

The government may waive some labor laws to attract or retain investment on a case-by-case basis. ROC has, for example, waived the requirement for certain multinationals to hire a Congolese general manager. No known labor law exceptions exist for Special Economic Zones.

Collective bargaining is widely used in this economy, more than half of companies used it in various industries.

Courts mediate and arbitrate labor disputes.

No major strikes that posed an investment risk occurred during the reporting period.

No serious questions of compliance in law or practice with international labor standards that may pose a reputational risk to investors exist. The International Labor Organization has not identified any potential gaps in law or practice with international labor standards.

The government did not enact any new labor laws or regulations during the last year.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Source for Host Country Data: Institut National de la Statistique (National Institute of Statistics)

Table 3: Sources and Destination of FDI

Data not available.

Table 4: Sources of Portfolio Investment

Data not available.

Economic Section
Embassy of the United States of America
Boulevard Denis Sassou Nguesso
Brazzaville, Republic of Congo.+ 242 06 612 2000brazzavillepolecon@state.gov

Policies Towards Foreign Direct Investment

São Tomé and Príncipe is taking steps toward sustainable economic growth. Its economic prospects depend on the government’s ability to attract sustained FDI. Therefore, the government is anxious to improve the country’s investment climate to make it a more attractive destination for foreign investors. Under Article 14 of the Investment Code, the State guarantees equal and non-discriminatory treatment to both foreign and domestic investors operating in the country. The Trade and Investment Promotion Agency (APCI, www.apcistp.com ), housed under the Ministry of Planning, Finance, and Blue Economy, promotes and facilitates investment through single-window service and multi-sectoral coordination. However, due to lack of capacity the agency is struggling to fully comply with its mandate.

Limits on Foreign Control and Right to Private Ownership and Establishment

According to Article 4 of the Investment Code, both domestic and foreign investors are free to establish and own business enterprises, as well as engage in all forms of business activity in STP, except in the sectors defined by law as reserved for the state, specifically military and paramilitary activities and Central Bank operations. STP is gradually moving toward open competition in all sectors of the economy, and competitive equality is the official standard applied to private enterprises in competition with public enterprises with respect to access to markets, credit, and other business operations. The government has eliminated former public monopolies in farming, banking, insurance, airline services, telecommunications, and trade (export and import).

There are no limits on foreign ownership or control except for activities customarily reserved for the state. The form of public participation, namely the percentage of government ownership in joint ventures, varies according to the agreement. Based on Article 8 of the Regulation of the Investment Code, all inbound investment proposals must be screened and approved by the applicable ministry for the economic sector in coordination with APCI. According to Article 14, an investment proposal can be rejected if it threatens national security, public health, or ecological equilibrium, and if the proposal has a negative effect or insufficient contribution to country’s economy. However, these mechanisms do not go beyond the law’s mandate and are not considered barriers to investment.

Other Investment Policy Reviews

The government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD). Neither the World Trade Organization (WTO) nor United National Conference on Trade and Development (UNCTAD) has conducted a review. STP is not currently a member of the WTO but has observer status; it is a member of UNCTAD.

Business Facilitation

STP has taken steps to facilitate investment and improve the business environment in recent years. The Millennium Challenge Corporation (MCC) worked with STP from 2007 to 2011 on a Threshold Country Program to improve investment opportunities, including by creating a “one-stop shop” to help encourage new investments by making it easier and cheaper to import and export goods, reducing the time required to start a new business, and improving STP’s tax and customs clearance administration. Currently a business can be registered within one to five days. In 2013, with the support of the International Trade Center, APCI was created. These business facilitation services, including the “one-stop shop” for business registration, offer equal treatment for women and underrepresented minorities in the economy; however, there is no special assistance provided to these groups. The Single Window website  ( http://gue-stp.net/spip.php?article24 ; in Portuguese only) provides information and the application form to create and register companies in STP.

Outward Investment

While STP’s government does not actively promote outward investment, it does not restrict domestic investors from investing abroad.

STP and Portugal signed a bilateral investment treaty (BIT) and a Double Tax Agreement in 1995 and 2015 respectively. Both documents are still pending ratification.

STP is closely working with the International Monetary Fund (IMF) to implement the value-added tax (VAT) system. The VAT Law (13/2019) was approved in November 2019 and will come into force in July 2021. STP has not signed a BIT or a bilateral taxation treaty with the United States. There were no ongoing systemic tax disputes between the government and foreign investors or any taxation issues concerning U.S. investors.

Transparency of the Regulatory System

The laws and regulations that affect direct investment, including environmental, health, and safety rules and regulations, apply equally to foreign and domestic firms. STP tax laws reward citizens who return to STP to invest, while also containing provisions for attracting foreigners to invest in STP. The STP legal code is based on Portuguese law, and laws and regulations are applied at the national level. Rule-making and regulatory authority exist at the national level and regulations are developed at the ministerial level, approved by the National Assembly, and promulgated by the President. The ministry concerned is responsible for any regulatory enforcement mechanisms. Rarely, drafted bills or regulations are made available for public comment. Copies of most regulations can be purchased online at https://www.legis-palop.org/  or directly at the Ministry of Justice, Public Administration, and Human Rights in the format of the Official Gazette. The public finances and debt obligations are relatively transparent and are periodically available on the finance ministry website: https://financas.gov.st/

International Regulatory Considerations

STP is a member of the Economic Community of Central African States (ECCAS), whose fundamental goal is to promote exchange and collaboration among the member countries and give an institutional and legal framework to their cooperation. ECCAS is the largest economic community in Central Africa, including Central African Economic and Monetary Community (CEMAC) member states (Gabon, Cameroon, the Central African Republic, Chad, Republic of Congo, and Equatorial Guinea), as well as Burundi, the Democratic Republic of Congo, Angola, Rwanda, and STP. STP is not a member of the WTO, but has observer status. STP is among the 44 African Nations to have signed the agreement on African Continental Free Trade Area (AfCFTA) in March 2018 in Kigali, Rwanda, and became the 25th African country to ratify the AfCFTA in June 2019.

Legal System and Judicial Independence

Aside from a dispute between a local businessman and an Angolan investor, which led to an unconstitutional dismissal of Supreme Court Judges by the parliament in May 2018, disputes are generally solved through dialogue or negotiations between parties without litigation, and there are few instances of disagreements involving foreign investors reaching international courts. The country has a written commercial law but does not have specialized courts.

Overall, the legal system is perceived as acting independently. The judicial process is fair but is subject to manipulation on occasion. All regulations or enforcement actions are appealable to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

The VAT Law approved in 2019 will come into force in July 2021. A modern Labor Code (6/2019) enacted in April 2019, is designed to make labor standards easier for investors to understand and implement. In June 2019, STP ratified the AfCFTA. The Public Private Partnership (PPP) Law, the new Notary Code, and the Commercial Register Code all entered into force in 2018; the Regulation of Investment Code was adopted in 2017; and the Investment Code and Code of Fiscal Benefits and Incentives were adopted in 2016. APCI is a one-stop shop for all investment information: https://apcistp.com/

Due to the establishment of a “one-stop shop” for starting a new business, the cost and waiting period to start a new business have been substantially reduced. A new business can obtain expedited registration within 24 hours for approximately STN10,190 ($495) and between three to five days for approximately STN 5,190 ($252). Despite this improvement, STP was downgraded to 150 out of 190 countries in terms of starting a new business according to the 2020 Doing Business Report. In comparison, in 2017 it ranked 35 out of 190 economies.

Although no online business registration process exists, companies can easily register their businesses at the counter. The following is a general description of how a foreign company can establish a local office:

1. Provide full company documentation, translated into Portuguese.
2. Check the uniqueness of the proposed company name and reserve a name.
3. Notarize the company statutes with the registration office at the Ministry of Justice.
4. File a company declaration with the Tax Administration Office at the Ministry of Finance, Commerce, and Blue Economy.
5. Register with the Social Security Office at the Ministry of Labor and Social Affairs.
6. Publish the incorporation notice in the official government gazette (Diario da Republica).
7. Publish the incorporation notice in a national newspaper.
8. Register the company with the Commercial Registry Office at the Ministry of Finance, Commerce, and Blue Economy.
9. Apply for a commercial operations permit (also known as an “alvara”).
10. Apply for a taxpayer identification number with the Office of Tax Administration at the Ministry of Finance, Commerce, and Blue Economy.
11. Register employees with the Social Security Office.

Other required documents include: 1) copies of the by-laws of the parent company and of the minutes of the meeting of the board of directors in which the opening of the STP branch is approved; 2) a certificate of appointment of the general manager for the STP office; 3) a copy of any agreement signed with a São Toméan company or with the STP government; 4) two copies of permits from the Court authorization to operate; and 5) two photographs and a copy of the passport of the General Manager.

In addition, the Single Window website  ( http://www.gue-stp.net/spip.php?article24 ; in Portuguese only) provides information on creating and registering companies in STP.

Beyond the “one-stop shop” to help encourage new business, there are no agencies or brokers that provide services to further simplify the procedures for establishing an office in STP. Some companies hire a legal office for assistance.

Competition and Antitrust Laws

The AGER (General Regulatory Authority of the Democratic Republic of São Tomé and Principe) was created to promote competition and prevent operator abuses in the water, electricity, and telecommunications sectors, as well as in the postal service. The AGER was established in 2005 and is housed under the Ministry of Public Works, Infrastructures, Natural Resources, and Environment. STP does not have specific agencies that review transactions for competition-related concerns for other economic sectors.

Expropriation and Compensation

The STP Constitution and the Expropriation Code allow only the central government to expropriate private property. The law permits expropriation of private property only if it is deemed to be in the national public interest and only with adequate compensation. There is no evidence to suggest that the government would undertake expropriation in a discriminatory manner or in violation of established principles of international law and standards.

Aside from a massive land expropriation from colonial farmers in 1976 – later recognized by the government as detrimental to STP’s economy – there have not been any documented cases of expropriation of foreign-owned properties. The government has reportedly considered expropriating land to expand the runway at the international airport, but thus far has been reluctant to do so out of concern that any expropriation will deter new investment.

Dispute Settlement

ICSID Convention and New York Convention

STP is a member of the International Centre for the Settlement of Investment Disputes (ICSID) Convention and the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

STP does not have a Bilateral Investment Treaty with the United States. In May 2018, a dispute between a local businessman and an Angolan investor over a brewery led to a government intervention and the unconstitutional approval of a parliamentary resolution dismissing Supreme Court Judges, including its President. There are no reports of investor-state disputes that have involved a U.S. person in the past 10 years. STP courts recognize and enforce foreign arbitral awards issued against the government.

International Commercial Arbitration and Foreign Courts

STP does not have any conflict mediation system, but the country has a Voluntary Arbitration Law (LAV). The LAV is largely based on the Portuguese Arbitration Act of 1986 and incorporates many of the principles of the UNCITRAL Model Law. The Arbitration Center, which was housed under the Chamber of Commerce, never fully played its role and has ceased its activities.

The STP legal system recognizes international arbitration, and local courts recognize foreign arbitral awards, though enforcement may be difficult. No state-owned enterprise (SOE) is currently involved in an investment dispute.

Bankruptcy Regulations

STP has a bankruptcy law, but it is not well developed. In the World Bank’s 2020 Doing Business Report, STP ranks 168 out of 190 economies on the ease of resolving insolvency, the same rank as in 2019.

Investment Incentives

According to the 2016 Investment Code, all investments above 50,000 Euros are eligible for guarantees and benefits, including fiscal incentives stated in the Fiscal Benefits and Incentives Code of November 2016. These incentives include deductions on corporation taxes, stamp taxes, taxes on baking operations, and withholding taxes. Other incentives include reductions or exemptions of import and re-export tariffs. The government also provides incentives for human resources training, as well other exceptional and complementary benefits and incentives. Based on Article 31 of the Fiscal Benefits and Incentives Code, the incentives are granted through the Private Investment Registration Certificate (CRIP) issued by the APCI on approval of the investment project. However, contrary to the 2008 Investment Code, the 2016 Code does not provide access to state-owned land and facilities as incentive to investments. No significant measure was adopted in the last year to incentive investments.

Foreign Trade Zones/Free Ports/Trade Facilitation

STP currently has no free trade zones or free ports but in October 2020, the government formalized a free trade zone project to be developed in Malanza, Caué district, south of São Tomé. Article 33 of the Fiscal Benefits and Incentives Code defines the districts of Cantagalo, Lemba, Lobata, and Caué, as well as Príncipe, as Special Development Zones. Therefore, any new investment established in these areas under the Investment Code can qualify for special incentives. According to Article 14 of the Investment Code, the state assures fair, non-discriminatory, and equal treatment for all investment in the national territory. Companies that qualify may benefit from reductions or exemptions of taxes under the conditions set forth in the Code of Free and Offshore Activities.

Performance and Data Localization Requirements

The government encourages but does not mandate local employment. STP has no specific performance requirements as a condition for establishing, maintaining, or expanding investment. However, under the Code of Fiscal Benefits and Incentives, the government offers better incentives for those companies that choose to reinvest or expand their investment. There are no requirements for investors to buy local products, to export a certain percentage of output, to invest in a specific geographical area, or use a domestic technology. There is no blanket requirement that STP nationals own shares in foreign investments in STP. The visa application process is straightforward and transparent, and visas or work permits are usually easy to obtain if companies meet all the requirements. Nevertheless, few São Toméan embassies worldwide process visa applications. Under the Legal Regime of Foreign Citizens in STP, STP lifted visa requirements for citizens of the United States, EU, Canada, and the Community of Portuguese Language Countries. Also, any foreign citizen holding a valid passport with a valid Schengen or U.S. visa can enter and stay in the country up to 15 days. STP recently began accepting online visa applications. Information on submitting an online visa application is available in Portuguese and English at https://evisa.st , though it reportedly suffers from outages, requiring visa applications to be done in person or via email.

Due to the COVID-19 pandemic, the government enacted travel restrictions in March 2020 for flights and travelers from certain countries. Check https://travel.state.gov/content/travel.html for country-specific information when planning travel. Currently, to fly in and out of STP, travelers must have a negative COVID-19 PCR test result valid for 72 hours.

The National Agency for Personal Data Protection (ANPDP) oversees all the rules and requirements for data storage and transfer: https://www.anpdp.st/#13 .

Real Property

Based on Article 46 of the Constitution, private property rights are guaranteed by the state. According to Article 13 of the Expropriation Code, authorities must provide fair, adequate, and effective payment at market value in advance before expropriating any private property. The government owns the vast majority of land in the country, most of which is agricultural land granted by the Ministry of Agriculture, Fishing, and Rural Development through concessions of land titles under the Land Reform Law. Less than 10 percent of land is held by private owners. Foreigners cannot purchase land, although they can purchase structures. The 2020 World Bank’s Doing Business Report ranks STP 172 out 190 economies in terms of registering properties. The 2018 Notary Law provides the country with a modern and practical legal framework that allows for fast and efficient notarial acts, while ensuring judicial security. U.S. companies have not raised property rights concerns with the Embassy.

Intellectual Property Rights

U.S. companies have not raised intellectual property (IP) rights concerns with the Embassy. During the past year, no new IP related laws and regulation were enacted, nor are any reform bills pending. All copyright and industrial property rights proceedings are covered by the Directorate of Industry in collaboration with the National Directorate of Culture, under the Secretariat of State for Commerce and Industry and the Ministry of Tourism and Culture, respectively.

STP is not listed in the USTR’s Special 301 report and is not listed in the notorious market report. STP is a member of the World Intellectual Property Organization (WIPO). The Regulation on Industrial Property regulates the enforcement of IP, including geographical indications, patents, and trademarks. STP does not report on seizures of counterfeit goods. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Portfolio investment is undeveloped and unclear. The Central Bank of STP (BCSTP) issued Treasury bills (T-bills) for the first time on June 29, 2015 for STN 75 million (approximately $3.7 million) at the fixed interest rate of 6.2 percent, with a maturity of six months. The demand was 20 percent higher than the offer, due to the participation of three domestic banks. The most recent issuance occurred on March 15, 2018. STP does not have a stock market. Articles 13 and 14 of the Foreign Exchange Regulations facilitate the free flow of financial resources under the supervision of the Central Bank. Foreign investors are able to get credit on the local market; however, access to credit is difficult due to the limited variety of credit instruments, high interest rates, and the number of guarantees requested by the commercial banks. As a result, on the World Bank Doing Business Report 2020, STP ranked 165 out 190 economies regarding access to credit, a 4-point drop compared to the previous year. There are currently no significant U.S. investors active in STP.

Money and Banking System

STP has five private commercial banks. Portuguese, Nigerian, Angolan, Cameroonian, Gabonese, and Togolese, as well as Säo Toméan, interests are represented in the ownership and management of the commercial banks. The International Bank of STP (BISTP) is the largest in terms of assets; however, banks’ asset estimations are not publicly available. In early 2018, the BCSTP declared the commercial bank “Private Bank” insolvent and opened a public tender to liquidate its assets and liabilities. The Gabonese investment bank BGFI opened its São Toméan operation in March 2012. Banking services are available in the capital with a few smaller branches in cities in the north, south, and center of the country, as well as in Príncipe. In December 2020, the Governor of the Central Bank announced STP’s financial system would begin accepting Visa and MasterCard over the course of 2021.

In addition to retail banking, commercial banks offer most corporate banking services, or can procure them from overseas. Local credit to the private sector is limited and expensive, but available to both foreign and local investors on equal terms. The country’s main economic actors finance themselves outside STP. Foreigners must establish residency to open a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The BCSTP supervises the national financial system and defines monetary and exchange rate policies in STP. Among other responsibilities, it sells hard currency and establishes the reference rate. In case of a shortage, access to foreign currency is limited; however, there is no official norm restricting access. Article 18 of the Investment Code dictates that foreign investors are allowed to transfer or repatriate funds associated with an investment.

The dobra (STN) is the national currency. In July 2009, STP and Portugal signed an economic cooperation agreement to peg the dobra to the euro rather than a weighted basket of currencies. Based on the 2017 Monetary Law, the BCSTP introduced a new currency to modernize and strengthen the country’s financial system. With the introduction of the new dobra on January 1, 2018, the exchange rate is currently 24.5 dobra to the euro. This peg offers credible parity, minimizes monetary instability costs, and provides better credibility for exchange rate and monetary policy. The exchange rate to the U.S. dollar fluctuates.

Remittance Policies

Repatriation of capital is possible with prior authorization. According to both the Foreign Exchange Law and the Investment Code, transfer of profits outside the country is also allowed after the deductions for legal and statutory reserves and the payment of existing taxes owed. The government encourages reinvestments with associated reductions in income taxes.

Sovereign Wealth Funds

STP does not have a traditional sovereign wealth fund (SWF). It does have a small National Oil Account (NOA). The NOA was previously funded by signing bonuses paid by energy and oil companies to gain rights to conduct exploration and production activities. According to officials from the budget department, the Law of Petroleum allows the government to withdraw up to 20 percent of the balance of the NOA every year as calculated on June 30 of the previous year. Details are available on the state budget and under NOA online: www.grip.st/?cntnr_informac=informac&ficherselt=DT-166- Envio de Extracto da Conta Nacional de Petroleo junto BCSTP.pdf

When STP’s cocoa plantations were shut down in the late 1980s, most SOE’s closed. EMAE (Water and Power Supply Company), ENAPORT (Port Authority Company), ENASA (National Company for Airports and Air Safety), and Empresa dos Correios (Post Office) are 100 percent state-owned, though they have some financial autonomy. Under a joint venture, the government holds 49 percent of CST (Santomean Telecommunication Company), while the largest Brazilian telecommunication company, OI, owns 51 percent. The government has a 48 percent stake in BISTP, while the Portuguese Caixa Geral de Depositos holds 27 percent and the African Investment Bank holds 25 percent. All four fully owned state enterprises are unprofitable and are annually audited by the Ministry of Planning, Finance, and Blue Economy and biennially by the Court of Audit. They have financial autonomy, but largely depend on funds from the state budget. EMAE, ENAPORT, and ENASA have no competitors. Regarding telecommunication and banking, traditionally government is the largest client of CST and BISTP.

Privatization Program

STP does not have an active privatization program. However, thorough its periodical reports, the IMF has been recommending the privatization of the SOEs, especially EMAE. On occasion, there are concession opportunities. They are normally advertised under a non-discriminatory public bidding process.

Ministry of Planning, Finance and Blue Economy: https://financas.gov.st/ 

BCSTP’s website: https://bcstp.st/

There are no rules or legislation pertaining to responsible business conduct (RBC) in STP. Companies generally act in accordance with laws pertaining to labor, environment, flora and fauna protection, consumer protection, and taxation. There is limited awareness of expectations of or standards for responsible business conduct. STP participates in the Extractive Industries Transparency Initiative (EITI). Companies usually respect human and labor rights. On occasion, civil society and NGOs speak up against businesses’ inappropriate conduct, especially as regards environmental destruction.

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 and;
• North Korea Sanctions & Enforcement Actions Advisory

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.

STP has an overall positive trajectory in combatting corruption due to reforms the government has undertaken in recent years. STP ranked 63 out 180 countries on Transparency International’s 2019 Corruption Perception Index, climbing one position compared to the previous year. The government passed an anti-corruption law in 2012 that required all payments to government entities over $5 be made directly at the BCSTP and all salary payments to civil servants be paid directly to the employee’s bank account. The government has also taken steps to review and update existing contracts with some foreign companies to support liberalization and free market competition. The government has denounced corruption and pledged to take necessary steps to prevent and combat it.

Although corruption in customs was historically an issue for foreign investors, the MCC Threshold Program resulted in a modern customs code and related decrees by introducing modern customs tracking software and eliminating manual procedures, with customs agents handling payments for the importer. As a result, customs revenues have increased significantly while incidents of corruption have reportedly declined.

In 2013, the parliament adopted an amended anti-money laundering/counter-terrorist financing (AML/CFT) law that complies with international standards. It designates the Financial Information Unit (Unidade de Informação Financeira) as the central agency in STP with responsibility for investigating suspect transactions. STP is a member of the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), a FATF-style regional body.

According to the 2016 Investment Code, all investment proposals must be submitted to the APCI, which is responsible for carrying out all legal inter-institutional coordination with different sectors involved in the analysis and approval of the investment project. The law limits contacts between investment proponents and officials involved in the investment approval process.

STP signed and ratified the UN Anticorruption Convention. It is not party to the Economic Co-operation and Development Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

STP does not have a designated agency responsible for combatting corruption.

Resources to Report Corruption

“Watchdog” organization:

Deodato Capela
President
Centro de Integridade Pública de São Tomé e Príncipe (STP Public Integrity Center) – Anticorruption, Transparency and Integrity -NGO
P.C: 330, Almeirim-São Tomé; São Tomé e Príncipe
+ 239 991 1116
cipstp.org@gmail.com 
http://cipstp.st/ 

STP is relatively stable, has no ethnic tensions, and has a relaxed lifestyle, which locals refer to as leve-leve (“take it easy”). Since its democratic reforms in 1990, the archipelago has been a good example of democracy in the sub-region with a history of peaceful transfers of power and consensus in decision making. There were some protests in 2018 over the creation of the Constitutional Court, and a lower court decision to recount the votes of the October 7 legislative, local, and regional elections. Despite the post-election protests, the legislative elections led to the peaceful formation of a new coalition Government.

STP generally has a good human rights record and demonstrates a respect for citizens’ and workers’ rights. Strikes are not the primary means to settle labor disputes and labor strikes have been sporadic in recent times.

Since independence in 1975, there have been no incidents of politically motivated attacks on projects or installations. There is no anti-American sentiment and instances of civil disorder are rare. Recently maritime piracy has affected STP’s territorial waters in the Gulf of Guinea, though the threat of terrorism remains limited. STP has sought to be an active partner in regional maritime security efforts, although its capacity and resources are minimal. Despite two violent murders in early 2020, violent crime rates are at a historical low.

A significant portion of STP’s workforce is young, relatively well-educated, and multilingual (Portuguese and French). Further training of the workforce is needed, however, for the economy to continue developing. The percentage of foreign/migrant workers is low but covered by the new Labor Code (Law 6/2019). The government does not officially require but encourages companies to hire nationals. For the first time in 2016, the government set the national minimum wage for private and public sectors. The basic salary varies by the size of the enterprise and increases over time. For micro enterprises or family businesses, the minimum wage is around STN 800 ($38.8) per month, small business STN 1,000 ($48.5), medium enterprise STN 1,300 ($63.1) and large enterprise STN 1,600 ($77.7). The basic salary for the public sector is approximately STN 1,100 ($53.4). Women are entitled to state-funded maternity leave for a period of 14 weeks, including 8 weeks after childbirth. The law recognizes the right of workers to form and join independent unions, conduct legal strikes (though this is strictly regulated), and bargain collectively. The law does not prohibit anti-union discrimination or retaliation against strikers. Workers’ collective bargaining agreements remain relatively weak due to the government’s role as the principal employer and key interlocutor in labor matters, including wages. Special tax incentives are provided under the Fiscal Benefit Code to companies that provide training to its human resources. Labor disputes are usually solved through dialogue between parties, under mediation of the General Labor Inspection Department (IGT), or through litigation if a consensus cannot be reached. The Labor Law was drafted in collaboration with the ILO. The IGT is housed under the Labor Ministry.

* Source for Host Country Data: Ministry of Planning, Finance and Blue Economy, 2019. 

Christopher Tremann
Deputy Chief of Mission
U.S. Embassy Libreville
Tel: (241) 11.45.71.30 tremannce@state.gov
tremannce@state.gov
LibrevillePE@state.gov

Policies Towards Foreign Direct Investment

The FGS and the Federal Member States (FMS) have a positive attitude towards foreign direct investment (FDI).  However, insecurity and uncertainty driven by terrorist groups, lack of transparency, failure to fully constitute governing bodies per the 2012 provisional constitution, and widespread corruption in government sectors present considerable barriers to FDI.

Parliament passed a foreign investment law in 2015 to promote and protect foreign investment.  The law also provides some incentives to foreign investors, such as tax advantages and guarantees against expropriation.

In September 2020, Somalia’s investment promotion authority, Sominvest, released a five-year National Investment Promotion Strategy, which aims to improve the investment climate and Somalia’s image abroad.  This strategy paints a rosy picture of doing business in Somalia and suggests the key areas with potential for foreign investment are agriculture, fishing, energy, and banking.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no laws that address private ownership rights or limit foreign control.

Other Investment Policy Reviews

There has not yet been a third-party investment review of Somalia.

The FGS is not a member of the World Trade Organization (WTO) or the Organization for Economic Cooperation and Development.  In 2017 Somalia submitted a notification of intent to join the WTO, and in May 2020, after working through the accession stages, Somalia submitted a Memorandum on the Foreign Trade Regime, a document that outlines its trade and economic policies and its trade agreements with other countries.  The WTO confirmed Somalia’s Working Party chairperson, Swedish Ambassador to the WTO Mikael Anzen, in October 2020 and is planning the first Working Party meeting for mid-2021.

The FGS rejoined the Common Market for Eastern and Southern Africa in July 2018.  As a member, Somalia is required to undertake several institutional, policy, and regulatory reforms to meet the organization’s free trade protocols.

The FGS has applied for East African Community (EAC) membership, which would allow Somalia to formalize trade with its neighbors and facilitate movement of Somali citizens to other EAC member states through acquisition of the common EAC passport.  However, at the February 2021 Heads of State Summit, the EAC found that Somalia’s application was not yet ready for a decision.

Somalia has also indicated its intent to participate in negotiations on the African Continent Free Trade Agreement.

Business Facilitation

In 2019 the FGS passed a company law formalizing the legal requirements to create and register a company.  Also in 2019, the Ministry of Commerce and Industry announced the launch of a “one-stop shop” business registration website, but it has not yet become operational.

The World Bank ranked Somalia 190 of 190 countries in its 2020 Ease of Doing Business Report.

Outward Investment

The Somali government does not have a policy that promotes or incentivizes outward investment.  Anecdotal evidence suggests that Somalis who accumulate wealth seek to move it overseas to avoid the uncertain domestic investment environment.

Somalia does not have a bilateral investment treaty with the United States.  It does have bilateral investment treaties with Egypt and Germany.  Somalia and Turkey signed a bilateral investment treaty in 2016, but it has not yet come into force.

Somalia does not have a bilateral taxation treaty with any country.

Transparency of the Regulatory System

Somalia’s regulatory system is largely nonexistent.  The 2012 provisional constitution has not been finalized, and there is not yet a constitutional court to enforce it.  Many of the current investment laws and regulations predate the 1991 government collapse.  The FGS has revised some of these regulations and has begun to develop modern business and investment legislation to conform to the global business environment, but it has a long way to go.  Somalia has a procurement act that is intended to provide for transparency in public contracts and concessions, but it is not always followed.  In 2020 the FGS passed a petroleum law that provides a regulatory framework for issuing exploration and development licenses.

International Regulatory Considerations

Somalia is a member of the Intergovernmental Authority on Development, as well as the Arab League and the Organization of Islamic Cooperation.  In 2018 Somalia obtained provisional membership in the Common Market for Eastern and Southern Africa, but it has several conditions to fulfill before achieving full membership.  Somalia is not yet a member of the WTO.

Legal System and Judicial Independence

Somalia’s legal system derives from Italian and British law, customary dispute resolution (xeer) principles, and Islamic law.  The provisional constitution establishes a judicial system that is theoretically independent of the executive and the legislature, but in practice the legal system depends on the executive.  There are no courts dedicated to commercial disputes.  A November 2020 USAID-funded report found that the courts lack political independence, are marked by “pervasive graft,” and face competition from a parallel al-Shabaab court system.  There are reports that some citizens choose to bring cases to al-Shabaab courts, finding them less corrupt than government courts.

Laws and Regulations on Foreign Direct Investment

Somalia’s 2015 foreign investment law provides some guidance for foreign investors, but a comprehensive investor and investment bill remains stuck in parliament.  In 2019 the Ministry of Planning opened its investment promotion office, Sominvest, to provide potential investors with guidance on working in Somalia.

Competition and Antitrust Laws

Competition and anti-trust laws do not exist in Somalia.  Local business disputes often are informally settled through the intervention of traditional elders.

Expropriation and Compensation

Somalia is rebuilding from decades of civil war, and its legal and regulatory environment remains undeveloped.  There are no laws that define how the government can expropriate private property.  However, the provisional constitution provides a right to just compensation from the government if property has been compulsorily acquired in the public interest.  After the 1991 government collapse, many state-owned properties ended up in private hands, and the FGS has indicated interest in repossessing these properties.  There is a draft investors protection bill in parliament that will address expropriation, dispute resolution, and the transfer and repatriation of investments.

Dispute Settlement

ICSID Convention and New York Convention

Somalia is not a party to the Convention on the International Centre for Settlement of Investment Disputes or the New York Convention of 1958.

Investor-State Dispute Settlement

The government has limited capacity to enforce laws or settle disputes domestically.  Many businesses in Somalia are owned by members of the diaspora, many of whom operate them as Somali businesses rather than foreign entities.  The FGS still has not passed the investor and investment bill, which could provide a legal framework for investor-state dispute settlement.  Somalia is not a signatory to any internationally binding treaty or investment agreement to arbitrate investment disputes.  The government has no bilateral investment treaty or free trade agreement with an investment chapter with the United States.  There have been no investment disputes involving U.S. persons or other foreign investors for the past 30 years.

International Commercial Arbitration and Foreign Courts

Somalia is not a signatory to any convention on commercial arbitration, and local courts have limited capacity to enforce their own decisions.  Domestically, parties often resort to a local council of elders, clan elders, religious leaders, or al-Shabaab to settle disputes.  Many foreign companies rely on arbitration courts in Djibouti or the United Arab Emirates (UAE).  The Intergovernmental Authority on Development is developing a regional initiative to establish a business dispute and arbitration center in Djibouti.

Bankruptcy Regulations

Somalia has no bankruptcy laws.

Investment Incentives

The 2015 foreign investment law provides some investment incentives, such as tax benefits, to foreign investors.  The government does not issue grants or jointly finance foreign direct investment projects, but the FGS informally uses ad hoc tax exemptions and revenue sharing agreements to attract investment.  The director of revenue at the Ministry of Finance has authority to grant tax exemptions, but in practice line ministers and the prime minister have offered tax exemptions to foreign investors.  Sominvest is developing a national investment incentive framework.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no laws or policies that designate any area as a free trade zone or as an area with special tax treatment.  Pursuant to an agreement signed in December 2019, the semi-autonomous state of Somaliland is constructing a free trade zone dubbed the Berbera Economic Free Zone, funded jointly by the Somaliland government and UAE-based Dubai Ports World.

Performance and Data Localization Requirements

The FGS does not require local employment.  There are no laws inhibiting foreign investors or foreign employees.  Few foreign companies operate in Somalia, and most of them are based within the secure compound surrounding Mogadishu’s airport.  Most of these companies are under contract to the FGS or an international organization to undertake infrastructure and security-related projects.  Some are in the service sector, such as hotels.  Foreign companies may contract with foreign employees with specific skillsets not locally available and can obtain entry visas for these employees.

Real Property

Somali laws relating to land are complex and include customary rules and traditions used by Somalia’s clan-based society, Western-style laws from the colonial period, remnants of the pre-1991 authoritarian rule, and Islamic law and tradition.  While there have been no federal efforts to catalogue property ownership and title land, some FMS have tried to document land ownership for the purposes of taxation.  In addition, land within the major cities, including Mogadishu, is generally documented for taxation purposes.  There are no specific regulations regarding land leases or acquisition by foreign investors.

When the government collapsed in 1991, there was widespread conflict over land, land-grabbing by warlords, and displacement of local populations, especially in southern Somalia.  As a result, fraudulent titles and land disputes are common.  A former government official moved all records of pre-1991 property registrations outside the country.  Requests to verify titles registered before 1991 therefore take a month to be processed and cost between $1,000 and $2000.  For properties registered more recently, records may be available in the official bulletin.  Lawyers charge approximately $50 to verify a title’s authenticity.

Somaliland has a more advanced land title framework and dispute mechanism.  The Somaliland legal framework addresses urban land management, agricultural land ownership, urban land dispute resolution, and civil procedures for hearing property disputes.

Intellectual Property Rights

There are no laws protecting or enforcing intellectual property (IP).  The cabinet approved a new IP law in 2019, but parliament has not yet approved it.  The FGS passed a law on standardization and quality control in March 2020 that provides for the creation of the Somalia Bureau of Standards as the enforcement authority for quality control.  Although there are no official reports on seizures of counterfeit goods, it is widely believed that many goods entering Somalia are counterfeit.  The government has no capacity to seize or track counterfeit goods entering the country.  For additional information about national laws and points of contact at local IP offices, please see the World Intellectual Property Organization’s country profiles.

Capital Markets and Portfolio Investment

Somalia has no structured financial system and does not have portfolio investment financial products in the market.  Somalia does not issue government bonds or corporate bonds.  There is one private stock exchange operating in Somalia, but the government has no authority to regulate trade in stocks and securities.

Money and Banking System

Somalia’s banking system has yet to recover from years of conflict.  Moving money into and around the country through traditional banking mechanisms is difficult.  The Somali shilling lacks legitimacy, as it has not been printed since 1991 and more than 98 percent of the bills in circulation are counterfeit, printed by warlords and rogue businessmen.  Consequently, much of the Somali economy relies on the U.S. dollar.

Since the FGS reestablished the CBS in 2009, it has been slowly developing the tools and capabilities to oversee licensing and supervision of commercial banks and money transfer businesses.  The CBS has issued licenses to 10 banks and seven informal money transfer systems known as hawalas.  A 2019 anti-money laundering/countering the financing of terrorism law requires enhanced KYC controls and created the government’s financial investigation unit, the FRC.  Nevertheless, a 2020 UN report found that al-Shabaab moves millions of dollars through the formal banking system, which keeps Somalia’s financial risk profile high.  Somalia’s banks are also stymied by the lack of any national identification, which creates challenges in verifying client identity.

Only 15 percent of Somalis have formal bank accounts due to a lack of branches in many towns and the difficulty of obtaining acceptable forms of identification to open accounts.  Mobile finance therefore plays an important role in the economy.  Mobile money platforms have been essentially unregulated since their introduction in 2012.  In February 2021 the CBS issued its first mobile money license.

There is no publicly available data regarding the assets of privately owned banks.  No foreign banks operate in Somalia.  The CBS issued an interim license to an Egyptian bank in April 2019, but the bank has not opened.

Foreign Exchange and Remittances

Foreign Exchange

While the official currency for Somalia is the Somali shilling, almost all of the currency in circulation is counterfeit.  As a result, Somalia’s economy is largely dollarized, and a significant portion of daily transactions are conducted through phone-based mobile money managed by telecommunications companies.

There is no restriction or limitation on converting or repatriating funds associated with outside investment.  The shilling is volatile and fluctuates rapidly against the dollar.  Since there is no government agency that determines monetary policy at this time, the exchange rate is set by currency traders located in Mogadishu’s Bakara market.  The government has plans to print a new currency but does not have the budget do so in the near term.

Remittance Policies

For two decades there was no functioning banking system in Somalia.  Instead, hawalas transferred money into, out of, and within Somalia.  Somalis in the diaspora remit more than $1 billion annually, accounting for between 20 and 40 percent of Somalia’s GDP.  While the effects of the COVID-19 pandemic on Somalia’s financial sector are still uncertain, during the early stages of the pandemic the country saw a drop in remittances.

Sovereign Wealth Funds

There are no sovereign wealth funds or any other state-owned investment fund.

Somalia has no fully or partially state-owned enterprises.

Privatization Program

Since the government does not own any business entities, there are no entities to privatize.  The World Bank has supported the development of a public-private partnership law, but parliament has not yet acted on it.

Somalia has no fully or partially state-owned enterprises.

Privatization Program

Since the government does not own any business entities, there are no entities to privatize.  The World Bank has supported the development of a public-private partnership law, but parliament has not yet acted on it.

There are no laws or regulations addressing corporate social responsibility or responsible business conduct.

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/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 (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/); and
• North Korea Sanctions and Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf).

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings );
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);
• Sweat and Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab); and
• Comply Chain (https://www.dol.gov/ilab/complychain/).

The provisional constitution criminalizes several forms of corruption such as abuse of office, embezzlement of funds, and bribery.  The FGS enacted an anti-corruption bill in September 2019 that provides for the formation of an independent anti-corruption commission at both federal and state levels.  Somalia’s procurement laws have provisions to address potential conflicts of interest in awarding government contracts, but enforcement is lax.  Corruption is rampant in all sectors of government, particularly government procurement.  Transparency International ranked Somalia 179 (tied) of 180 countries in its 2020 Corruption Perceptions Index.

For the past several years, the FGS has waged a campaign against public corruption and graft, resulting in several high-profile dismissals and arrests.  For example, in August 2020 a court convicted four senior Ministry of Health officials of embezzling funds intended to address the COVID-19 pandemic.  However, without a robust asset declaration mechanism, an updated penal code, and a functioning criminal justice system, anti-corruption efforts remain ad hoc, and there is little deterrence.

Procurement laws require all government contracts to go through an open tender process unless they meet specified conditions for limited competition.  However, the FGS has not put the relevant procedures in place, and in practice the FGS still awards lucrative contracts based on close relationships and favors.  Moreover, the FGS has not yet established a procurement board as required by law, which further stifles attempts to ensure transparency and accountability in government procurement activities.  An interim procurement board exists, but it meets irregularly.

Resources to Report Corruption

There is no central agency or office for whistleblowers to report corruption, and there is no legal framework to protect whistleblowers.  The FGS has not established an Office of the Ombudsman, as required by the provisional constitution.

Somalia has a long history of political and clan-based violence, which destroyed the basic state institutions that support economic development.  Most of Somalia’s infrastructure was destroyed during 30 years of civil war and violence.  There are pockets of stability, but Somalia remains an insecure environment.  Attacks by al-Shabaab, clan-based militias, and others affect individuals and businesses throughout the country, often with loss of life.  The U.S. Department of State advises U.S. citizens against traveling to Somalia due to crime, terrorism, and civil unrest.

Somali law provides for the right of every worker to form or join a trade union, participate in union activities, conduct legal strikes, and engage in collective bargaining.  Although the law does not specifically address anti-union discrimination or the reinstatement of workers fired for union activity, in February 2021 a Somali court issued a decision reinstating an employee who had been dismissed for union organizing.

Somalia is emerging from three decades of political instability and economic hardship that destroyed government institutions, leaving little data on the status of the current labor market.  According to UNICEF statistics from 2017, 75 percent of the population is under the age of 30, and 67 percent of youth are unemployed.  There is a mismatch between the skills youth possess and the requirements of the labor market.  In 2020 the International Labor Organization (ILO) finalized its survey of Somalia’s labor force, finding that most labor is unskilled and most Somalis work in the informal sector or agriculture.

Some international partners implement projects to improve vocational training, but these reach a small portion of the workforce.  The private sector, such as the major telecommunications companies, maintain their own training programs to meet the needs of their workforce.  Somalia does not have a formal labor or employment policy that would restrict the hiring of foreigners.  Somalia has drafted a modern labor code, but it has yet to be enacted.  In February 2020 the FGS released a social safety net policy.

Conflicts between the government and labor unions resulted in a formal complaint to the ILO in 2018.  Since the complaint’s filing, the government has stopped limiting the labor unions’ activities and has worked cooperatively with the labor union umbrella organization to draft labor policies and codes.

The ILO established an office in Mogadishu in 2018 to address the significant gaps between Somalia’s labor practices and international standards.  With ILO and labor union support, in February 2019 the government finalized a draft employment policy, which the cabinet approved.

DFC has one project in Somalia, a guarantee of $2.7 million to support the installation and operation of solar projects.

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

Table 4: Sources of Portfolio Investment
Data not available.

Paul Gormley
Economic/Commercial Officer
U.S. Embassy Mogadishu
GormleyPJ@State.gov