Policies Towards Foreign Direct Investment

The government actively encourages Foreign Direct Investment (FDI) and is committed to increasing it. Foreign companies are free to invest and list on the regional stock exchange Bourse Régionale des Valeurs Mobilières (BRVM), which is based in Abidjan and covers the eight countries of the West African Economic and Monetary Union (WAEMU). WAEMU members are part of the Regional Council for Savings and Investment, a regional securities regulatory body.

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

Land tenure is a complicated and sensitive issue. Land tenure disputes exist all over the country owing to multiple forms of traditional collective tenure and the lack of formal private land ownership in most areas. Companies that wish to purchase land must have the property surveyed before obtaining title. Surveying is tightly controlled by a small group of companies and can often cost more than the value of the parcel of land. Freehold land tenure in rural areas is difficult to negotiate, however, and can inhibit foreign investment. Most businesses, including agribusinesses and forestry companies, circumvent the complicated land purchase process by acquiring long-term leases instead. There are regulations designed to control land speculation in urban areas, but they do not prevent foreigners from owning land.

The Ivoirian government’s investment promotion agency, the Center for the Promotion of Investment in Côte d’Ivoire (CEPICI), promotes and attracts national and foreign investment. Its services are available to all investors, provided through a one-stop shop intended to facilitate business creation, operation, and expansion. CEPICI ensures that investors receive incentives outlined in the investment code and facilitates access to industrial land. More information is available at http://www.cepici.gouv.ci/ .

Côte d’Ivoire maintains an ongoing dialogue with investors through various business networks and platforms, such as CEPICI, the Ivoirian Chamber of Commerce (CCI-CI), the association of large enterprises (CGECI), and the bankers’ association.

Limits on Foreign Control and Right to Private Ownership and Establishment

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

There are no general, economy-wide limits on foreign ownership or control, and few sector-specific restrictions. There are no laws specifically directing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control in those firms, and no such practices have been reported.

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

The government does not have an official policy to screen investments, and its overall economic and industrial strategy does not discriminate against foreign-owned firms. There are indications in some instances of preferential treatment for firms from countries with longstanding commercial ties to Côte d’Ivoire.

Other Investment Policy Reviews

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

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

The Government of Côte d’Ivoire provides information about sector policies and business opportunities in publicly available reports. More information can be found at: https://www.cepici.gouv.ci/ .

Business Facilitation

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

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

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

Outward Investment

Côte d’Ivoire does not promote or incentivize outward investment.

However, the government does not restrict domestic investors from investing abroad.

Transparency of the Regulatory System

The government aims for transparency in law and policy to foster competition and provide clear rules of the game and a level playing field for domestic and foreign investors. Transparency of the Ivoirian regulatory system is a concern; both foreign and Ivoirian companies complain that new regulations are issued with little warning and without a period for public comment.

There are no informal regulatory processes managed by non-governmental organizations or private-sector associations.

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

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

Draft legislation and regulations are not published or made available for public comment. The government, however, often holds public seminars and workshops to discuss proposed plans with trade and industry associations.

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

The Autorité Nationale de Régulation des Marchés Publics (National Regulatory Authority for Public Procurement; ANRMP), polices transparency in public procurement and private sector compliance with public procurement rules. Consumers, trade associations, private companies, and individuals have the right to file complaints with ANRMP to hold the government to its own administrative processes.

The U.S. Government does not have any knowledge of regulatory system reforms that have been announced since the last ICS report, including enforcement reforms. The government has fully implemented regulatory reforms announced in prior years, with the goal of creating an enabling business environment, fostering competition, and building investor confidence.

Public and private institutions tasked with controlling and regulating various sectors make regulatory enforcement mechanisms available to the public.

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

The Ivoirian government promotes transparency of public finances and debt obligations (including explicit and contingent liabilities) with the publication of this information through the following websites: http://budget.gouv.ci 

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

International Regulatory Considerations

The Ivoirian government incorporates WAEMU directives into its public procurement bidding policy, processes, and auditing. This includes separating auditing and regulating functions and increasing advance payment for the initial procurement of goods and services from 25 to 30 percent. The ANRMP regulates public procurement with a view to improving governance and transparency. It has the authority to sanction private-sector entities that do not comply with public-procurement regulations and to provide recommendations to ministries to address irregularities.

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

Côte d’Ivoire has been a WTO member since 1995 but has not notified all draft technical regulations to the WTO Committee on Technical Barriers to Trade. Côte d’Ivoire signed the Trade Facilitation Agreement (TFA) in December 2013 and ratified it in December 2015. The National TFA Committee (NTFC) coordinates TFA implementation.

Legal System and Judicial Independence

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

Côte d’Ivoire is a signatory to OHADA, which provides common corporate law and arbitration procedures for the 16 member states. The Commercial Court of Abidjan adjudicates corporate law cases and contract disputes. Mediation is also available through the Ivoirian legal framework in addition to the Commercial Court and the Arbitration Tribunal. The Commercial Court of Abidjan retains jurisdiction for the entire country.

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

Laws and Regulations on Foreign Direct Investment

The 2018 Investment Code is the primary governing authority for investment conduct. The Code does not restrict foreign investment or the repatriation of funds. The Code offers a mixture of fiscal incentives, combining tax exoneration and tax credits to encourage investment. The government also offers incentives to promote small businesses and entrepreneurs, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development. Some sectors have additional laws that govern investment activity in those sectors. In mining, for example, the Mining Code allows a period for holding permits for ten years with a possibility to extend for two more years on a limited permit area of 400 square kilometers.

As of January 2021, the Government of Côte d’Ivoire has been preparing a bill detailing local content requirements for the petroleum sector for consideration by the legislature (see also Performance and Data Localization Requirements).

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

www.cepici.gouv.ci/ 

Competition and Antitrust Laws

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

No significant competition cases were reported over the past year.

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

Côte d’Ivoire is a signatory to the International Center for Settlement of Investment Disputes (ICSID) and a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

In cases where a firm does not meet the nationality conditions stipulated by Article 25 of the Convention, the dispute must be resolved within the provisions of the supplementary mechanisms approved by the ICSID.

Investor-State Dispute Settlement

Côte d’Ivoire is a signatory to investment agreements subject to binding international arbitration of investment disputes. Côte d’Ivoire recognizes and has been known to enforce foreign arbitral awards, but enforcement is inconsistent.

Côte d’Ivoire does not have a Bilateral Investment Treaty (BIT) or a Free Trade Agreement (FTA) with the United States.

In the past 10 years, foreign investors have had investment disputes, which have often been resolved through arbitration or amicable settlement. There have been no reported disputes involving U.S. firms in the past 10 years. As Côte d’Ivoire is a signatory to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, local courts are obliged to enforce foreign arbitral awards.

The U.S. government is not aware of any history of extrajudicial action against foreign investors, including U.S. firms.

International Commercial Arbitration and Foreign Courts

The Abidjan-based regional Joint Court of Justice and Arbitration (CCJA) provides a means of solving contractual disputes. The arbitration tribunal has the ability to enforce awards more quickly, but most business contracts are written to specify that disputes will be settled in Ivoirian courts, thus the Ivoirian court system is the first resort.

Côte d’Ivoire is a member of OHADA, whose provisions adopted in 1999 have replaced domestic law on arbitration. The unified law is based on the model law of the United Nations Commission on International Trade Law (UNICITRAL).

Judgments of foreign courts are recognized but difficult to enforce in local courts. To avoid being forced to work through the Ivoirian legal system, some investors stipulate in contracts that disputes must be settled through international commercial arbitration. Yet, even if stipulated in the contract, decisions reached through OHADA are sometimes not honored by local courts.

The U.S. government is not aware of cases in which Côte d’Ivoire’s domestic courts have shown preferential treatment for state-owned enterprises involved in investment disputes.

Bankruptcy Regulations

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

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

Investment Incentives

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

The government occasionally guarantees loans or jointly finances foreign direct investment projects. This is not a common practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

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

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees via incentives outlined in the Investment Code, but this is not a requirement. In January 2021, the Ministry of Petroleum, Energy and Renewable Energy announced plans to introduce a local content law for the oil and gas sector. A draft bill has since been endorsed by the Council of Ministers and is ready for submission to the legislature for deliberation. The text of the bill is not yet publicly available and specific measures have not been publicly reported.

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

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

There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology. For example, the Ivoirian government required that one U.S. fast food franchise use locally sourced key ingredients, which it is able to do. The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Côte d’Ivoire.

There are no performance requirements for investments.

Cellular telephone companies must meet technology performance requirements to maintain their licenses. The U.S. government does not know of any requirements that Côte d’Ivoire imposes on foreign information technology firms to give the government source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business-related data. Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorité de Régulation des Télécommunications (Telecommunications Regulatory Authority of Côte d’Ivoire; ART-CI).

Côte d’Ivoire’s law on data protection requests prior declaration or authorization by ART-CI for any data processing. ART-CI is responsible for the oversight of local data storage.

Real Property

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

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

The Audace Institute, an independent Ivoirian think tank, estimates that 96 percent of land does not have a clear title. The World Bank estimates that only 30 percent of property owners have clear title. The Ministry of Agriculture and Rural Development requires that all land to be titled be professionally surveyed. The surveying, which must be performed by one of the few companies authorized by the Ministry of Agriculture and Rural Development to execute land surveys in Côte d’Ivoire, can cost more than the value of the land. A lack of title and a conflict between modern land tenure law and traditional practice hinders resolution of land tenure disputes.

It is not necessary to occupy legally purchased property in order to retain title.

Intellectual Property Rights

The Ivoirian Civil Code includes measures to protect intellectual property rights (IPR), but the government has limited capacity to enforce them. The government’s Office of Intellectual Property (Office ivoirien de la propriété intellectuelle; OIPI) is charged with ensuring the protection of patents, trademarks, industrial designs, and commercial names. Patents are valid for 10 years, with the possibility of two extensions of five years each. Trademarks are valid for 10 years and are renewable indefinitely. Copyrights are valid for 50 years. The Ivoirian Copyright Office (Bureau ivoirien du droit d’auteur; BURIDA) has a labeling system in place to prevent counterfeiting and to protect audio, video, literary, and artistic property rights in music and computer programs. While Ivoirian IPR law is in conformity with standards established by the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the country lacks customs checks at its porous borders, limiting the law’s impact.

The government has not adopted any IPR-related laws or regulations in the past year. In 2020, the Ministry of Culture, Art, and Entertainment Business put committees in place to study and make recommendations for the reform and restructuring of BURIDA. BURIDA and the Ministry plan to implement the recommendations – which are not yet public – throughout 2021.

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

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

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

Capital Markets and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is located in Abidjan and the BRVM lists companies from the eight countries of the WAEMU. The existing regulatory system effectively facilitates portfolio investment through the West African Central Bank (BCEAO) and the Regional Council for Savings Investments (CREPMF). There is sufficient liquidity in the markets to enter and exit sizeable positions.

Government policies allow the free flow of financial resources into the product and factor markets.

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

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses. Foreign investors can acquire credit on the local market.

Money and Banking System

As of December 2020, there were 29 commercial banks and two credit institutions in Côte d’Ivoire. Banks are expanding their national networks, especially in the secondary cities outside Abidjan, as domestic investment has increased up-country. The total number of bank branches has more than doubled from 324 in 2010 to 725 branches in 2019 (latest data available). According to the World Bank, in 2017 (latest data available) 41 percent of the population over the age of 15 have a bank account. Alternative financial services available include mobile money and microfinance for bill payments and transfers. Many Ivoirians prefer mobile money over banking, but mobile money does not yet offer the same breadth of financial services as banks.

Most Ivoirian banks are compliant with the BCEAO’s minimum capital requirements. Some public banks have large numbers of nonperforming loans. The government has been restructuring and privatizing the commercial banking sector over the past decade in order to remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 14 billion and account for more than half of total bank assets in the country.

The BCEAO is common to the eight member states of the WAEMU and manages banking regulations.

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

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer or repatriation of capital and income earned, or on investments financed with convertible foreign currency. Once an investment is established and documented, the government regularly approves the remittances of dividends and/or repatriation of capital. The same holds true for requests for other sorts of transactions (e.g. imports, licenses, and royalty fees).

Funds associated with investments funded with convertible currency are freely convertible into any world currency.

Côte d’Ivoire is a member of WAEMU, which uses the West African CFA Franc (XOF). The French Treasury holds the foreign exchange reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro. In December 2019, the Ivoirian President, concurrently serving as chairman of WAEMU, announced in the presence of the French President the forthcoming transition from the CFA to a new common regional currency to be called the Eco; details about the timeline or modalities of the change have not yet been published.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

There are no time limitations on remittances. Total personal remittances received by Ivoirians were about USD 338 million in 2019 or 0.6 percent of GDP.

Sovereign Wealth Funds

Côte d’Ivoire does not have a sovereign wealth fund, although there are reports as of late 2020 that the government is in the process of creating one.

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

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

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

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

Privatization Program

The government has been pursuing SOE privatization for decades. Most recently, in 2017, the government sold 90 percent of its shareholdings in the Ivoirian Textile Development Company (Compagnie Ivoirienne du Développement du Textile; CIDT) as well as in the Ity Mining Company (Société des mines d’Ity; SMI). In 2018, the government sold 51 percent of the Housing Bank of Côte d’Ivoire (Banque d’Habitat de Côte d’Ivoire; BHCI).

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

The private sector, the government, NGOs, and local communities are becoming progressively aware of the importance of Responsible Business Conduct (RBC) with regard to environmental, social, and governance issues in Côte d’Ivoire.

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

There are reports of children subjected to forced labor in agricultural work, particularly on cocoa farms. In February 2021, several individuals from Mali sued major international chocolate manufacturers in U.S. courts for supporting child labor and child trafficking in Côte d’Ivoire.

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

The OHADA outlines corporate governance standards that protect shareholders.

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

While international firms are aware of OECD guidelines and international best practices in RBC, most local firms have limited familiarity with international standards.

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

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

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.

Corruption is a concern for businesses. In 2013, the Ivoirian government issued Executive Order number 2013-660 related to preventing and fighting against corruption. The High Authority for Good Governance serves as the government’s anti-corruption authority. Its mandate includes raising awareness about corruption, investigating corruption in the public and private sectors, and collecting mandated asset disclosures from certain public officials (e.g., the president, ministers, and mayors) upon their entry and exit from office. The High Authority, however, does not have a mandate to prosecute; it must refer cases to the Attorney General who decides whether or not to take up those cases. The country’s financial intelligence office, CENTIF, has broad authority to investigate suspicious financial transactions, including those of government officials. Despite the establishment of these bodies and credible allegations of widespread corruption, there have been few charges filed, and few prosecutions and judgments against prominent people for corruption. The domestic business community generally assesses that these watchdog agencies lack the power and/or will to combat corruption effectively. In April 2021, the government formally added Good Governance and Anti-Corruption to the title and portfolio of the Ministry of Capacity Building.

Anti-corruption laws extend to family members of officials and to political parties.

The country’s Code of Public Procurement No. 259 and the associated WAEMU directives cover conflicts-of-interest in awarding contracts or government procurement.

Under the Ivoirian Penal Code, a bribe by a local company to a foreign official is a criminal act.

Some private companies use compliance programs or measures to prevent bribery of government officials. U.S. firms underscore to their Ivoirian counterparts that they are subject to the Foreign Corrupt Practices Act (FCPA).

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

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

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

No local industry or non-profit groups offer services for vetting potential local investment partners.

Resources to Report Corruption

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

High Authority for Good Governance

(Haute Autorité pour la Bonne Gouvernance)
N’Golo Coulibaly
President
TELEPHONE: +225 272 2479 5000
FAX: +225 2247 8261

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

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

In 2016, the country adopted a new constitution, creating the position of Vice-President (currently vacant), and a Senate, which first convened in April 2018. In the period around elections in 2018 and 2020, demonstrations and protests by political parties and their supporters were common and occasionally led to vandalism, destruction of public and private property, and violent clashes with security forces and with other civilians. Unions also engage in protests that sometimes become violent. President Alassane Ouattara was elected to a third term in October 2020. In the run up to the 2020 presidential election, the lack of political party-consensus on the composition of the country’s Independent Electoral Commission, the contentious reform of the Electoral Code, the constitutional validation of the incumbent president’s eligibility for a third term, and the exclusion of significant opposition figures from the race, aggravated political divides within the country. National Assembly elections in March 2021, however, passed largely peacefully, and the opposition won a substantial number of seats.

Côte d’Ivoire’s security situation has significantly improved since its 2010-2011 post-electoral violence. In early 2017, some Ivoirian soldiers mutinied, demanding payment of bonuses. The government responded by largely acceding to their demands and pledging to improve living and working conditions for armed and security forces, which it has steadily done over the ensuing years. Côte d’Ivoire suffered a terrorist attack in March 2016 in the popular tourist town of Grand Bassam in which attackers killed 22 people. Al-Qaeda in the Islamic Maghreb claimed responsibility for the attack. In June 2020 and March 2021, the country experienced other attacks in the Ivoirian-Burkinabe border town of Kafolo, which the government attributed to unidentified terrorists. Al-Qaeda and other extremist organizations continue to pose a major terrorism risk to the region. Côte d’Ivoire continues to cooperate with international partners to combat the increasing terrorism/extremist threat emanating from the Sahel to its immediate North.

The official unemployment rate is 3.5 percent, however, unemployment is difficult to measure in the informal sector, which comprises 60-80% of the Ivoirian economy. The official unemployment rate among those aged 15-24 is 5.5 percent. Forty-seven percent of the non-agricultural workforce is employed in the informal economy. Official statistics fail to fully account for the large informal economy throughout the country, and do not accurately portray the general dearth of well-paying employment opportunities. Despite the government’s efforts, child labor remained a widespread problem in rural and urban areas, particularly on cocoa and coffee plantations, as well as in artisanal gold mining areas and in domestic work.

There are significant shortages of skilled labor in higher education fields, including information technology, engineering, finance, management, health, and science. The Ivoirian government is working with the Millennium Challenge Corporation (MCC) to build and develop four technical and vocational training centers as part of a five-year Compact valued at nearly USD 525 million.

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

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

Labor laws are not waived to attract or retain investment.

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

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

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

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

The government did not adopt any new labor-related laws or regulations in 2020. In 2017, the government passed a law forbidding most forms of child labor for children under 12 and restricting it for minors aged 13 to 17. The law’s passage put Ivoirian law on par with ILO standards for child labor.

Table 4: Sources of Portfolio Investment
Data not available.

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

Policies Towards Foreign Direct Investment

The Government of Ghana has made increasing FDI a priority and acknowledges the importance of having an enabling environment for the private sector to thrive. Officials are implementing some regulatory and other reforms to improve the ease of doing business and make investing in Ghana more attractive.

The 2013 Ghana Investment Promotion Center (GIPC) Act requires the GIPC to register, monitor, and keep records of all business enterprises in Ghana. Sector-specific laws further regulate investments in minerals and mining, oil and gas, industries within Free Zones, banking, non-bank financial institutions, insurance, fishing, securities, telecommunications, energy, and real estate. Some sector-specific laws, such as in the oil and gas sector and the power sector, include local content requirements that could discourage international investment. Foreign investors are required to satisfy the provisions of the GIPC Act as well as the provisions of sector-specific laws. GIPC leadership has pledged to collaborate more closely with the private sector to address investor concerns, but there have been no significant changes to the laws. More information on investing in Ghana can be obtained from GIPC’s website, www.gipcghana.com .

Limits on Foreign Control and Right to Private Ownership and Establishment

Most of Ghana’s major sectors are fully open to foreign capital participation.

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

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

Real Estate

The 1992 Constitution recognized existing private and traditional titles to land. Given this mix of private and traditional land titles, land rights to any specific area of land can be opaque. Freehold acquisition of land is not permitted. There is an exception, however, for transfer of freehold title between family members for land held under the traditional system. Foreigners are allowed to enter into long-term leases of up to 50 years and the lease may be bought, sold, or renewed for consecutive terms. Ghanaian nationals are allowed to enter into 99-year leases. The Ghanaian government has been working since 2017 on developing a digital property address and land registration system to reduce land disputes and improve efficiency. (See “Protection of Property Rights” p. 14)

Oil and Gas

The oil and gas sector is subject to a variety of state ownership and local content requirements. The Petroleum (Exploration and Production) Act, 2016 (Act 919) mandates local participation. All entities seeking petroleum exploration licenses in Ghana must create a consortium in which the state-owned Ghana National Petroleum Corporation (GNPC) holds a minimum 15 percent carried interest, and a local equity partner holds a minimum interest of five percent. The Petroleum Commission issues all licenses. Exploration licenses must also be approved by Parliament. Further, local content regulations specify in-country sourcing requirements with respect to the full range of goods, services, hiring, and training associated with petroleum operations. The regulations also require local equity participation for all suppliers and contractors. The Minister of Energy must approve all contracts, sub-contracts, and purchase orders above USD 100,000. Non-compliance with these regulations may result in a criminal penalty, including imprisonment for up to five years.

The Petroleum Commission applies registration fees and annual renewal fees on foreign oil and gas service providers, which, depending on a company’s annual revenues, range from USD 70,000 to USD 150,000, compared to fees of between USD 5,000 and USD 30,000 for local companies.

Mining

Per the Minerals and Mining Act, 2006 (Act 703), foreign investors are restricted from obtaining a small-scale mining license for mining operations less than or equal to an area of 25 acres (10 hectares). In 2019, the criminal penalty for non-compliance with these regulations was increased to a minimum prison sentence of 15 years and maximum of 25 years, from a maximum of five years, to discourage illegal small-scale mining. The Act mandates local participation, whereby the government acquires 10 percent equity in ventures at no cost in all mineral rights. In order to qualify for any mineral license, a non-Ghanaian company must be registered in Ghana, either as a branch office or a subsidiary that is incorporated under the Ghana Companies Act or Incorporated Private Partnership Act. Non-Ghanaians may apply for industrial mineral rights only if the proposed investment is USD 10 million or above.

The Minerals and Mining Act provides for a stability agreement, which protects the holder of a mining lease for a period of 15 years from future changes in law that may impose a financial burden on the license holder. When an investment exceeds USD 500 million, lease holders can negotiate a development agreement that contains elements of a stability agreement and more favorable fiscal terms. The Minerals and Mining (Amendment) Act (Act 900) of 2015 requires the mining lease-holder to, “…pay royalty to the Republic at the rate and in the manner that may be prescribed.” The previous Act 703 capped the royalty rate at six percent. The Minerals Commission implements the law. In December 2020, Ghana passed the Minerals and Mining (Local Content and Local Participation) Regulations, 2020 (L.I. 2431) to expand the specific provisions under the mining regulations that require mining entities to procure goods and services from local sources. The Minerals Commission publishes a Local Procurement List, which identifies items that must be sourced from Ghanaian-owned companies, whose directors must all be Ghanaians.

Power Sector

In December 2017, Ghana introduced regulations requiring local content and local participation in the power sector. The Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations, 2017 (L.I. 2354) specify minimum initial levels of local participation/ownership and 10-year targets:

The regulations also specify minimum and target levels of local content in engineering and procurement, construction, post-construction, services, management, operations, and staff. All persons engaged in or planning to engage in the supply of electricity are required to register with the ‘Electricity Supply Local Content and Local Participation Committee’ and satisfy the minimum local content and participation requirements within five years. Failure to comply with the requirements could result in a fine or imprisonment.

Insurance

The National Insurance Commission (NIC) imposes nationality requirements with respect to the board and senior management of locally incorporated insurance and reinsurance companies. At least two board members must be Ghanaians, and either the Chairman of the board or Chief Executive Officer (CEO) must be Ghanaian. In situations where the CEO is not Ghanaian, the NIC requires that the Chief Financial Officer be Ghanaian. Minimum initial capital investment in the insurance sector is 50 million Ghana cedis (approximately USD 9 million).

Telecommunications

Per the Electronic Communications Act of 2008, the National Communications Authority (NCA) regulates and manages the nation’s telecommunications and broadcast sectors. For 800 MHz spectrum licenses for mobile telecommunications services, Ghana restricts foreign participation to a joint venture or consortium that includes a minimum of 25 percent Ghanaian ownership. Applicants have two years to meet the requirement, and can list the 25 percent on the Ghana Stock Exchange. The first option to purchase stock is given to Ghanaians, but there are no restrictions on secondary trading.

Banking and Electronic Payment Service Providers

The Payment Systems and Services Act, 2019 (Act 987), establishes requirements for the licensing and authorization of electronic payment services. Act 987 ( https://www.bog.gov.gh/wp-content/uploads/2019/08/Payment-Systems-and-Services-Act-2019-Act-987-.pdf ) imposes limitations on foreign investment and establishes residency requirements for company senior officials or members of the board of directors. Specifically, Act 987 mandates electronic payment services companies to have at least 30 percent Ghanaian ownership (either from a Ghanaian corporate or individual shareholder) and requires at least two of its three board directors, including its chief executive officer, be resident in Ghana.

There are no significant limits on foreign investment or differences in the treatment of foreign and national investors in other sectors of the economy.

Other Investment Policy Reviews

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

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

Business Facilitation

Although registering a business is a relatively easy procedure and can be done online through the Registrar General’s Department (RGD) at https://egovonline.gegov.gov.gh/RGDPortalWeb/portal/RGDHome/eghana.portal  (this would be controlled by the new Office of the Registrar of Companies in 2021), businesses have noted that the process involved in establishing a business is lengthy and complex, and requires compliance with regulations and procedures of at least four other government agencies, including GIPC, Ghana Revenue Authority (GRA), Ghana Immigration Service, and the Social Security and National Insurance Trust (SSNIT).

According to the World Bank’s Doing Business Report 2020 , it takes eight procedures and 13 days to establish a foreign-owned limited liability company (LLC) to engage in international trade in Ghana. In 2019, Ghana passed a new Companies Act, 2019 (Act 992), which among other things created a new independent office called the Office of the Registrar of Companies, responsible for the registration and regulation of all businesses. The new office is expected to be in place in 2021, and would separate the registration process for companies from the Registrar General’s Department; the latter would continue to serve as the government’s registrar for non-business transactions such as marriages. The new law also simplifies some registration processes by scrapping the issuance of a certificate to commence business and the requirement for a company to state business objectives, which limited the activities in which a company could engage. The law also expands the role of the company secretary, which now requires educational qualifications with some background in company law practice and administration or having been trained under a company secretary for at least three years. Foreign investors must obtain a certificate of capital importation, which can take 14 days. The local authorized bank must confirm the import of capital with the Bank of Ghana, which confirms the transaction to GIPC for investment registration purposes.

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

The Ghanaian business environment is unique, and guidance can be extremely helpful. In some cases, a foreign investment may enjoy certain tax benefits under the law or additional incentives if the project is deemed critical to the country’s development. Most companies or individuals considering investing in Ghana or trading with Ghanaian counterparts find it useful to consult with a local attorney or business facilitation company. The United States Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service ( https://2016.export.gov/ghana/contactus/index.asp ) or U.S. Citizen Services (https://gh.usembassy.gov/u-s-citizen-services/attorneys/). Specific information about setting up a business is available at the GIPC website: http://www.gipcghana.com/invest-in-ghana/doing-business-in-ghana.html .

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

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

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

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

Outward Investment

Ghana has no specific outward investment policy. It has entered into bilateral treaties, however, with a number of countries to promote and protect foreign investment on a reciprocal basis. Some Ghanaian companies have established operations in other West African countries.

Transparency of the Regulatory System

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

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

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

The government launched a Business Regulatory Reform program in 2017, but implementation has been slow. The program aims to improve the ease of doing business, review all rules and regulations to identify and reduce unnecessary costs and requirements, establish an e-registry of all laws, establish a centralized public consultation web portal, provide regulatory relief for entrepreneurs, and eventually implement a regulatory impact analysis system. The government continues to work towards achieving these goals and in 2020 established the centralized public consultation web portal ( www.bcp.gov.gh ), the Ghana Business Regulatory Reforms platform. It is an interactive platform to allow policymakers to consult businesses and individuals in a transparent, inclusive, and timely manner on policy issues. Ghana adopted International Financial Reporting Standards in 2007 for all listed companies, government business enterprises, banks, insurance companies, security brokers, pension funds, and public utilities.

Ghana continues to improve on making information on debt obligations, including contingent and state-owned enterprise debt, publicly available. Information on the overall debt stock (including domestic and external) is presented in the Annual Debt Management Report, which is available on the Ministry of Finance website at https://www.mofep.gov.gh/investor-relations/annual-public-debt-report . However, information on contingent liabilities from state-owned enterprises is not explicit and is not consolidated in one report.

International Regulatory Considerations

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

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

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

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

Competition and Anti-Trust Laws

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

Ghana is a member state of the International Centre for the Settlement of Investment Disputes (ICSID Convention). Ghana is a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

There is a caveat for investment disputes arising from within the energy sector. The Government of Ghana has expressed a preference for handling disputes under the ad hoc arbitration rules of the UN Commission on International Trade Law (UNCITRAL Model Law).

International Commercial Arbitration and Foreign Courts

The United States has signed three bilateral agreements on trade and investment with Ghana: a Trade and Investment Framework Agreement (TIFA), OPIC Investment Incentive Agreement, and the Open Skies Agreement. These agreements contain provisions for investment as well as trade dispute mechanisms.

The Commercial Conciliation Center of the American Chamber of Commerce (Ghana) provides arbitration services on trade and investment issues for disputes regarding contracts with arbitration clauses.

There is interest in alternative dispute resolution, especially as it applies to commercial cases. Several lawyers provide arbitration and/or conciliation services. Arbitration decisions are enforceable provided they are registered in the courts.

In March 2005, the government established a commercial court with exclusive jurisdiction over all commercial matters. This court also handles disputes involving commercial arbitration and the enforcement of awards; intellectual property rights, including patents, copyrights and trademarks; commercial fraud; applications under the Companies Act; tax matters; and insurance and re-insurance cases. A distinctive feature of the commercial court is the use of mediation or other alternative dispute resolution mechanisms, which are mandatory in the pre-trial settlement conference stage. Ghana also has a Financial and Economic Crimes Court, which is a specialized division of the High Court that handles high-profile corruption and economic crime cases.

Enforcement of foreign judgments in Ghana is based on the doctrine of reciprocity. On this basis, judgments from Brazil, France, Israel, Italy, Japan, Lebanon, Senegal, Spain, the United Arab Emirates, and the United Kingdom are enforceable. Judgments from American courts are not currently enforceable in Ghana.

The GIPC, Free Zones, Labor, and Minerals and Mining Laws outline dispute settlement procedures and provide for arbitration when disputes cannot be settled by other means. They also provide for referral of disputes to arbitration in accordance with the rules of procedure of the United Nations Commission on International Trade Law (UNCITRAL), or within the framework of a bilateral agreement between Ghana and the investor’s country. The Alternative Dispute Resolution Act, 2010 (Act 798) provides for the settlement of disputes by mediation and customary arbitration, in addition to regular arbitration processes.

Bankruptcy Regulations

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

Investment Incentives

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

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

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate. The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner. Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law. The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law. The GIPC website ( http://www.gipcghana.com/ ) provides a thorough description of available incentive programs. The law also guarantees an investor all the tax incentives provided for under Ghanaian law. For example, rental income from commercial and residential property is exempt from tax for the first five years after construction. Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation. Rural banks and cattle ranching are exempt from income tax for ten years and pay eight percent thereafter.

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

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

Performance and Data Localization Requirements

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

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

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

Data Storage and Access

The Government of Ghana does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology. In addition, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption). Section 50 of the Payment Systems and Services Act, 2019 (Act 987), however, requires electronic payment systems service providers to allow the Bank of Ghana to inspect the “premises, equipment, computer hardware, software, any communication system, books of accounts, and any other document or electronic information which the Bank of Ghana may require in relation to the system.” During the coronavirus outbreak, to achieve its goal of contact tracing, the government issued Executive Instrument E.I. 63 that requires all telecommunication network operators to make available to the National Communications Authority (NCA) Common Platform mobile users location log and roaming files, caller or called numbers, Merchant Codes (of mobile money vendors), Mobile Station International Subscriber Directory Number Codes, International Mobile Equipment Identity Codes and site location. Executive Instrument 63 is being challenged in court.

Real Property

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

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

Intellectual Property Rights

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

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

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

Resources for Rights Holders

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

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

The United States Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service ( https://2016.export.gov/ghana/contactus/index.asp ) or U.S. Citizen Services (https://gh.usembassy.gov/u-s-citizen-services/attorneys/).

American Chamber of Commerce Ghana
5th Crescent Street, Asylum Down
P.O. Box CT2869, Cantonments-Accra, Ghana
Tel: +233 (0) 302 247 562/ +233 (0) 307 011 862 (Omit the (0) after the area code when dialing from abroad)
Email: info@amchamghana.org
Website: http://www.amchamghana.org/. 

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

Capital Markets and Portfolio Investment

Private sector growth in Ghana is constrained by financing challenges. Businesses continue to face difficulty raising capital on the local market. While credit to the private sector has increased in nominal terms, levels as percentage of GDP have remained stagnant over the last decade, and high government borrowing has driven interest rates above 21 percent and crowded out private investment.

Capital markets and portfolio investment are gradually evolving. The longest-term domestic bonds are 15 years, with Eurobonds ranging up to 41-year maturities. Foreign investors are permitted to participate in auctions of bonds only with maturities of two years or longer. In November 2020, foreign investors held about 17.9 percent (valued at USD 4.6 billion) of the total outstanding domestic securities. In 2015, the Ghana Stock Exchange (GSE) added the Ghana Fixed-Income Market (GFIM), a specialized platform for secondary trading in debt instruments to improve liquidity.

The rapid accumulation of debt over the last decade, and particularly the past three years, has raised debt sustainability concerns. Ghana received debt relief under the Heavily Indebted Poor Country (HIPC) initiative in 2004, and began issuing Eurobonds in 2007. In February 2020, Ghana sold sub-Saharan Africa’s longest-ever Eurobond as part of a $3 billion deal with a tenor of 41 years. In 2020, total public debt, roughly evenly split between external and domestic, stood at approximately 76 percent of GDP, partly as a result of the economic shock of COVID-19 as revenue declined and expenditures spiked.

The Ghana Stock Exchange (GSE) has 31 listed companies, four government bonds, and one corporate bond. Both foreign and local companies are allowed to list on the GSE. The Securities and Exchange Commission regulates activities on the Exchange. There is an eight percent tax on dividend income. Foreigners are permitted to trade stocks listed on the GSE without restriction. There are no capital controls on the flow of retained earnings, capital gains, dividends, or interest payments. The GSE composite index (GGSECI) has exhibited mixed performance.

Money and Banking System

Banks in Ghana are relatively small, with the largest in the country in terms of operating assets, Ecobank Ghana Ltd., holding assets of about USD 2.1 billion in 2019. The Central Bank increased the minimum capital requirement for commercial banks from 120 million Ghana cedis (USD 22 million) to 400 million (USD 70 million), effective December 2018, as part of a broader effort to strengthen the banking industry. As a result of the reforms and subsequent closures and mergers of some banks, the number of commercial banks dropped from 36 to 23. Eight are domestically controlled, and the remaining 15 are foreign controlled. In total, there are nearly 1,500 branches distributed across the sixteen regions of the country.

Overall, the banking industry in Ghana is well capitalized with a capital adequacy ratio of 19.8 percent as of December 2020, above the 11.5 percent prudential and statutory requirement. The non-performing loans ratio increased from 14.3 percent in December 2019 to 14.5 percent as of December 2020. Lending in foreign currencies to unhedged borrowers poses a risk, and widely varying standards in loan classification and provisioning may be masking weaknesses in bank balance sheets. The BoG has almost completed actions to address weaknesses in the non-bank deposit-taking institutions sector (e.g., microfinance, savings and loan, and rural banks) and has also issued new guidelines to strengthen corporate governance regulations in the banks.

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

Foreign Exchange and Remittances

Foreign Exchange

Ghana operates a managed-float exchange rate regime. The Ghana cedi can be exchanged for dollars and major currencies. Investors may convert and transfer funds associated with investments, provided there is documentation of how the funds were acquired. Ghana’s investment laws guarantee that investors can transfer the following transactions in convertible currency out of Ghana: dividends or net profits attributable to an investment; loan service payments where a foreign loan has been obtained; fees and charges with respect to technology transfer agreements registered under the GIPC Act; and the remittance of proceeds from the sale or liquidation of an enterprise or any interest attributable to the investment. Companies have not reported challenges or delays in remitting investment returns. For details, please consult the GIPC Act ( http://www.gipcghana.com ) and the Foreign Exchange Act guidelines ( http://www.sec.gov.gh ). Persons arriving in or departing from Ghana are permitted to carry up to USD 10,000.00 without declaration; any greater amount must be declared.

Ghana’s foreign exchange reserve needs are largely met through cocoa, gold, and oil exports; government securities; foreign assistance; and private remittances.

Remittance Policies

There is a single formal system for transferring currency out of the country through the banking system. The Foreign Exchange Act, 2006 (Act 723) provides the legal framework for the management of foreign exchange transactions in Ghana. It fully liberalized capital account transactions, including allowing foreigners to buy certain securities in Ghana. It also removed the requirement for the Bank of Ghana (the central bank) to approve offshore loans. Payments or transfer of foreign currency can be made only through banks or institutions licensed to do money transfers. There is no limit on capital transfers as long as the transferee can identify the source of capital.

Sovereign Wealth Funds

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

For additional information regarding Ghana Petroleum Fund, please visit the 2019 Petroleum Annual Report at: https://www.mofep.gov.gh/publications/petroleum-reports .

Ghana has 86 State-Owned Enterprises (SOEs), 45 of which are wholly owned, while 41 are partially owned. Thirty-six of the wholly owned SOEs are commercial and operate more independently from government, while nine are public corporations or institutions, some providing regulatory functions. While the president appoints the CEO and full boards of most of the wholly owned SOEs, they are under the supervision of line ministries. Most of the partially owned investments are in the financial, mining, and oil and gas sectors. To improve the efficiency of SOEs and reduce fiscal risks they pose to the budget, in 2019 the government embarked on an exercise to tackle weak corporate governance in the SOEs as well as created the State Interests and Governance Authority (SIGA), a single institution, to monitor all SOEs, replacing both the State Enterprises Commission and the Divestiture Implementation Committee.

As of April 2021, only a handful of large SOEs remain, mainly in the transportation, power, and extractive sectors. The largest SOEs are Ghana Ports and Harbor Authority (GPHA), Electricity Company of Ghana (ECG), Volta River Authority (VRA), Ghana Water Company Limited (GWCL), Tema Oil Refinery (TOR), Ghana Airport Company Limited (GACL), Ghana Cocoa Board (COCOBOD), Ghana National Gas Company Limited, and Ghana National Petroleum Corporation (GNPC). Many of these receive subsidies and assistance from the government. The list of SOEs can be found at: https://siga.gov.gh/state-interest/ .

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

Privatization Program

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

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

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

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

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/).

Corruption in Ghana is comparatively less prevalent than in most other countries in the region, according to Transparency International’s Perception of Corruption Index, but remains a serious problem, scoring 45 on a scale of 100 and ranking 75 out of 180 countries in 2020. The government has a relatively strong anti-corruption legal framework in place, but enforcement of existing laws is rare and inconsistent. Corruption in government institutions is pervasive. The Government of Ghana has vowed to combat corruption and has taken some steps to promote better transparency and accountability. These include establishing an Office of the Special Prosecutor (OSP) in 2017 to investigate and prosecute corruption cases and passing a Right to Information Act, 2019 (Act 989) (similar to the U.S. Freedom of Information Act) to increase transparency. The OSP has been without a Special Prosecutor since late 2020 and has still not prosecuted a significant anti-corruption case. In addition, the Auditor-General was placed on accrued annual leave in mid-2020 and then removed from office in March 2021 after a controversy related to his date of birth and mandatory retirement age.

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

The Public Procurement (Amendment) Act, 2016 (Act 914) was passed to address the shortcomings identified over a decade of implementation of the original 2003 law aimed at harmonizing the many public procurement guidelines used in the country and to bring public procurement into conformity with WTO standards. Nevertheless, complete transparency is lacking in locally funded contracts. There continue to be allegations of corruption in the tender process, and the government has in the past set aside international tender awards in the name of alleged national interest. The Public Financial Management Act, 2016 (Act 921) provided for stiffer sanctions and penalties for breaches, but its effectiveness in stemming corruption has yet to be demonstrated. In 2016, Ghana amended the company registration law (which has been retained in the new Companies Act, 2019 (Act 992)) to include the disclosure of beneficial owners. In September 2020, Ghana deployed a Central Beneficial Ownership Register to collect and maintain a national database on beneficial owners for all companies operating in Ghana. The law requires each person who creates a company in Ghana to report the identities of the company’s beneficial owners on the Beneficial Ownership Declaration form at the Registrar-General’s Department (RGD). Existing companies are also required to provide this information by the end of June 2021. There are different types of thresholds for reporting beneficial owners, depending on the sector the company belongs to and the type of person the beneficial owner is. For the general threshold, a person who has direct or indirect interest of 10 percent or more in a company must be registered as a beneficial owner. A Politically Exposed Person (PEP) in Ghana who has any shares or any form of control over a company in any sector must be registered as a beneficial owner, while for a foreign PEP, shares must be five percent or more. For companies in the extractive industry, financial institutions, and businesses operating in sectors listed as high risk by the RGD, the threshold for reporting beneficial owners is five percent. Failure to comply with the requirements may attract a fine of up to 6,000 cedis (USD 1,050) or two years in prison, or both.

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

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

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

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

Resources to Report Corruption

Commission on Human Rights and Administrative Justice (CHRAJ)
Old Parliament House, High Street, Accra
Postal Address: Box AC 489, Accra
Omit the (0) after the area code when dialing from abroad: Phone: +233 (0) 242 211 534
Email: info@chraj.gov.gh
Website: http://www.chraj.gov.gh 

Economic and Organized Crime Office (EOCO)
Behind Old Parliament House, Accra
Omit the (0) after the area code when dialing from abroad:
Tel +233 (0) 302 665559, +233 (0) 302 634 363
Email: eoco@eoco.org.gh
Website: www.eoco.org.gh

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

Ghana has a large pool of unskilled labor. English is widely spoken, especially in urban areas. However, according to the United Nations, nationwide illiteracy remains high at 33 percent. Labor regulations and policies are generally favorable to business. Although labor-management relationships are generally positive, occasional labor disagreements stem from wage policies in Ghana’s inflationary environment. Many employers find it advantageous to maintain open lines of communication on wage calculations and incentive packages. A revised Labor Act of 2003 (Act 651) unified and modified the old labor laws to bring them into conformity with the core principles of the International Labor Convention, to which Ghana is a signatory.

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

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

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

There are no statutory requirements for profit sharing, but fringe benefits in the form of year-end bonuses and retirement benefits are generally included in collective bargaining agreements. Child labor remains a problem. Child labor is particularly severe in agriculture, including in cocoa and fishing. In general, worker protection provisions in the Labor Act, including health and safety provisions, are weakly enforced. Post recommends consulting a local attorney for detailed advice regarding labor issues. The U.S. Embassy in Accra maintains a list of local attorneys, which is available through the U.S. Foreign Commercial Service ( https://2016.export.gov/ghana/contactus/index.asp ) or U.S. Citizen Services (https://gh.usembassy.gov/u-s-citizen-services/attorneys/).

Table 4: Sources of Portfolio Investment
Data not available.

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

Policies Towards Foreign Direct Investment

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

Investment Promotion Agency

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

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

Limits on Foreign Control and Right to Private Ownership and Establishment

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

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

Other Investment Policy Reviews

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

Business Facilitation

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

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

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

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

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

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

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

Outward Investment

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

Transparency of the Regulatory System

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

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

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

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

International Regulatory Considerations

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

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

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

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

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

Competition and Antitrust Laws

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

Expropriation and Compensation

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

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

International Commercial Arbitration and Foreign Courts

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

Bankruptcy Regulations

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

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

Investment Incentives

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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

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

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

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

Performance and Data Localization Requirements

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

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

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

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

Real Property

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

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

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

Intellectual Property Rights

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

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

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

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

For additional information about treaty obligations and points of contact at local intellectual property offices, please see the World Intellectual Property Organization’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

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

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

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

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

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

Money and Banking System

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

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

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

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

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

Foreign Exchange and Remittances

Foreign Exchange Policies

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

Remittance Policies

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

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

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

Sovereign Wealth Funds

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

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

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

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

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

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

Privatization Program

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

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

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

Additional Resources

Department of State

• 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/).

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

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

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

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

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

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

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

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

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

Resources to Report Corruption

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

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

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

Contact at “watchdog” organization:

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

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

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

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

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

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

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

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

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

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

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

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

Table 4: Sources of Portfolio Investment
Data not available.

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

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 (FDI)

The Government of South Africa is generally open to foreign investment to drive economic growth, improve international competitiveness, and access foreign markets. The Department of Trade and Industry and Competition’s (the DTIC) Trade and Investment South Africa (TISA) division assists foreign investors. It actively courts manufacturing in sectors where it believes South Africa has a competitive advantage. It favors sectors that are labor intensive and with the potential for local supply chain development. The DTIC publishes the “Investor’s Handbook” on its website: www.the DTIC.gov.za  and TISA provides investment support through One Stop Shops in Pretoria, Johannesburg, Cape Town, Durban, and online at http://www.investsa.gov.za/one-stop-shop/  (see Business Facilitation). The 2018 Competition Amendment Bill introduced a government review mechanism for FDI in certain sectors on national security grounds, including energy, mining, banking, insurance, and defense (see section on Laws and Regulations on Foreign Direct Investment). The private sector has expressed concern about the politicization of mergers and acquisitions.

Limits on Foreign Control and Right to Private Ownership and Establishment

Currently there is no limitation on foreign private ownership. South Africa’s efforts to re-integrate historically disadvantaged South Africans into the economy have led to policies that could disadvantage foreign and some locally owned companies. The Broad-Based Black Economic Empowerment Act of 2013 (B-BBEE), and associated codes of good practice, requires levels of company ownership and participation by black South Africans to obtain bidding preferences on government tenders and contracts. The DTIC created an alternative equity equivalence (EE) program for multinational or foreign owned companies to allow them to score on the ownership requirements under the law, but many view the terms as onerous and restrictive. Only eight multinationals, primarily in the technology sector, participate in the EE program. The government also is considering a new Equity Employment Bill that will set a numerical threshold, purportedly at the discretion of each Ministry, for employment based on race, gender and disability, over and above other B-BBEE criteria.

Other Investment Policy Reviews

The World Trade Organization published a Trade Policy Review for the Southern African Customs Union, which South Africa joined in 2015. OECD published an Economic Survey on South Africa, with investment-related information in 2020. UN Conference on Trade and Development (UNCTAD) has not conducted investment policy reviews for South Africa. https://www.oecd.org/economy/surveys/South-africa-2020-Overview_E.pdf

Business Facilitation

According to the World Bank’s Doing Business report, South Africa’s rank in ease of doing business in 2020 was 84 of 190, down from 82 in 2019. It ranks 139th for starting a business, 5 points lower than in 2019. In South Africa, it takes an average of 40 days to complete the process. South Africa ranks 145 of 190 countries on trading across borders.

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

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

Outward Investment

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

Transparency of the Regulatory System

South African laws and regulations are generally published in draft form for stakeholder comment. However, foreign stakeholders have expressed concern over the adequacy of notice and the government’s willingness to address comments. Legal, regulatory, and accounting systems are generally transparent and consistent with international norms. The DTIC is responsible for business-related regulations. It develops and reviews regulatory systems in the areas of competition, standards, consumer protection, company and intellectual property registration and protections, as well as other subjects in the public interest. It also oversees the work of national and provincial regulatory agencies mandated to assist the DTIC in creating and managing competitive and socially responsible business and consumer regulations. The DTIC publishes a list of Bills and Acts that govern its work at: http://www.theDTIC.gov.za/legislation/legislation-and-business-regulation/?hilite=%27IDZ%27 

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

International Regulatory Considerations

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

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

Legal System and Judicial Independence

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

Laws and Regulations on Foreign Direct Investment

The February 2019 ratification of the Competition Amendment Bill (CAB) introduced, among other revisions, section 18A that mandates the President create an as-of-yet-unestablished committee comprised of 28 Ministers and officials chosen by the President to evaluate and intervene in a merger or acquisition by a foreign acquiring firm on the basis of protecting national security interests. The law also states that the President must identify and publish in the Gazette, the South African equivalent of the U.S. Federal Register, a list of national security interests including the markets, industries, goods or services, sectors or regions for mergers involving a foreign acquiring firm.

Competition and Antitrust Laws

The Competition Commission, separate from the above committee, is empowered to investigate, control, and evaluate restrictive business practices, abuse of dominant positions, and review mergers to achieve equity and efficiency. Its public website is www.compcom.co.za . The Competition Tribunal has jurisdiction throughout South Africa and adjudicates competition matters in accordance with the CAB. While the Commission is the investigation and enforcement agency, the Tribunal is the adjudicative body, very much like a court.

Expropriation and Compensation

Racially discriminatory property laws and land allocations during the colonial and apartheid periods resulted in highly distorted patterns of land ownership and property distribution in South Africa. Given land reform’s slow and mixed success, the National Assembly (Parliament) passed a motion in February 2018 to investigate amending the constitution (specifically Section 25, the “property clause”) to allow for land expropriation without compensation (EWC). Some politicians, think-tanks, and academics argue that Section 25 already allows for EWC in certain cases, while others insist that amendments are required to implement EWC more broadly. Parliament tasked an ad hoc Constitutional Review Committee composed of parliamentarians from various political parties to report back on whether to amend the constitution to allow EWC, and if so, how it should be done. In December 2018, the National Assembly adopted the committee’s report recommending a constitutional amendment. Following elections in May 2019 the new Parliament created an ad hoc Committee to Initiate and Introduce Legislation to Amend Section 25 of the Constitution. The Committee drafted constitutional amendment language explicitly allowing for EWC and accepted public comments on the draft language through March 2021. Parliament awaits the committee’s submission after granting a series of extensions to complete its work. Constitutional amendments require a two-thirds parliamentary majority (267 votes) to pass, as well as the support of six out of the nine provinces in the National Council of Provinces. Because no single political party holds such a majority, a two-third vote can only be achieved with the support of two or more political parties. Academics foresee EWC test cases in the next year primarily targeted at abandoned buildings in urban areas, informal settlements in peri-urban areas, and property with labor tenants in rural areas.

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

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

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

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

Dispute Settlement

ICSID Convention and New York Convention

South Africa is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards as implemented through the Recognition and Enforcement of Foreign Arbitral Awards Act, No. 40 of 1977 . It is not a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States or the World Bank’s International Center for the Settlement of Investment Disputes.

Investor-State Dispute Settlement

The 2015 Promotion of Investment Act removes the option for investor state dispute settlement through international courts typically afforded through bilateral investment treaties (BITs). Instead, investors disputing an action taken by the South African government must request the DTIC to facilitate the resolution by appointing a mediator. A foreign investor may also approach any competent court, independent tribunal, or statutory body within South Africa for the resolution of the dispute. Dispute resolution can be a time-intensive process in South Africa. If the matter is urgent, and the presiding judge agrees, an interim decision can be taken within days while the appeal process can take months or years. If the matter is a dispute of law and is not urgent, it may proceed by application or motion to be solved within months. Where there is a dispute of fact, the matter is referred to trial, which may take several years so there is a growing preference for Alternative Dispute Resolution.

International Commercial Arbitration and Foreign Courts

The Arbitration Act of 1965, which does not distinguish between domestic and international arbitration and is not based on UNCITRAL model law, governs arbitration in South Africa. South African courts retain discretion to hear a dispute over a contract using the law of a foreign jurisdiction. However, the South African court will interpret the contract with the law of the country or jurisdiction provided for in the contract. South Africa recognizes the International Chamber of Commerce, which supervises the resolution of transnational commercial disputes. It applies commercial and bankruptcy laws with consistency and has an independent, objective court system for enforcing property and contractual rights. Alternative Dispute Resolution is increasingly popular in South Africa for many reasons, including the confidentiality which can be imposed on the evidence, case documents, and the judgment. South Africa’s new Companies Act also provides a mechanism for Alternative Dispute Resolution.

Bankruptcy Regulations

South Africa’s bankruptcy regime grants many rights to debtors, including rejection of overly burdensome contracts, avoiding preferential transactions, and the ability to obtain credit during insolvency proceedings. South Africa ranks 68 out of 190 countries for resolving insolvency according to the 2020 World Bank Doing Business report, a drop from its 2019 ranking of 65.

Investment Incentives

The Public Investment Corporation SOC Limited (PIC) is an asset management firm wholly owned by the government of South Africa and is governed by the Public Investment Corporation Act, 2004 . PIC’s clients are mostly public sector entities, including the Government Employees Pension Fund (GEPF) and Unemployment Insurance Fund (UIF), among others. The PIC runs a diversified investment portfolio including listed equities, real estate, capital market, private equity, and impact investing. The PIC has been known to jointly finance foreign direct investment if the project will create social returns, primarily in the form of new employment opportunities for South Africans. South Africa also offers various investment incentives targeted at specific sectors or types of business activities, including tax allowances to support in the automotive sector and rebates for film and television production. More information regarding incentive programs may be found at: http://www.thedtic.gov.za/financial-and-non-financial-support/incentives/ 

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

Employment and Investor Requirements

Foreign investors who establish a business or invest in existing businesses in South Africa must show within twelve months of establishing the business that at least 60 percent of the total permanent staff are South African citizens or permanent residents. The Broad-Based Black Economic Empowerment (B-BBEE) program measures employment equity, management control, and ownership by historically disadvantaged South Africans for companies which do business with the government or bid on government tenders. Companies may consider the B-BBEE scores of their sub-contractors and suppliers, as their scores can sometimes contribute to or detract from the contracting company’s B-BBEE score.

A business visa is required for foreign investors or business owners. To qualify for a visa, investors must invest a prescribed financial capital contribution equivalent to R2.5 million (USD 178,000) and have at least R5 million (USD 356,000) in cash and capital available. The capital requirements may be reduced or waived if the investment qualifies under one of the following types of industries/businesses: information and communication technology; clothing and textile manufacturing; chemicals and bio-technology; agro-processing; metals and minerals refinement; automotive manufacturing; tourism; and crafts. The documentation required for obtaining a business visa is onerous and includes, among other requirements, a letter of recommendation from the DTIC regarding the feasibility of the business and its contribution to the national interest, and various certificates issued by a chartered or professional South African accountant. U.S. citizens have found the process lengthy, confusing, and difficult. Requirements frequently change mid-process. Many U.S. citizens use facilitation services.

In February 2021, the Minister of Home Affairs published the 2021 Critical Skills List for public comment, updating the 2014 version. This list forms the basis for granting business visas. Stakeholders are concerned that the list eliminates highly skilled jobs for which it is difficult to find local labor, particularly in ICT and engineering, which may have a negative impact on investment.

Goods, Technology, and Data Treatment

The government incentivizes the use of local content in goods and technology. The Protection of Personal Information Act (POPIA), which the government enacted in 2013 and which will enter fully into force in July 2021, regulates how personal information may be processed and under which conditions data may be transferred outside of South Africa. POPIA created an Information Regulator (IR) to draft and enforce regulations., Detailed guidance concerning transnational data transfers is scheduled to be released before July 2021. The IR acknowledges POPIA’s implementation will create substantial compliance costs for tech firms.

Investment Performance Requirements

There are no performance requirements on investments.

Real Property

The South African legal system protects and facilitates the acquisition and disposition of all property rights (e.g., land, buildings, and mortgages). Deeds must be registered at the Deeds Office. Banks usually register mortgages as security when providing finance for the purchase of property. Foreigners may purchase and own immovable property in South Africa without any restrictions, as foreigners are generally subject to the same laws as South African nationals. Foreign companies and trusts are also permitted to own property in South Africa if they are registered in South Africa as an external company. South Africa ranks 108 of 190 countries in registering property according to the 2020 World Bank Doing Business report.

Intellectual Property Rights

South Africa enforces intellectual property rights through civil and criminal procedures. It is a member of the World Intellectual Property Organization (WIPO) and in the process of acceding to the Madrid Protocol. 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/ . It is also a signatory to the WTO’s Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS).

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

Literary, musical, and artistic works, as well as cinematographic films and sound recordings, are eligible for protection under the Copyright Act of 1978. New designs may be registered under the Designs Act of 1967, which grants copyrights for five years. The Counterfeit Goods Act of 1997 provides additional protection to owners of trademarks, copyrights, and certain marks under the Merchandise Marks Act of 1941. The Intellectual Property Laws Amendment Act of 1997 amended the Merchandise Marks Act of 1941, the Performers’ Protection Act of 1967, the Patents Act of 1978, the Copyright Act of 1978, the Trademarks Act of 1993, and the Designs Act of 1993 to bring South African intellectual property legislation into line with TRIPS.

To modernize its IPR regime further, the DTIC introduced the Copyright Amendment Bill (CB) and the Performers’ Protection Amendment Bill (PPA). The controversial bills remain under Parliamentary review after being returned by the President in June 2020 on constitutional grounds. Stakeholders have raised several concerns, including the CB bill’s application of “fair use,” and clauses in both bills that allow the DTIC Minister to set royalty rates for visual artistic work or equitable renumeration for direct or indirect uses of copyrighted works. Additional changes to South Africa’s IPR regime are under consideration through a draft DTIC policy document, Phase 1 of the Intellectual Property Policy of the Republic of South Africa.

Capital Markets and Portfolio Investment

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

South Africa has access to deep pools of capital from local and foreign investors that provides sufficient scope for entry and exit of large positions. Financial sector assets amount to almost three times the country’s GDP, and the JSE is the largest on the continent with capitalization of approximately USD 670 billion and 335 companies listed on the main, alternative, and other smaller boards as of January 2021. Non-bank financial institutions (NBFI) hold about two thirds of financial assets. The liquidity and depth provided by NBFIs make these markets attractive to foreign investors, who hold more than a third of equities and government bonds, including sizeable positions in local-currency bonds. A well-developed derivative market and a currency that is widely traded as a proxy for emerging market risk allows investors considerable scope to hedge positions with interest rate and foreign exchange derivatives.

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

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

Money and Banking System

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

The Financial Services Board (FSB) governs South Africa’s non-bank financial services industry (see website: www.fsb.co.za/ ). The FSB regulates insurance companies, pension funds, unit trusts (i.e., mutual funds), participation bond schemes, portfolio management, and the financial markets. The JSE Securities Exchange SA (JSE), the sixteenth largest exchange in the world measured by market capitalization, enjoys the global reputation of being one of the best regulated. Market capitalization stood at USD 670 billion as of January 2021, with 335 firms listed. The Bond Exchange of South Africa (BESA) is licensed under the Financial Markets Control Act. Membership includes banks, insurers, investors, stockbrokers, and independent intermediaries. The exchange consists principally of bonds issued by government, state-owned enterprises, and private corporations. The JSE acquired BESA in 2009. More information on financial markets may be found at www.jse.co.za . Non-residents can finance 100 percent of their investment through local borrowing. A finance ratio of 1:1 also applies to emigrants, the acquisition of residential properties by non-residents, and financial transactions such as portfolio investments, securities lending and hedging by non-residents.

Foreign Exchange and Remittances

Foreign Exchange

The SARB Exchange Control Department administers foreign exchange policy. An authorized foreign exchange dealer, normally one of the large commercial banks, must handle international commercial transactions and report every purchase of foreign exchange, irrespective of the amount. Generally, there are only limited delays in the conversion and transfer of funds. Due to South Africa’s relatively closed exchange system, no private player, however large, can hedge large quantities of Rand for more than five years. While non-residents may freely transfer capital in and out of South Africa, transactions must be reported to authorities. Non-residents may purchase local securities without restriction. To facilitate repatriation of capital and profits, foreign investors should ensure an authorized dealer endorses their share certificates as “non-resident.” Foreign investors should also be sure to maintain an accurate record of investment.

Remittance Policies

Subsidiaries and branches of foreign companies in South Africa are considered South African entities, treated legally as South African companies, and subject to SARB’s exchange control. South African companies generally may freely remit to non-residents repayment of capital investments; dividends and branch profits (provided such transfers are made from trading profits and are financed without resorting to excessive local borrowing); interest payments (provided the rate is reasonable); and payment of royalties or similar fees for the use of know-how, patents, designs, trademarks or similar property (subject to SARB prior approval).

While South African companies may invest in other countries, SARB approval/notification is required for investments over R500 million (USD 33.5 million). South African individuals may freely invest in foreign firms listed on South African stock exchanges. Individual South African taxpayers in good standing may make investments up to a total of R4 million (USD 266,000) in other countries. As of 2010, South African banks are permitted to commit up to 25 percent of their capital in direct and indirect foreign liabilities. In addition, mutual and other investment funds can invest up to 25 percent of their retail assets in other countries. Pension plans and insurance funds may invest 25 percent of their retail assets in other countries.

Before accepting or repaying a foreign loan, South African residents must obtain SARB approval. SARB must also approve the payment of royalties and license fees to non-residents when no local manufacturing is involved. DTIC must approve the payment of royalties related to patents on manufacturing processes and products. Upon proof of invoice, South African companies may pay fees for foreign management and other services provided such fees are not calculated as a percentage of sales, profits, purchases, or income.

Sovereign Wealth Funds

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

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

The Department of Public Enterprises (DPE) oversees in full or in part for seven of the approximately 700 SOEs at the national, provincial, and local levels. These include: Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation, transmission, and distribution); South African Express and Mango (budget airlines); South African Airways (national carrier); South African Forestry Company (SAFCOL); and Transnet (transportation). The seven SOEs employ approximately 105,000 people. For other national-level SOEs, the appropriate cabinet minister acts as shareholder on behalf of the state. The Department of Transport, for example, oversees South African’s National Roads Agency (SANRAL), Passenger Rail Agency of South Africa (PRASA), and Airports Company South Africa (ACSA), which operates nine of South Africa’s airports. The Department of Communications oversees the South African Broadcasting Corporation (SABC).

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

Eskom, provides generation, transmission, and distribution for over 90 percent of South Africa’s electricity of which 80 percent comes from 15 coal-fired power plants. Eskom’s coal plants are an average of 39 years old, and a lack of maintenance has caused unplanned breakdowns and rolling blackouts, known locally as “load shedding,” as old coal plants struggle to keep up with demand. Load shedding reached a record 859 hours in 2020 costing the economy an estimated $7 billion and is expected to continue for the next several years until the South African Government can increase generating capacity and increase its Energy Availability Factor (EAF). In October 2019 the DMRE finalized its Integrated Resource Plan (IRP) for Electricity, which outlines South Africa’s policy roadmap for new power generation until 2030, which includes replacing 10,000 Mega Watts (MW) of coal-fired generation by 2030 with a mix of technologies, including renewables, gas and coal. The IRP also leaves the possibility open for procurement of nuclear technology at a “scale and pace that flexibly responds to the economy and associated electricity demand” and DMRE issued a Request for Information on new nuclear build in 2020. In accordance with the IRP, the South African government recently approved almost 14,000 Mega Watts (MW) of power to address chronic electricity shortages. The government announced the long-awaited Bid Window 5 (BW5) of the Renewable Energy Independent Power Procurement Program (REIPPP) in September 2020, the primary method by which renewable energy has been introduced into South Africa. The REIPP relies primarily on private capital and since the program launched in 2011 it has already attracted approx. ZAR 210 billion (USD 14 billion) of investment into the country. All three major credit ratings agencies have downgraded Eskom’s debt following Moody’s downgrade of South Africa’s sovereign debt rating in March 2020, which could impact investors’ ability to finance energy projects.

Transnet National Ports Authority (TNPA), the monopoly responsible for South Africa’s ports, charges some of the highest shipping fees in the world. High tariffs on containers subsidize bulk shipments of coal and iron. According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products. TNPA is a division of Transnet, a state-owned company that manages the country’s port, rail, and pipeline networks. In April 2012, Transnet launched its Market Driven Strategy (MDS), a R336 billion (USD 28 billion) investment program to modernize its port and rail infrastructure. In March 2014, Transnet announced an average overall tariff increase of 8.5 percent at its ports to finance a USD 240 million modernization effort. In 2016, Transnet reported it had invested R124 billion (USD 10.3 billion) in the previous four years in rail, ports, and pipeline infrastructure. In May 2020 S&P downgraded Transnet’s local currency rating from BB to BB- based on a generally negative outlook for South Africa’s economy rather than Transnet’s outlook specifically.

Direct aviation links between the United States and South Africa have been sharply curtailed by the COVID-19 pandemic. The emergence of a more contagious South African strain of COVID-19 in December 2020 spurred a deadly spike in infections and led the United States and many African countries to restrict entry of persons traveling from South Africa. Consequently, many airlines suspended transcontinental flights between South Africa and Europe, as well as the United States. United Airlines and Delta Air Lines provided regular service between Atlanta (Delta) and Newark (United) to Johannesburg and Cape Town before the pandemic, but both airlines have suspended service indefinitely pending resumption of sufficient demand. The state-owned carrier, South African Airways (SAA), entered business rescue in December 2019 and suspended all operations indefinitely in September 2020. The pandemic exacerbated SAA’s already dire financial straits and complicated its attempts to find a strategic equity partner to help it resume operations. Industry experts doubt the airline will be able to resume operations.

The telecommunications sector, while advanced for the continent, is hampered by regulatory uncertainty and poor implementation of the digital migration, both of which contribute to the high cost of data. In 2006, South Africa agreed to meet an International Telecommunication Union deadline to achieve analogue-to-digital migration by June 1, 2015. As of March 2021, South Africa has initiated but not completed the migration due to legal delays. Until this process is finalized, South Africa will not be able to effectively allocate the resulting additional spectrum. The independent communications regulator initiated a spectrum auction in September 2020, which was enjoined by court action in February 2021 following suits by two of the three biggest South African telecommunications companies. The regulator temporarily released high-demand spectrum to mobile network operators in June 2020 and extended the temporary release in March 2021.

Privatization Program

The government has not taken any concrete action to privatize SOEs. Candidates for unbundling are Eskom and defense contractor Denel.

Responsible Business Conduct (RBC) is well-developed in South Africa, driven in part by the socio-economic development element of B-BBEE policy as firms have largely aligned their RBC activities to B-BBEE requirements. The B-BBEE target is one percent of net profit after tax spent on RBC, and at least 75 percent of the RBC activity must benefit historically disadvantaged South Africans and is directed primarily towards non-profit organizations involved in education, social and community development, and health.

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

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.

South Africa has a robust anti-corruption framework, but laws are inadequately enforced, and public sector accountability is low. High-level political interference has undermined the country’s National Prosecuting Authority (NPA). “State capture”, a term used to describe systemic corruption of the state’s decision-making processes by private interests, is synonymous with the administration of former president Jacob Zuma. In response to widespread calls for accountability, President Ramaphosa launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, and the NPA which have revealed pervasive networks of corruption across all levels of government.

The Department of Public Service and Administration coordinates government initiatives against corruption, and South Africa’s Directorate for Priority Crime Investigations focuses on organized crime, economic crimes, and corruption. The Office of the Public Protector, a constitutionally mandated body, investigates government abuse and mismanagement. The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation. Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas. Inconsistently implemented, the PCCA lacks whistleblower protections. The Promotion of Access to Information Act and the Public Finance Management Act call for increased access to public information and review of government expenditures.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

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

Resources to Report Corruption

To report corruption to the government:

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

Or for a non-government agency:

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

South Africa has strong institutions and is relatively stable, but it also has a history of politically motivated violence and civil disturbance. Violent protests against the lack of effective government service delivery are common. Killings of, and by, mostly low-level political and organized crime rivals occur regularly. In May 2018, President Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings. The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner. The task force ordered multiple arrests, including of high-profile officials, in what appears to be a crackdown on political killings. Criminal threats and labor-related unrest have impacted U.S. companies in the past.

The unemployment rate in the fourth quarter of 2020 was 32.5%. The results of the Quarterly Labour Force Survey (QLFS) for the fourth quarter of 2020 show that the number of employed persons increased by 333,000 to 15 million in the fourth quarter of 2020. The number of unemployed persons increased by 701, 000 to 7.2 million compared to the third quarter of 2020. The youth unemployment (ages 15-24) rate was 63.2% in the fourth quarter of 2020.

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

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

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

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

Major labor legislation includes:

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

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

The Employment Equity Act of 1998 (EEA), amended in 2014, protects workers against unfair discrimination on the grounds of race, age, gender, religion, marital status, pregnancy, family responsibility, ethnic or social origin, color, sexual orientation, disability, conscience, belief, political, opinion, culture, language, HIV status, birth, or any other arbitrary ground. The EEA further requires large- and medium-sized companies to prepare employment equity plans to ensure that historically disadvantaged South Africans, as well as women and disabled persons, are adequately represented in the workforce. More information regarding South African labor legislation may be found at: www.labour.gov.za/legislation 

* Source for Host Country Data: N/A

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

Policies Towards Foreign Direct Investment

Attracting foreign direct investment (FDI) is a priority for Togo. The new Ministry of Investment Promotion created in November 2020 serves as an interface for potential investors, allowing them to target investment sectors and provide priority projects. Although the government was unable to host high-profile international events to showcase its economic reforms and infrastructure investments as in previous years due to COVID-19, government officials have made many trips abroad (including to Germany, France, and Russia) to promote Togo as a place to invest. Notably, Dangote Industries  signed an agreement in November 2019 for a $2 billion phosphate fertilizer project. The government hopes that its strategic focus on improving the business environment will facilitate an increase in FDI in the coming years. Investment opportunities are available in transportation, logistics, agribusiness, energy, banking, and mining.

Togo does not have laws or practices that discriminate against foreign investors. The Investment Code, adopted in June 2019, prescribes equal treatment for Togolese and foreign businesses and investors; free management and circulation of capital for foreign investors; respect of private property; protection of private investment against expropriation; and investment dispute resolution regulation. The code meets West African Economic and Monetary Union (WAEMU) standards.

As an Investment Holding Company, Togo Invest Corporation focuses on investments involving the government through Public-Private-Partnerships. Although Togo prioritizes investment retention, the government does not maintain a formal dialogue channel with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activities. The foreign investor can also create a wholly owned subsidiary. It has no obligation to associate itself with a local investor. This right is contained in the Investment Code “le Code des Investissements,” adopted June 17, 2019, and there are no general limits on foreign ownership or control. Section 3 of the Investment Code states that any company established in the Togolese Republic freely determines its production and marketing policy, in compliance with the laws and regulations in force in the Togolese Republic. Additionally, there are no formal investment approval mechanisms in place for inbound foreign investment nor rules, restrictions, limitations, or requirements applied to private investments.

Other Investment Policy Reviews

Togo conducted a trade policy review through the World Trade Organization (WTO) in October 2017. A link to the report can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp366_e.htm 

Business Facilitation

Over the last decade, Togo has significantly reduced the costs and procedures required to establish a business. In 2013, Togo established a center for starting new businesses – the “Centre de Formalité des Entreprises” that manages new business registration with an online business registration process. It only takes seven hours to register a company: https://www.cfetogo.org/eentreprise . In 2014, Togo made starting a business easier by permitting the Centre de Formalité des Entreprises to publish notices of incorporation, as well as eliminating the requirement to obtain an economic operator card. The World Bank Doing Business Report 2020 places Togo at 15 of 190 for the “Starting a Business” indicator, in comparison to 74 of 190 in 2019. The World Bank announced it will publish the Doing Business Report 2021 in mid-2021, incorporating data corrections for several previous reports (the World Bank announcement noted that Togo’s previous reports are unaffected).

Togo has enacted reforms to improve the process for obtaining construction permits. First, Togo removed a cumbersome and costly bureaucratic hurdle by eliminating the requirement of providing a certificate of registration from the National Association of Architects as a condition precedent to receiving a construction permit. Second, Togo has streamlined the entire procedure by establishing a “One-Stop Shop” for property transactions (called the Guichet Unique Foncier) at the Togolese Revenue Office (OTR). This “One-Stop Shop” within the OTR allows applicants to drop off their applications and retrieve their permits in one place, thus eliminating the need to visit multiple administrative offices to process paperwork.

The government created a Business Climate Unit in the Presidency in late 2017. The unit is committed to improving operating conditions for business, especially young entrepreneurs and women.

The creation of two commercial courts in Lomé and Kara favors private investors as these legal authorities allow for greater transparency in the treatment of commercial disputes.

Outward Investment

Togo does not promote outward investment, nor does it restrict domestic investors from investing abroad.

Transparency of the Regulatory System

In June 2019, the National Assembly adopted a new investment code, which is in line with the objectives of the National Development Plan (PND) and embraces the government’s desire to make the private sector the engine of economic growth.

The Investment Code seeks to make Togo an attractive place for international companies, supporting the development of logistics hubs by offering tax incentives. The incentives are proportional to the size of the investments made and the number of jobs created. At a time when Togo is committed to decentralization, the new investment code provides additional advantages to investments that create jobs outside of major urban centers. The code operationalizes the National Agency for the Promotion of Investments and the Free Zone (API-ZF) which simplifies formalities. The deadline for adjudicating files is now set at 30 days maximum.

As a member of West African Economic and Monetary Union (WAEMU), Togo participates in zone-wide plans to harmonize and rationalize regulations governing economic activity within the Organization for the Harmonization of Business Law in Africa (OHADA – Organisation pour L’Harmonisation en Afrique du Droit des Affaires). OHADA includes sixteen African countries, including Togo, and one of the principal goals is a common charter on investment. Togo directly implements WAEMU and OHADA regulations without requiring an internal ratification process by the National Assembly.

Although the government does not make draft bills and proposed regulations available for public comment, ministries, and regulatory agencies in Togo generally give notice of and distribute the text of proposed regulations to relevant stakeholders. Ministries and regulatory agencies also generally request and receive comments on proposed regulations through targeted outreach to business associations and other stakeholders.

Togo is a member of UNCTAD’s international network of transparent investment procedures http://togo.eregulations.org . Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities, persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures. The site is generally up-to-date and useful.

The Public Procurement Regulatory Authority (ARMP) ensures compliance and transparency with respect to government procurements. Each responsible ministry ensures compliance with its regulations which are developed in conformity with international standards and agreements such as WTO or WAEMU norms. Regulations are not reviewed on the basis of scientific or data-driven assessments. The government has not announced any upcoming changes to the regulatory enforcement system. A July 2019 Decree No. 2019-097 / PR sets out a code of ethics and professional conduct in public procurement.

Togo joined the Development Center of OECD in June 2019, an opportunity to share experiences and pool resources.

International Regulatory Considerations

Togo is a member of the World Trade Organization (WTO). It is not known if the government notifies all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

For the most part, in economic terms, the Togolese legal and administrative framework is aligned with the community texts of UEMOA, ECOWAS or larger groups.

On the financial side, Togo depends on sub-regional institutions, notably the Central Bank of West African States (BCEAO) whose head office is in Dakar. The Regional Council for Public Savings and Financial Markets (CREPMF), headquartered in Abidjan, regulates financial markets.

The Togolese insurance market is subject to the rules of the CIMA zone (Inter African Conference of Insurance Markets).

With regard to intellectual property, Togo relies on OAPI (African Intellectual Property Organization).

The main laws and directives of these different legal and administrative areas are available, among others, on the website www.droit-afrique.com under the heading Togo.

More broadly, Togo is a member of the United Nations (UN), the World Trade Organization (WTO) or the International Renewable Energy Agency (IRENA).

At the African level, the country is also party to the Council of the Agreement, the Benin Electric Community (CEB), the African Peer Review Mechanism (APRM), the Alliance Zone and the Co-operation Zone for Prosperity (ZACOP), and the African Union.

Legal System and Judicial Independence

Togo practices a code-based legal system inherited from the French system. The judiciary is recognized as the third power after the executive and the legislative (the press being the 4th) and thus remains independent of the executive branch. Togo, as a member of the OHADA, has a judicial process that is procedurally competent, fair, and reliable. Regulations or enforcement actions are appealable like any other civil actions and are adjudicated in the national court system.

A Court of Arbitration and Mediation created in 2011 legally enforces contracts. The main law covering commercial issues is the Investment Code adopted in 2012. In 2013, Togo created three commercial Chambers within the Lomé tribunal with specialized magistrates who have exclusive trial court level jurisdiction over contract enforcement and business disputes.

Laws and Regulations on Foreign Direct Investment

The Investment Code allows the resolution of investment disputes involving foreigners through: (a) bilateral agreements between Togo and the investor’s government; (b) arbitration procedures agreed to between the interested parties; or (c) through the offices of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The OHADA also provides a forum and legal process for resolving legal disputes in 16 African countries.

Investment dispute are managed by SEGUCE Togo (Societe d’Exploitation du Guichet Unique pour le Commerce Exterieur), and can be accessed at www.segucetogo.tg 

Togo is a member of UNCTAD’s international network of transparent investment procedures http://togo.eregulations.org . Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time and legal bases justifying the procedures.

Competition and Anti-Trust Laws

The Public Procurement Regulatory Authority (ARMP) ensures compliance and transparency for competition-related concerns. The government regularly seeks to improve the framework for public procurement (including professionalizing the public procurement sector, moving procurement online, enacting legislative regulations, etc). These reforms directly benefit the private sector, which serves as the engine for the National Development Plan (PND).

Expropriation and Compensation

The government can legally expropriate property through a Presidential decree submitted by the cabinet of ministers and signed by the President.

Only two major expropriations of property have taken place in Togo’s history. The first was the February 1974 nationalization of the then French-owned phosphate mines. The second was the November 2014 nationalization of the Hôtel du 2 Février after it had ceased operations for several years. Shortly after the nationalization of the hotel, Togo announced that it was establishing a commission to determine the fair market amount owed as compensation to the hotel’s Libyan owners/investors. Setting aside the case of the Hôtel du 2 Février as an isolated example, there is little evidence to suggest a trend towards expropriation or “creeping expropriation.” The government designed the 2012 Investment Code to protect against government expropriations. There are some claimants from lands expropriated for recent road construction, however, and the procedure to investigate and resolve those claims is slow. Another issue is that land titles are very unclear with traditional and modern systems overlapping. The government has occasionally earmarked land for development with unclear title that has raised complaints from local communities.

Dispute Settlement

ICSID Convention and New York Convention

Togo is not a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Togo is, however, 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), which it ratified in 1967.

Investor-State Dispute Settlement

Togo does not have Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.

Togo does not have a history of extrajudicial action against foreign investors, notwithstanding the two historical examples above. There do not appear to be any investment disputes involving U.S. persons from the past ten years. Local courts recognize and enforce foreign arbitral awards issued against the government.

International Commercial Arbitration and Foreign Courts

The dispute resolution alternative is the Court of Arbitration of Togo (CATO), which conforms to standards as established by the Investment Climate Facility for Africa (ICF). Local courts recognize and enforce foreign arbitral awards and there are no known State Owned Enterprise investment disputes that have gone to the domestic court system.

The World Bank’s International Finance Corporation (IFC) worked with the Government of Togo to improve commercial justice through the strengthening of alternative dispute resolution mechanisms. The aim of the project was to increase the speed and efficiency of settlement of commercial disputes through the procedures used by the CATO.

As a result of the project, 30 new arbitrators and 100 magistrates and professionals received training in mediation/arbitration techniques. Further, the new CATO procedure manual is explicit that the time between filing and judgment shall be a maximum of 6 months as per article 36 of the ruling procedures.

Bankruptcy Regulations

Togo uses the standards set forth under the Organization for the Harmonization of Business Law in Africa (OHADA). That law states that if bankruptcy occurs, the competent jurisdiction designates an expert that concludes an agreement with creditors and stakeholders (preventive arrangement). The Manager (or managers) can be put under “patrimonial sanctions”, meaning they can be personally liable for the debts of the company. The manager is then forbidden to do business, to manage, administer, or control an enterprise, or hold political or administrative office, for three to ten years. Bankruptcy is criminalized, but generally as a last resort.

According to data collected by the World Bank, insolvency proceedings take three years on average and cost approximately 15 percent of the debtor’s estate, with the most likely outcome being that the company will be sold off in pieces. The average recovery rate is 27.9 cents on the dollar. The World Bank’s Doing Business 2020 places Togo at 88 of 190 for the “Resolving Insolvency” indicator, well above the Sub-Saharan Africa regional average.

Investment Incentives

Investment incentives are available to foreign investors that invest more than $100,000. Incentives include exemption from VAT and Customs Duties on new imported plant and materials, reduced income taxes for up to five years, and depending on the number of permanent jobs created for nationals, reduction on salary taxes during an approved period of time. Incentives are also available in the Export Processing Zone (EPZ).

Foreign Trade Zones/Free Ports/Trade Facilitation

The 2011 law modifying the 1989 law creating the Export Processing Zone (EPZ) provides an advantageous taxation scheme for companies based in the EPZ with a reduced tax bill on their profits for their first 20 years of operation, including a five percent tax on profits for the first five years. The law also exempts companies from customs duties and VAT on imported equipment and inputs, as well as an exemption from VAT on goods and services purchased locally. It also provides EPZ companies the freedom to repatriate capital, including dividends and other income. The law also exempts companies within the EPZ from providing workers with many legal protections, including protection against anti-union discrimination with regard to hiring and firing.

The government created the National Agency for the Promotion of Investments and the Free Zone (API-ZF) in 2003 but it is not yet operational. API-ZF is now a government priority to help accelerate the growth of investments in line with the government road map. The government anticipates that API-ZF will help boost national and international investments across all sectors, leading to increased jobs and wealth creation.

The 400-hectare “Adetikope Industrial Plateform” (PIA) industrial zone will open in June 2021. PIA will be dedicated to processing industries, including the cotton sector and agro-processing. This industrial zone will boost Togo’s capacity to transform raw materials into goods for export. PIA aims to process 30% of Togo’s total exports within five years.

The African Continental Free Trade Area (AfCFTA / ZLECAF) will facilitate intra-African trade and eliminate customs duties for 90% of goods from other African countries. The trade accord also aims to reduce or eliminate non-tariff impediments such as corruption and border delays and encourage trade facilitation measures. Additionally, UNDP and AfCFTA signed a March 2021 agreement to promote trade as a stimulus for Africa’s socio-economic recovery from the COVID-19 crisis, especially for women and youth.

Performance and Data Localization Requirements

Firms are required by law to employ Togolese nationals on a priority basis, and after five years foreign workers cannot account for more than 20 percent of the total workforce or of any professional category. In practice, the Togolese government strongly encourages large foreign employers outside of the EPZ to hire as many Togolese nationals as practical. These encouragement schemes do not typically apply to senior management level employees.

There are reports that foreigners seeking to legalize their status for long-term work and residence purposes have encountered significant administrative obstacles and delays, although the steps for receiving residence permits are well defined. Issuance of such permits is the responsibility of the National Police.

There are no government-imposed conditions on permission to invest and there is no policy on “forced localization.” Foreign IT providers are not required to turn over source code and/or provide access to encryption and there are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory.

Real Property

Property rights and interests are enforced, although nearly 80% of court cases are reported to involve land title disputes. Mortgages and liens exist but land titles are precarious and often subject to litigation. Most land does not have a clear title, especially outside of urban areas. The government is attempting to fix this issue through various commissions that will issue recommendations, but it will take years to resolve.

The average time to proceed with property transfer decreased from eight days in 2018 to five days in 2019.

All land-related operations are carried out via the government’s “One-Stop Shop” for property transactions (called the Guichet Unique Foncier) at the Togolese Revenue Office (OTR). This “One-Stop Shop” within the OTR simplifies property transfer procedures, reduces administrative costs, and minimizes the risks in the process. The government has reduced the registration fee for property transfer to a 35,000 FCFA ($64) flat fee rather than the previous 4% of market value. The process of issuing a land title now takes only five hours, down from 48 hours in 2018.

An independent complaints mechanism exists in the Togolese Revenue Office (OTR). OTR has been set up to deal with land complaints. The office gives itself 48 hours to respond to requests.

Since December 10, 2019, all cadastral maps of greater Lomé (2,568 in total) were digitized and are made available in a database. This makes it possible to update the targeted plans and to carry out studies and validation of files at the “Guichet Unique Foncier” (GUF).

In Togo, only Togolese citizens, French citizens, foreign governments, and those granted citizenship by the judiciary are allowed to possess real property. Other foreigners must request permission from the Prime Minister, which is usually granted for investors who will develop the land. Land speculation is discouraged by the government. Property legally purchased that remains unoccupied will not be reverted to other owners under the law; however, in practice, unused land that is not protected will likely be occupied or used by others and potentially subject to lengthy court battles to prove ownership.

Intellectual Property Rights

The regional African Intellectual Property Organization (OAPI) and National Institute for Industrial Property and Technology (INPIT) are the two agencies that protect IP in Togo. On November 30, 2020 Togo ratified the Bangui Agreement, which governs intellectual property in the 17 OAPI member states.. There are no official figures available on how the country tracks and reports on seizures of counterfeit goods. The country may prosecute IPR violations, but there are no known cases.

Togo is not listed in USTR’s Special 301 report or in the notorious market report. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Capital Markets and Portfolio Investment

Togo and the other West African Economic and Monetary Union (WAEMU) member countries are working toward greater regional integration with unified external tariffs. Togo relies on the West African Economic and Monetary Union (WAEMU) Regional Stock Exchange in Abidjan, Cote d’Ivoire to trade equities for Togolese public companies.

WAEMU has established a common accounting system, periodic reviews of member countries’ macroeconomic policies based on convergence criteria, a regional stock exchange, and the legal and regulatory framework for a regional banking system. The government and central bank respect IMF Article VIII and refrain from restrictions on payments and transfers for current international transactions. Credit is generally allocated on market terms. With sufficient collateral, foreign investors are generally able to get credit on the local market. The private sector in general has access to a variety of credit instruments when and if collateral is available.

Money and Banking System

The penetration of banking services in the country is low and generally only available in major cities.

The government and the banking sector have worked to restore Togo’s reputation as a regional banking center, which was weakened by political upheavals from 1991 to 2005, and several regional and sub-regional banks now operate in Togo, including Orabank, Banque Atlantique, Bank of Africa, Diamond Bank, International Bank of Africa in Togo (BIAT), and Coris Bank.

Additionally, Togo is home to the headquarters of the ECOWAS Bank for Investment and Development (EBID), the West African Development Bank (BOAD – the development bank of the West African Economic and Monetary Union), Oragroup, and Ecobank Transnational Inc. (ETI), the largest independent regional banking group in West Africa and Central Africa, with operations in 36 countries in Sub-Saharan Africa.

The banking sector is generally healthy, and the total assets of Togo’s largest banks are approximately $25-30 billion, including Ecobank, a very large regional bank headquartered in Lomé.

Togo’s monetary policy and banking regulations are managed by the Central Bank of West African States (BCEAO). No known correspondent relationships were lost in the past four years. No known correspondent banking relationships are in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer of funds to other FCFA-zone countries or to France. The transfer of more than FCFA 500,000 (about $1,000) outside the FCFA-zone requires justification documents (e.g. pro forma invoice) to be presented to bank authorities.

The exchange system is free of restrictions for payments and transfers for international transactions. Some American investors in Togo have reported long delays (30 – 40 days) in transferring funds from U.S. banks to banks located in Togo. This is reportedly because banks in Togo have limited contacts with U.S. banks to facilitate the transfer of funds.

Togo uses the CFA franc (FCFA), which is the common currency of the eight (8) West African Economic and Monetary Union (WAEMU) countries. The currency is fixed to the Euro at a rate of 656 FCFA to 1 Euro. As a result of this fixed exchange rate, Togo’s inflation rate is consistently below 2%.

Remittance Policies

The 2012 Investment Code provides for the free transfer of revenues derived from investments, including the liquidation of investments, by non-residents.

Sovereign Wealth Funds

Togo does not maintain a Sovereign Wealth Fund (SWF) or other similar entity.

The government published a list of 16 State-owned Enterprises (SOEs) and the shareholding of twenty-six (26) other semi-public companies in December 2019. These SOEs may enjoy non-market based advantages received from the host government, such as the government delaying private enterprise investment in infrastructure that could disadvantage the market share of the SOE.

All SOEs have a Board of Directors and Supervisory Board, although the Togolese government has not specified how it exercises ownership in the form of an ownership policy or governance code. The SOEs also have auditors who certify their accounts. Once certified by these auditors, the accounts of these companies are sent to the Court of Auditors, Togo’s supreme audit institution, which verifies and passes judgment on these financial statements and reports to the National Assembly. The Court publishes the results of its audits annually, including at http://courdescomptestogo.org .

SOEs control or compete in the fuel, cotton, telecommunications, banking, utilities, phosphate, and grain-purchasing markets. The government wants to revitalize the phosphate sector and become a leading global player via the state-owned New Phosphate Company of Togo (SNPT).

In June 2020, the New Cotton Company of Togo (NSCT) which produces cotton domestically was sold to the Singaporean Company OLAM Group (51%) with 40% to Cotton Producers Consortium (FNGPC) (40%), while the Government of Togo maintained a 9% stake. Through this privatization, the Government hopes to further develop the textile industry. Before this privatization, NSCT was 60% state-controlled after the bankruptcy and dissolution of the 100% state-owned Togolese Cotton Company (SOTOCO) in 2009.

In September 2012, Togo sold the formerly state-owned Togolese Development Bank to Orabank Group, which has some U.S. investors. Likewise, in March 2013, Togo sold the formerly state-owned Banque Internationale pour l’Afrique au Togo to the Attijariwafa Bank Group of Morocco.

Following these sales, Union Togolaise de Banque (UTB) and Banque Togolaise pour le Commerce et l’Industrie (BTCI) are now the only two state-owned banks. Togo’s first call for tenders for these two banks, completed in 2011, was unsuccessful. Togolese authorities are working in consultation with the IMF to either merge the two banks into a single entity, or try to privatize one or both. These two remaining state-owned banks hold weak loan portfolios characterized by high exposure (about one-third of total bank credit) to the government, as well as to the cotton and phosphate industries.

In the telecommunications sector, the government combined in 2017 the two state-owned entities Togo Telecom and TogoCell into a holding company, TogoCom. In November 2019, Agou Holding consortium, made up of the Madagascan conglomerate Axian (majority) and the capital-investor Emerging Capital Partners (ECP) bought a 51% stake in TogoCom. The Togolese Government maintains a 49% stake. Agou Holding plans to invest $271 million in TogoCom over seven years to improve international connectivity and expand its high-speed fiber-optic and mobile networks. However, such investment is not yet apparent, with 4G restricted to a small area in Lomé. Nonetheless, Togocom announced in March 2021 that it is launching 5G service at the Port of Lome, the main government administrative area, and the Adetikope Industrial Platform (PIA), using Nokia equipment.

The new entity stills directly competes with a private cell phone company, Moov Togo. Atlantique Telecom, a subsidiary of Emirates Telecommunications Corporation (Etisalat), owns and controls Moov Togo. The Government of Togo has licensed Togocom and Moov for 4G. Private company CAFÉ Informatique also offers satellite-based internet access and other services, mainly to the business sector. Two new internet service providers, Teolis and Vivendi Africa Group (GVA-Togo), entered the market in 2018 and the government is installing new fiber optic cable in the country.

Public utilities such as the Post Office, Lomé Port Authority, Togo Water, and the Togolese Electric Energy Company (CEET) hold monopolies in their sectors.

The National Agency for Food Security (ANSAT) is a government agency that purchases cereals on the market during the harvest for storage. When cereal prices increase during the dry season, it is ANSAT’s task to release cereals into the markets to maintain affordable cereal prices. When supplies permit, ANSAT also sells cereals on international markets, including Ghana, Niger, and Gabon.

Togo does not adhere to the OECD Guidelines on Corporate Governance for SOEs (link to guidelines at www.oecd.org/daf/ca/oecdguidelinesoncorporategovernanceofstate-ownedenterprises.htm 

Privatization Program

Previous privatization in Togo covered many sectors, such as hotels, banking, and mining. Foreign investors are encouraged to compete in new privatization programs via a public bidding processes. The government publishes all notifications in the French language, but unfortunately, a relevant government website is not available.

Responsible Business Conduct (RBC) is not officially addressed in Togo by the government, other than as it relates to corruption and criminal activity. RBC and its variants such as “Fair Trade” is known by independent NGOs and businesses which promote these practices and are able to do their work freely.

Some American-owned companies follow generally-accepted RBC principles, and participate in outreach programs to local villages where they supply, among other things, school buildings, water, electricity, and flood abatement resources. In accordance with a law passed in March 2011, new construction projects must now address environmental and social impacts.

Togo joined the Extractive Industries Transparency Initiative (EITI) in 2009 and has been officially recognized as EITI-compliant since 2013. Togo’s EITI Secretariat carries out a yearly verification of financial statements relating to the extractive industry.

The Ministry of Civil Service, Labor, Administrative Reform, and Social Protection sets workplace health and safety standards and is responsible for enforcement of all labor laws. There have been no high-profile, controversial instances of private sector impact on human rights or resolution of such cases in the recent past.

Togolese law provides workers, except security forces (including firefighters and police), the right to form and join unions and bargain collectively. There are supporting regulations that allow workers to form and join unions of their choosing. Workers have the right to strike, although striking healthcare workers may be ordered back to work as necessary for the security and well-being of the population. While no provisions in the law protect strikers against employer retaliation, the law requires employers to get a judgment from the labor inspectorate before they fire workers. If firms fire workers illegally, including for union activity, the companies must reinstate the employees and compensate them for lost salary.

The law recognizes the right to collective bargaining; representatives of the government, labor unions, and employers negotiate and endorse a nationwide agreement. This collective bargaining agreement sets nationwide wage standards for all formal sector workers. For sectors where the government is not an employer, the government participates in this process as a labor-management mediator. For sectors with a large government presence, including the state-owned companies, the government acts solely as an employer and does not mediate.

The government follows OHADA recommended rules and regulations on corporate governance, accounting, and executive compensation.

Private security companies are present in Togo but the country is not a participant in the International Code of Conduct for Private Security Service Providers Association (ICoCA).

The Togolese government has established several important institutions designed in part to reduce corruption by eliminating opportunities for bribery and fraud: the Togolese Revenue Authority (OTR), the One-Stop Shop to create new businesses (CFE), and the Single Window for import/export formalities.

In 2015, the Togolese government created the High Authority for the Prevention and Fight against Corruption and Related Offenses (HAPLUCIA), which the government designed to be an independent institution dedicated to fighting corruption. The government appointed members in 2017. HAPLUCIA encourages private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials. HAPLUCIA presented on February 7, 2019 its strategic plan for the period 2019-2023; it set up a toll-free number, the “8277” to receive complaints and denunciations.

Anti-corruption laws extend to family members of officials, and to political parties and the government does not interfere in the work of anti-corruption NGOs.

In 2011, the government effectively implemented procurement reforms to increase transparency and reduce corruption. The government announces procurements weekly in a government publication. Once contracts are awarded, all bids and the winner are published in the weekly government procurement publication. Other measurable steps toward controlling corruption include joining the Extractive Industries Transparency Initiative (EITI) and establishing public finance control structures and a National Financial Information Processing Unit.

Togo signed the UN Anticorruption Convention in 2003 and ratified it on July 6, 2005.

Resources to Report Corruption

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

Essohana Wiyao
President of HAPLUCIA, the High Authority for the Prevention and Fight against Corruption and Related Offenses
Tel. +228 90 21 28 46 / 90 25 77 40
Email: essohanawiyao@yahoo.fr 
Lomé, Togo

Directeur, Anti-Corruption
Office Togolais des Recettes (OTR)
41 Rue des Impôts
02 BP 20823
Lomé, Togo
+228 – 22 53 14 00
otr@otr.tg 

Contact at a “watchdog” organization:

Samuel Kaninda
Regional Coordinator, West Africa
Transparency International
Alt-Moabit 96
10559 Berlin
Germany
+49 30 3438 20 773
skaninda@transparency.org 

After a period of sustained political instability and economic stagnation from 1990 to 2007, the government started the country along a gradual path to political reconciliation and democratic reform. Togo has held multiple presidential, legislative, and local elections that were deemed generally free and fair by international observers, though the most recent legislative elections were boycotted by the majority of the opposition. Political reconciliation has moved slowly. A political crisis erupted in 2017 regarding the failure of the government to implement political measures, such as presidential term limits. After international facilitation between the government and opposition parties, in May 2019 the government implemented non-retroactive term limits and a two-round election system. The government held local elections in 2019, the first since 1986. President Faure Gnassingbe was elected for a fourth term on February 22, 2020 in a peaceful election.

Political protests still occur on occasion and can often lead to tire burning, stone throwing, and government responses include the use of tear gas and other crowd control techniques. There are no known examples over the past ten years of damage to projects and/or installations pertaining to foreign investment due to political violence.

The labor market is predominately unskilled and there is a shortage of skilled labor and English speaking employees. Some migrant farm workers arrive from Ghana and Benin based on familial ties. Widespread underemployment exists, and large portions of the non-agricultural workforce participate in the informal economy.

In general, government labor policy favors employment of nationals.

Regulations require that firms hire workers with time specific contracts that include severance requirements. The labor code, and regulations called the “Convention Collective” differentiate between layoffs and firings, but both require severance payments. Free Trade zones offer different labor law provisions to encourage investment.

Public employee unions (school teacher, judicial clerks, etc) use collective bargaining, and are willing to take to the streets in non-violent protest to raise the profile of their demands. Labor disputes are often resolved on an ad-hoc basis, usually with the intervention of parliamentarians.

Togo adopted a new Labor Code on December 29, 2020, replacing the 2006 code. The new code has increased social protection measures, requires employers to register employees with the National Social Security Fund (CNSS), and introduces severance pay and precarious work premiums. At the same time, it provides greater flexibility in the labor market by allowing for a variety of contract types depending on a company’s activities (e.g. seasonal labor, project-based contracts, telework). Finally, the new code allows the government to favor disadvantaged geographic areas and social groups.

The U.S. and Togo have a DFC agreement in place. DFC provides political risk insurance and financing for ContourGlobal’s 100-megawatt power plant in Togo. The plant began operation in the fall of 2010 providing base-load electricity for the country. DFC also provides insurance for the West African Gas Pipeline Company Limited through Steadfast Insurance Co. The French government agency COFACE provides investment insurance in Togo under programs similar to those offered by DFC. Investment insurance through the Multilateral Investment Guarantee Agency (MIGA) is also an option to explore.

Note: U.S. based ContourGlobal built a 100 megawatt power plant in Togo in 2010. This FDI is not recorded in official U.S. government statistics.

Table 4: Sources of Portfolio Investment
Data not available.

Political-Economic Section
U.S. Embassy, Lomé
4332 Blvd Eyadéma – BP 852, Lomé, Togo
+228 2261 5470, ext 4466
togocommercial@state.gov