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

In 2021, Egypt’s government announced plans to launch a second round of economic reforms aimed at increasing the role of the private sector in the economy, addressing long-standing customs and trade policy challenges, and modernizing its industrial base and increasing exports.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Egypt does not restrict domestic investors from investing abroad.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No specialized court exists for foreign investments.

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

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

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

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

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

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

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

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

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

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

Green economy and climate change incentives:

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

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

The 2017 Investment Law

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

General Incentives:

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

Special Incentive Programs:

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

Additional Incentive Program:

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

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

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

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

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

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

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

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

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

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

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

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

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

Egypt has rules on national percentages of employment and difficult visa and work permit procedures. The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period. Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. The application of these regulations is inconsistent. The Labor Law allows Ministers to set the maximum percentage of foreign workers that may work in companies in a given sector. There are no such sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits or procedures regarding the proportion of foreign and local employees.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

IPR Contact at Embassy Cairo:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Department of State

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

Department of the Treasury

• OFAC Recent Actions 

Department of Labor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The major laws affecting foreign investment in South Africa are:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Resources

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

To report corruption to the GoSA:

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

Or for a non-government agency:

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

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

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

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

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

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

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

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

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

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

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

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

The UK actively encourages inward FDI.  With a few exceptions, the government does not discriminate between nationals and foreign individuals in the formation and operation of private companies.  The Department for International Trade, including through its newly created Office for Investment, actively promotes inward investment and prepares market information for a variety of industries.  U.S. companies establishing British subsidiaries generally encounter no special nationality requirements on directors or shareholders.  Once established in the UK, foreign-owned companies are treated no differently from UK firms.  The UK government is a strong defender of the rights of any UK-registered company, irrespective of its nationality of ownership.

Foreign ownership is limited in only a few strategic private sector companies, such as Rolls Royce (aerospace) and BAE Systems (aircraft and defense).  No individual foreign shareholder may own more than 15 percent of these companies.  Theoretically, the government can block the acquisition of manufacturing assets from abroad by invoking the Industry Act of 1975, but it has never done so.  Investments in energy and power generation require environmental approvals.  Certain service activities (like radio and land-based television broadcasting) are subject to licensing.

The National Security and Investment Act (NSIA) 2021 came into force on January 4, 2022.  The NSIA created a new screening regime for transactions which might raise national security concerns in the UK called the Investment Security Unit (ISU).  The ISU sits within the Department for Business, Energy and Industrial Strategy (BEIS).  It is responsible for identifying, addressing and mitigating national security risks to the UK arising when a person gains control of a qualifying asset or qualifying entity.

The UK requires that at least one director of any company registered in the UK be ordinarily resident in the country.  The UK, as a member of the Organization for Economic Cooperation and Development (OECD), subscribes to the OECD Codes of Liberalization and is committed to minimizing limits on foreign investment.

The Economist Intelligence Unit and the OECD’s Economic Forecast Summary have current investment policy reports for the United Kingdom:

http://country.eiu.com/united-kingdom 
https://www.oecd.org/economy/united-kingdom-economic-snapshot/ 

The UK government has promoted administrative efficiency successfully to facilitate business creation and operation.  The online business registration process is clearly defined, though some types of companies cannot register as an overseas firm in the UK, including partnerships and unincorporated bodies.  Registration as an overseas company is only required when the company has some degree of physical presence in the UK.  After registering their business with the UK governmental body Companies House, overseas firms must separately register to pay corporation tax within three months.  Since 2016, companies have had to declare all “persons of significant control.”  This policy recognizes that individuals other than named directors can have significant influence on a company’s activity and that this information should be transparent.  More information is available at this link: https://www.gov.uk/government/publications/guidance-to-the-people-with-significant-control-requirements-for-companies-and-limited-liability-partnerships .  Companies House maintains a free, publicly searchable directory, available at https://www.gov.uk/get-information-about-a-company.    

The UK offers a welcoming environment to foreign investors, with foreign equity ownership restrictions in only a limited number of sectors covered by the World Bank’s Investing Across Sectors indicators.

https://www.gov.uk/government/organisations/department-for-international-trade 
https://www.gov.uk/set-up-business 
https://www.gov.uk/topic/company-registration-filing/starting-company 
http://www.doingbusiness.org/data/exploreeconomies/united-kingdom/starting-a-business 

The British Overseas Territories (BOTs) comprise Anguilla, British Antarctic Territory, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands (Islas Malvinas), Gibraltar, Montserrat, Pitcairn Islands, St. Helena, Ascension and Tristan da Cunha, Turks and Caicos Islands, South Georgia and South Sandwich Islands, and Sovereign Base Areas on Cyprus.  The BOTs retain a substantial measure of responsibility for their own affairs.  Local self-government is usually provided by an Executive Council and elected legislature.  Governors or Commissioners are appointed by the Crown on the advice of the British Foreign Secretary, and retain responsibility for external affairs, defense, and internal security.

Many of the territories are now broadly self-sufficient.  The UK’s Foreign, Commonwealth and Development Office (FCDO), however, maintains development assistance programs in St. Helena, Montserrat, and Pitcairn.  This includes budgetary aid to meet the islands’ essential needs and development assistance to help encourage economic growth and social development to promote economic self-sustainability.  In addition, all other BOTs receive small levels of assistance through “cross-territory” programs for issues such as environmental protection, disaster prevention, HIV/AIDS, and child protection.

Seven of the BOTs have financial centers:  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Montserrat, and the Turks and Caicos Islands.  These territories have committed to the OECD’s Common Reporting Standard (CRS) for the automatic exchange of taxpayer financial account information.  They are already exchanging information with the UK, and began exchanging information with other jurisdictions under the CRS from September 2017.

Of the BOTs, Anguilla is the only one to receive a “non-compliant” rating by the Global Forum for Exchange of Information on Request.  The Global Forum has rated the other six territories as “largely compliant.”  Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, and the Turks and Caicos Islands have committed in reciprocal bilateral arrangements with the UK to hold beneficial ownership information in central registers or similarly effective systems, and to provide UK law enforcement authorities with near real-time access to this information.  These arrangements came into effect in June 2017.

Anguilla:  Anguilla is a neutral tax jurisdiction.  There are no income, capital gains, estate, profit or other forms of direct taxation on either individuals or corporations, for residents or non-residents of the jurisdiction.  The territory has no exchange rate controls.  Non-Anguillan nationals may purchase property, but the transfer of land to an alien includes a 12.5 percent tax on the assessed value of the property or the sales proceeds, whichever is greater.

British Virgin Islands:  The government of the British Virgin Islands offers a series of incentive packages aimed at reducing the cost of doing business on the islands.  This includes relief from corporation tax payments over specific periods, but companies must pay an initial registration fee and an annual license fee to the BVI Financial Services Commission.  Crown land grants are not available to non-British Virgin Islanders, but private land can be leased or purchased following the approval of an Alien Land Holding License.  Stamp duty is imposed on transfers of real estate and the transfer of shares in a BVI company owning real estate in the BVI at a rate of four percent for belongers (i.e., residents who have proven they meet a legal standard of close ties to the territory) and 12 percent for non-belongers.  There is no corporate income tax, capital gains tax, branch tax, or withholding tax for companies incorporated under the BVI Business Companies Act.  Payroll tax is imposed on every employer and self-employed person who conducts business in BVI.  The tax is paid at a graduated rate depending upon the size of the employer.  The current rates are 10 percent for small employers (those that have a payroll of less than $150,000, a turnover of less than $300,000 and fewer than seven employees) and 14 percent for larger employers.  Eight percent of the total remuneration is deducted from the employee, while the remainder of the liability is met by the employer.  The first $10,000 of remuneration is free from payroll tax.

Cayman Islands:  There are no direct taxes in the Cayman Islands.  In most districts, the government charges stamp duty of 7.5 percent on the value of real estate at sale, but certain districts, including Seven Mile Beach, are subject to a rate of nine percent.  There is a one percent fee payable on mortgages of less than KYD 300,000 ($360,237), and one and a half percent on mortgages of KYD 300,000 ($360,237) or higher.  There are no controls on the foreign ownership of property and land.  Investors can receive import duty waivers on equipment, building materials, machinery, manufacturing materials, and other tools.

Falkland Islands (Islas Malvinas):  Companies located in the Falkland Islands (Islas Malvinas) are charged corporation tax at 21 percent on the first £1 million ($1.4 million) and 26 percent for all amounts more than £1 million ($1.4 million).  The individual income tax rate is 21 percent for earnings below £12,000 ($16,800) and 26 percent above this level.

Gibraltar:  The government of Gibraltar encourages foreign investment.  Gibraltar has a buoyant economy with a stable currency and few restrictions on moving capital or repatriating dividends.  The corporate income tax rate is 20 percent for utility, energy, and fuel supply companies, and 12.5 percent for all other companies.  There are no capital or sales taxes.  Gibraltar is not currently a part of the EU, and its post-Brexit relationship with the bloc is the subject of ongoing negotiations between London and Brussels.  Under the terms of an agreement in principle reached between the UK and Spain on December 31, 2020, free movement of workers and goods across the land border between Gibraltar and Spain is temporarily continuing.

Montserrat:  The government of Montserrat welcomes new private foreign investment.  Foreign investors are permitted to acquire real estate, subject to the acquisition of an Alien Land Holding license, which carries a fee of five percent of the purchase price.  The government also imposes stamp and transfer fees of 2.6 percent of the property value on all real estate transactions.  Foreign investment in Montserrat is subject to the same taxation rules as local investment and is eligible for tax holidays and other incentives.  Montserrat has preferential trade agreements with the United States, Canada, and Australia.  The government allows 100 percent foreign ownership of businesses, but the administration of public utilities remains wholly in the public sector.

St. Helena:  The island of St. Helena is open to foreign investment and welcomes expressions of interest from companies wanting to invest.  Its government is able to offer tax-based incentives, which will be considered on the merits of each project – particularly tourism projects.  All applications are processed by Enterprise St. Helena, the business development agency.

Pitcairn Islands:  The Pitcairn Islands have approximately 50 residents, with a workforce of approximately 29 employed in 10 full-time equivalent roles.  The territory does not have an airstrip or safe harbor.  Residents exist on fishing, subsistence farming, and handcrafts.

Turks and Caicos Islands:  The islands operate an “open arms” investment policy.  Through the policy, the government commits to a streamlined business licensing system, a responsive immigration policy to give investment security, access to government-owned land under long-term leases, and a variety of duty concessions to qualified investors.  The islands have a “no tax” status, but property purchasers must pay a stamp duty on purchases over $25,000.  Depending on the island, the stamp duty rate may be up to 6.5 percent for purchases up to $250,000, eight percent for purchases $250,001 to $500,000, and 10 percent for purchases over $500,000.

The Crown Dependencies:

The Crown Dependencies are the Bailiwick of Jersey, the Bailiwick of Guernsey, and the Isle of Man.  The Crown Dependencies are not part of the UK but are self-governing dependencies of the Crown.  This means they have their own directly elected legislative assemblies, administrative, fiscal, and legal systems, and their own courts of law.  The Crown Dependencies are not represented in the UK Parliament.

Jersey’s standard rate of corporate tax is zero percent.  The exceptions to this standard rate are financial service companies, which are taxed at 10 percent; utility companies, which are taxed at 20 percent; and income specifically derived from Jersey property rentals or Jersey property development, taxed at 20 percent.  A five percent VAT is applicable in Jersey.

Guernsey has a zero percent rate of corporate tax.  Exceptions include some specific banking activities, taxed at 10 percent; utility companies, which are taxed at 20 percent; Guernsey residents’ assessable income is taxed at 20 percent; and income derived from land and buildings is taxed at 20 percent.

The Isle of Man’s corporate standard tax is zero percent.  The exceptions to this standard rate are income received from banking business, which is taxed at 10 percent, and income received from land and property in the Isle of Man, which is taxed at 20 percent.  In addition, a 10 percent tax rate also applies to companies that carry on a retail business in the Isle of Man and have taxable income in excess of £500,000 ($695,000) from that business.  A 20 percent rate of VAT is applicable in the Isle of Man.

The tax data above are current as of March 2022.

The UK is one of the largest outward investors in the world, often through bilateral investment treaties (BITs), which are used to promote and protect investment abroad and have been adopted by many countries.  The UK’s international investment position abroad (outward investment) in 2020 was $2.1 trillion.  The main destination for UK outward FDI is the United States, which accounted for approximately 25 percent of UK outward FDI stocks at the end of 2020.  Other key destinations include the Netherlands, Luxembourg, France, and Spain which, together with the United States, account for a little over half of the UK’s outward FDI stock.  Europe and the Americas remain the dominant areas for UK international investment positions abroad.

The UK has concluded 105 bilateral investment treaties, which are known in the UK as Investment Promotion and Protection Agreements.  For a complete current list, including actual treaties, see:  http://investmentpolicyhub.unctad.org/IIA/CountryBits/221#iiaInnerMenu  

The United Kingdom is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) and the Inclusive Framework’s October 2021 agreement on the global minimum corporate tax.

U.S. exporters and investors generally will find little difference between the United States and UK in the conduct of business.  The regulatory system provides clear and transparent guidelines for commercial engagement.  Common law prevails in the UK as the basis for commercial transactions, and the International Commercial Terms (INCOTERMS) of the International Chambers of Commerce are accepted definitions of trading terms.  In terms of accounting standards and audit provisions, firms in the UK must use the UK-adopted international accounting standards (IAS) instead of the EU-adopted IAS for financial years beginning on or after January 1, 2021.  The UK’s Accounting Standards Board provides guidance to firms on accounting standards and works with the IASB on international standards.

Statutory authority over prices and competition in various industries is given to independent regulators, for example the Office of Communications (Ofcom), the Water Services Regulation Authority (Ofwat), the Office of Gas and Electricity Markets (Ofgem), the Office of Fair Trading (OFT), the Rail Regulator, the Prudential Regulatory Authority (PRA), and the Financial Conduct Authority (FCA).  The PRA was created out of the dissolution of the Financial Services Authority (FSA) in 2013.  The PRA reports to the Financial Policy Committee (FPC) in the Bank of England.  The PRA is responsible for supervising the safety and soundness of individual financial firms, while the FPC takes a systemic view of the financial system and provides macro-prudential regulation and policy actions.  The FCA is a regulatory enforcement mechanism designed to address financial and market misconduct through legally reviewable processes.  These regulators work to protect the interests of consumers while ensuring that the markets they regulate are functioning efficiently.  Most laws and regulations are published in draft for public comment prior to implementation.  The FCA maintains a free, publicly searchable register of their filings on regulated corporations and individuals here: https://register.fca.org.uk/.   

The UK government publishes regulatory actions, including draft text and executive summaries, on the Department for Business, Energy & Industrial Strategy webpage listed below.  The current policy requires the repeal of two regulations for any new one in order to make the business environment more competitive.

https://www.gov.uk/government/policies/business-regulation 
https://www.gov.uk/government/organisations/regulatory-delivery 

The UK’s withdrawal from the EU has not yet caused dramatic shifts in the UK’s regulatory regimes but has opened the door to regulatory divergence.  The future regulatory direction of the UK remains uncertain as the UK determines whether to maintain the current regulatory regime inherited from the EU or to deviate towards new regulations.  The UK is an independent member of the WTO and actively seeks to comply with all WTO obligations.

The UK is a common-law country.  UK business contracts are legally enforceable in the UK, but not in the United States or other foreign jurisdictions.  International disputes are resolved through litigation in the UK Courts or by arbitration, mediation, or some other alternative dispute resolution (ADR) method.  The UK has a long history of applying the rule of law to business disputes.  The current judicial process remains procedurally competent, fair, and reliable, which helps position London as an international hub for dispute resolution with over 10,000 cases filed per annum.

The Economic Crime (Transparency and Enforcement) Act 2022, which took effect March 15, 2022, established a registry of foreign beneficial owners of real property (freeholds or leases of seven years or more) expected to go into place in September 2022.  The Act requires registry of ultimate beneficial owners, including those controlling at least 25 percent of overseas entities that own such property.  The requirement applies retroactively to properties purchased in England and Wales since 1999 and in Scotland since December 2014.  Entities or their officers who refuse to register or keep their information up to date face tough restrictions on selling the property, and those who break the rules could face a fine of up to £2,500 ($3,270) per day or up to five years in prison.

The procedure for establishing a company in the UK is identical for British and foreign investors.  No approval mechanisms exist for foreign investment, apart from the process outlined in Section 1.  Foreigners may freely establish or purchase enterprises in the UK, with a few limited exceptions, and acquire land or buildings.  As noted above, the UK is currently reviewing its procedures and has proposed new rules for restricting foreign investment in those sectors of the economy with higher risk for affecting national security.

The National Security and Investment (NSI) Act 2021 – which applies equally to foreign or domestic investment – requires mandatory reporting of significant investments (generally over 25 percent) in 17 sensitive sectors; the reporting requirement extends to investments in intellectual property and in higher education and research.  The UK government aims to review cases expeditiously, with most reviews of notifications completed within 30 days.

Alleged tax avoidance by multinational companies, including by several major U.S. firms, has been a controversial political issue and subject of investigations by the UK Parliament and EU authorities.  Foreign and UK firms are subject to the same tax laws, however, and several UK firms have also been criticized for tax avoidance.  Foreign investors may have access to certain EU and UK regional grants and incentives designed to attract industry to areas of high unemployment, but these do not include tax concessions.  Access to EU grants ended on December 31, 2020.

In 2015, the UK flattened its structure of corporate tax rates.  The UK currently taxes corporations at a flat rate of 19 percent for non-ring-fenced companies, with marginal tax relief granted for companies with profits falling between £300,000 ($420,000) and £1.5 million ($2.1 million).  On March 3, 2021, Chancellor of the Exchequer Rishi Sunak announced that, starting in 2023, UK corporate tax would increase to 25 percent for companies with profits over £250,000 ($346,000).  A small profits rate (SPR) will also be introduced so that companies with profits of £50,000 ($69,000) or less will continue to pay Corporation Tax at 19 percent.  Companies with profits between £50,000 ($69,000) and £250,000 ($346,000) will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.  Tax deductions are allowed for expenditure and depreciation of assets used for trade purposes.  These include machinery, plant, industrial buildings, and assets used for research and development, such as cloud computing.  A special rate of 20 percent is given to unit trusts and open-ended investment companies.  There are different Corporation Tax rates for companies that make profits from oil extraction or oil rights in the UK or UK continental shelf, known as “ring-fenced” companies.  Small “ring-fenced” companies are taxed at a rate of 19 percent for profits up to £300,000 ($420,000), and 30 percent for profits over £300,000 ($420,000).  A supplementary tax known as the bank Corporation Tax Surcharge, is applied to companies in the banking sector at eight percent of profits in excess of £25 million ($33 million).  To maintain equitable tax rates for banks with the upcoming tax rise, the government has changed the surcharge rate to three percent applied to profits above £100 million ($132 million), starting in April 2023.

The UK has a simple system of personal income tax.  The marginal tax rates for 2020-2021 are as follows: up to £12,570 ($16,500), 0 percent; £12,501 ($17,370) to £57,700 ($75,740), 20 percent; £57,701 ($75,740) to £150,000 ($196,900), 40 percent; and over £150,000 ($196,900), 45 percent.

UK citizens also make mandatory payments of about 13.25 percent of income into the National Insurance system, which funds healthcare, social security, and retirement benefits.  The UK requires non-domiciled residents of the UK to either pay tax on their worldwide income or the tax on the relevant part of their remitted foreign income being brought into the UK.  If they have been resident in the UK for seven tax years of the previous nine, and they choose to pay tax only on their remitted earnings, they may be subject to an additional charge of £30,000 ($42,000).  If they have been resident in the UK for 12 of the last 14 tax years, they may be subject to an additional charge of £60,000 ($84,000).

The Scottish Parliament has the legal power to increase or decrease the basic income tax rate in Scotland, currently 20 percent, by a maximum of three percentage points.

For guidance on laws and procedures relevant to foreign investment in the UK, follow the link below:

https://www.gov.uk/government/collections/investment-in-the-uk-guidance-for-overseas-businesses  

The UK competition regime is established by the Competition Act 1998 and the Enterprise Act 2002, as amended by the Enterprise and Regulator Reform Act 2013.  This legislative framework created the UK’s independent competition authority, the Competition and Markets Authority (CMA), which is responsible for enforcing UK competition law.  The government has limited powers to intervene in either the assessment of mergers or the investigation of markets.

Before Brexit, the prohibitions in UK law on abusing dominant market positions and anti-competitive agreements were based on and underpinned by equivalent provisions in EU law.  Since Brexit, under the terms of the UK-EU trade agreements, EU competition law is no longer enforced in the UK, and the UK and EU now operate separate competition regimes.

The CMA is responsible for:

1. investigating phase 1 and phase 2 mergers,
2. conducting market studies and market investigations,
3. investigating possible breaches of prohibitions against anti-competitive agreements under the Competition Act 1998,
4. bringing criminal proceedings against individuals who commit cartel offenses,
5. enforcing consumer protection legislation, particularly the Unfair Terms in Consumer Contract Directive and Regulations,
6. encouraging sectoral regulators to use their powers to protect competition,
7. considering regulatory references and appeals, and,
8. regulation of public sector subsidies to business.

While merger notification in the UK is voluntary, the CMA may impose substantial fines or suspense orders on potentially non-compliant transactions.  The CMA has no prosecutorial authority, but it may refer entities for prosecution in extreme cases, such as those involving cartel activity, which carries a penalty of up to five years imprisonment.

In 2021, the UK established the Digital Markets Unit on a non-statutory basis within the CMA to oversee and operationalize a forthcoming pro-competition regime for digital markets.  Powers for the DMU and the new regulatory regime will require new legislation.  In the interim, the DMU is supporting and advising the government on establishing the statutory regime, including by gathering evidence on digital markets.

In addition to the CMA, the Takeover Panel, the Financial Conduct Authority, and the Pensions Regulator have principal regulatory authority:

1. The Takeover Panel is an independent body, operating per the (the “Code”), which regulates takeovers of public companies, and some private companies, centrally managed or controlled in the UK, the Isle of Man, Jersey, and Guernsey.  The Code provides a binding set of rules for takeovers aimed at ensuring fair treatment for all shareholders in takeover bids, including requiring bidders to provide information about their intentions after a takeover.
2. The Financial Conduct Authority administers Listing Rules, Prospectus Regulation Rules, and Disclosure Guidance and Transparency Rules, which can apply to takeovers of publicly listed companies.
3. The Pensions Regulator has powers to intervene in investments in pension schemes.

The UK is a member of the OECD and adheres to the OECD principle that when a government expropriates property, compensation should be timely, adequate, and effective.  In the UK, the right to fair compensation and due process is uncontested and is reflected in all international investment agreements.  Expropriation of corporate assets or the nationalization of industry requires a special act of Parliament.  In response to the 2007-2009 financial crisis, the UK government nationalized Northern Rock bank (sold to Virgin Money in 2012) and took major stakes in the Royal Bank of Scotland (RBS) and Lloyds Banking Group.

As a member of the World Bank-based International Center for Settlement of Investment Disputes (ICSID), the UK accepts binding international arbitration between foreign investors and the State.  As a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the UK provides local enforcement on arbitration judgments decided in other signatory countries.

London is a thriving center for the resolution of international disputes through arbitration under a variety of procedural rules such as those of the London Court of International Arbitration, the International Chamber of Commerce, the Stockholm Chamber of Commerce, the American Arbitration Association International Centre for Dispute Resolution, and others.  Many of these arbitrations involve parties with no connection to the jurisdiction, but who are drawn to the jurisdiction because they perceive it to be a fair, neutral venue with an arbitration law and courts that support efficient resolution of disputes.  They also choose London-based arbitration because of the general prevalence of the English language and law in international commerce.  A wide range of contractual and non-contractual claims can be referred to arbitration in this jurisdiction including disputes involving intellectual property rights, competition, and statutory claims.  There are no restrictions on foreign nationals acting as arbitration counsel or arbitrators in this jurisdiction.  There are few restrictions on foreign lawyers practicing in the jurisdiction as evidenced by the fact that over 200 foreign law firms have offices in London.

ICSID Convention and New York Convention

In addition to its membership in ICSID, the UK is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.  The latter convention has territorial application to Gibraltar (September 24, 1975), Hong Kong (January 21, 1977), Isle of Man (February 22, 1979), Bermuda (November 14, 1979), Belize and Cayman Islands (November 26, 1980), Guernsey (April 19, 1985), Bailiwick of Jersey (May 28, 2002), and British Virgin Islands (February 24, 2014).

The United Kingdom has consciously elected not to follow the UNCITRAL Model Law on International Commercial Arbitration.  Enforcement of an arbitral award in the UK is dependent upon where the award was granted.  The process for enforcement in any particular case is dependent upon the seat of arbitration and the arbitration rules that apply.  Arbitral awards in the UK can be enforced under a number of different regimes, namely:  The Arbitration Act 1996, The New York Convention, The Geneva Convention 1927, The Administration of Justice Act 1920 and the Foreign Judgments (Reciprocal Enforcement) Act 1933, and Common Law.

The Arbitration Act 1996 governs all arbitrations seated in England, Wales, and Northern Ireland, both domestic and international.  The full text of the Arbitration Act can be found here: http://www.legislation.gov.uk/ukpga/1996/23/data.pdf.  

The Arbitration Act is heavily influenced by the UNCITRAL Model Law, but it has some important differences.  For example, the Arbitration Act covers both domestic and international arbitration; the document containing the parties’ arbitration agreement need not be signed; an English court is only able to stay its own proceedings and cannot refer a matter to arbitration; the default provisions in the Arbitration Act require the appointment of a sole arbitrator as opposed to three arbitrators; a party retains the power to treat its party-nominated arbitrator as the sole arbitrator in the event that the other party fails to make an appointment (where the parties’ agreement provides that each party is required to appoint an arbitrator); there is no time limit on a party’s opposition to the appointment of an arbitrator; parties must expressly opt out of most of the provisions of the Arbitration Act which confer default procedural powers on the arbitrators; and there are no strict rules governing the exchange of pleadings.  Section 66 of the Arbitration Act applies to all domestic and foreign arbitral awards.  Sections 100 to 103 of the Arbitration Act provide for enforcement of arbitral awards under the New York Convention 1958.  Section 99 of the Arbitration Act provides for the enforcement of arbitral awards made in certain countries under the Geneva Convention 1927.

Under Section 66 of the Arbitration Act, the court’s permission is required for an international arbitral award to be enforced in the UK.  Once the court has given permission, judgment may be entered in terms of the arbitral award and enforced in the same manner as a court judgment or order.  Permission will not be granted by the court if the party against whom enforcement is sought can show that (a) the tribunal lacked substantive jurisdiction and (b) the right to raise such an objection has not been lost.

The length of arbitral proceedings can vary greatly.  If the parties have a relatively straightforward dispute, cooperate, and adopt a fast-track procedure, arbitration can be concluded within months or even weeks.  In a substantial international arbitration involving complex facts, many witnesses and experts and post-hearing briefs, the arbitration could take many years.  A reasonably substantial international arbitration will likely take between one and two years.

There are two alternative procedures that can be followed in order to enforce an award.  The first is to seek leave of the court for permission to enforce.  The second is to begin an action on the award, seeking the same relief from the court as set out in the tribunal’s award.  Enforcement of an award made in the jurisdiction may be opposed by challenging the award.  The court may also, however, refuse to enforce an award that is unclear, does not specify an amount, or offends public policy.  Enforcement of a foreign award may be opposed on any of the limited grounds set out in the New York Convention.  A stay may be granted for a limited time pending a challenge to the order for enforcement.  The court will consider the likelihood of success and whether enforcement of the award will be made more or less difficult as a result of the stay.  Conditions that might be imposed on granting the stay include such matters as paying a sum into court.  Where multiple awards are to be rendered, the court may give permission for the tribunal to continue hearing other matters, especially where there may be a long delay between awards.  UK courts have a good record of enforcing arbitral awards.  The courts will enforce an arbitral award in the same way that they will enforce an order or judgment of a court.  At the time of writing, there are no examples of the English courts enforcing awards which were set aside by the courts at the place of arbitration.

Most awards are complied with voluntarily.  If the party against whom the award was made fails to comply, the party seeking enforcement can apply to the court.  The length of time it takes to enforce an award which complies with the requirements of the New York Convention will depend on whether there are complex objections to enforcement which require the court to investigate the facts of the case.  If a case raises complex issues of public importance the case could be appealed to the Court of Appeal and then to the Supreme Court.  This process could take around two years.  If no complex objections are raised, the party seeking enforcement can apply to the court using a summary procedure that is fast and efficient.  There are time limits relating to the enforcement of the award.  Failure to comply with an award is treated as a breach of the arbitration agreement.  An action on the award must be brought within six years of the failure to comply with the award or 12 years if the arbitration agreement was made under seal.  If the award does not specify a time for compliance, a court will imply a term of reasonableness.

The UK has strong bankruptcy protections going back to the Bankruptcy Act of 1542.  Today, both individual bankruptcy and corporate insolvency are regulated in the UK primarily by the Insolvency Act 1986 and the Insolvency Rules 1986, regulated through determinations in UK courts.  The World Bank’s Doing Business Report Ranks the UK 14 out of 190 for ease of resolving insolvency.

Regarding individual bankruptcy law, the court will oblige a bankrupt individual to sell assets to pay dividends to creditors.  A bankrupt person must inform future creditors about the bankrupt status and may not act as the director of a company during the period of bankruptcy.  Bankruptcy is not criminalized in the UK, and the Enterprise Act of 2002 dictates that for England and Wales bankruptcy will not normally last longer than 12 months.  At the end of the bankrupt period, the individual is normally no longer held liable for bankruptcy debts unless the individual is determined to be culpable for his or her own insolvency, in which case the bankruptcy period can last up to 15 years.

For corporations declaring insolvency, UK insolvency law seeks to distribute losses equitably between creditors, employees, the community, and other stakeholders in an effort to rescue the company.  Liability is limited to the amount of the investment.  If a company cannot be rescued, it is liquidated and assets are sold to pay debts to creditors, including foreign investors.  In March 2020, the UK government announced it would introduce legislation to change existing insolvency laws in response to COVID-19.  The new measures enabled companies undergoing a rescue or restructuring process to continue trading and help them avoid insolvency.  These measures expired in March 2022.

HMG does not currently require environmental, social, and governance disclosure to help investor and consumers distinguish between high- and low-quality investments.  The majority of ESG reporting is not currently mandatory in the UK.  However, some specific metrics that come under the ESG regulation reporting umbrella are mandatory, including:

1. Greenhouse gas reporting:  Mandatory for quoted companies since 2013 under the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
2. Energy use:  Quoted companies must report on their global energy use, and large businesses must disclose their UK annual energy use and greenhouse gas emissions. This is required by the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
3. Gender pay gap:  Any employer with a headcount of 250 or more must comply with gender pay gap reporting regulations.
4. Modern Slavery: UK organizations with an annual turnover of £36 million ($47 million) or more must publish an annual statement setting out the steps to prevent modern slavery.

The UK offers a range of incentives for companies of any nationality locating in depressed regions of the country, as long as the investment generates employment.  DIT works with its partner organizations in the devolved administrations – Scottish Development International, the Welsh Government, and Invest Northern Ireland – and with London and Partners and Local Enterprise Partnerships (LEPs) throughout England–to promote each region’s particular strengths and expertise to overseas investors.

Local authorities in England and Wales also have power under the Local Government and Housing Act of 1989 to promote the economic development of their areas through a variety of assistance schemes, including the provision of grants, loan capital, property, or other financial benefit.  Separate legislation, granting similar powers to local authorities, applies to Scotland and Northern Ireland.

Invest NI is the economic development agency for Northern Ireland.  Invest NI provides guidance and support to businesses seeking to invest in Northern Ireland throughout the lifespan of their investment.  This support includes grants for employment, R&D, training, and assistance with recruitment and real estate.

HMG offers tax incentives for businesses that purchase new:

1. Electric cars and cars with zero CO2 emissions
2. Plant and machinery for gas refueling stations, for example storage tanks, pumps
3. Gas, biogas and hydrogen refueling equipment
4. Zero-emission goods vehicles
5. Equipment for electric vehicle charging points
6. Plant and machinery for use in a freeport tax site

If businesses buy an eligible asset, they can deduct the full cost from their profits before tax.  They cannot normally claim on items bought to lease to other people or for use within a home they let out.  Most analysts suggest these incentives have helped uptake of green vehicles.

HMG’s Feed-In Tariff Scheme (FITS) ran from 2010 and was closed to new entrants in 2019.  FITS helps to promote the uptake of renewable and low-carbon electricity generation technologies through payments made for the electricity a business generates and exports.

In March 2021, the UK government identified eight sites as post-Brexit freeports to spur trade, investment, innovation, and economic recovery.  The eight sites are: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Thames, and Teesside.  The UK government has said it will establish at least one freeport in each of Scotland, Wales, and Northern Ireland in the future. The designated areas will offer special customs and tax arrangements and additional infrastructure funding to improve transport links.

The EU’s General Data Protection Regulation (GDPR) is retained in domestic UK law as the UK GDPR, though the UK has the independence to keep the framework under review.  Entities based in the UK must also continue to comply with the amended version of the Data Protection Act (DPA) 2018, which sits alongside UK GDPR.  The Information Commissioner’s Office (ICO) is the UK’s independent data protection authority.

The UK permits transfers of data from the UK to the European Economic Area (EEA).  In 2021, the EU Commission published data adequacy decisions for the UK.  As a result, data transfers from the EEA to the UK are permitted in most cases.  Transfers of personal data for the purposes of UK immigration control, or which would otherwise fall within the scope of the immigration exemption in the DPA 2018, are excluded from the scope of the adequacy decision.

While the UK GDPR does not impose data localization requirements, it requires controllers and processors of personal data to put in place appropriate technical and organizational measures to implement data protection effectively and safeguard individual rights.  This may include an organization’s appointment of a data protection officer (DPO).  A DPO is anyone an organization appoints to monitor internal compliance, inform and advise on data protection obligations, provide advice regarding Data Protection Impact Assessments (DPIAs), and act as a contact point for data subjects and the ICO.  A DPO can be an existing employee or externally appointed, but must be independent, an expert in data protection, adequately resources, and report to the highest management level.

The UK has robust real property laws stemming from legislation including the Law of Property Act 1925, the Settled Land Act 1925, the Land Charges Act 1972, the Trusts of Land and Appointment of Trustees Act 1996, and the Land Registration Act 2002.

Interests in property are well enforced, and mortgages and liens have been recorded reliably since the Land Registry Act of 1862.  The Land Registry is the government database where all land ownership and transaction data are held for England and Wales, and it is reliably accessible online: https://www.gov.uk/search-property-information-land-registry .  Scotland has its own Registers of Scotland, while Northern Ireland operates land registration through the Land and Property Services.

Long-term physical presence on non-residential property without permission is not typically considered a crime in the UK.  Police take action if squatters commit other crimes when entering or staying in a property.

The UK legal system provides a high level of intellectual property rights (IPR) protection.  Enforcement mechanisms are comparable to those available in the United States.  The UK is a member of the World Intellectual Property Organization (WIPO).  The UK is also a member of the following major intellectual property protection agreements: the Bern Convention for the Protection of Literary and Artistic Works, the Paris Convention for the Protection of Industrial Property, the Universal Copyright Convention, the Geneva Phonograms Convention, and the Patent Cooperation Treaty.  The UK has signed and, through implementing various EU Directives, enshrined into UK law the WIPO Copyright Treaty (WCT) and WIPO Performance and Phonograms Treaty (WPPT), known as the internet treaties.

The Intellectual Property Office (IPO) is the official UK government body responsible for intellectual property rights, including patents, designs, trademarks, and copyright.  The IPO web site contains comprehensive information on UK law and practice in these areas.

https://www.gov.uk/government/organisations/intellectual-property-office   

According to the Intellectual Property Crime Report (IPCR) for 2019/20, imports of counterfeit and pirated goods to the UK accounted for as much as £13.6 billion ($18.8 billion) in 2016 – the equivalent of three percent of UK imports in genuine goods.  The most recent IPCR for 2020/2021 does not quantify the UK’s counterfeit imports.

The UK is not on the Special 301 Report nor on 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/ .

London houses one of the oldest and most developed financial markets in the world.  London offers the full range of financial services underpinned by high quality regulation and strong standards of disclosure and transparency, a supportive market infrastructure, and a dynamic, highly skilled workforce.

The UK government is generally hospitable to foreign portfolio investment.  Government policies are intended to facilitate the free flow of capital and to support the flow of resources in product and services markets.  Foreign investors are able to obtain credit in local markets at normal market terms, and a wide range of credit instruments are available.  The principles underlying legal, regulatory, and accounting systems are transparent, and they are consistent with international standards.  In all cases, regulations have been published and are applied on a non-discriminatory basis by the Bank of England’s Prudential Regulation Authority (PRA).

The London Stock Exchange is one of the most active equity markets in the world and has seen robust activity in 2021 in terms of both the number of IPOs as well as the amount of equity raised.   London’s markets have historically been the main financial hub serving the EU and have the advantage of bridging the gap between the day’s trading in the Asian markets and the opening of the U.S. market.  Despite the pandemic and Brexit, the UK retains its global place and has the lead in trading in areas such as foreign exchange, cross border bank lending, and international insurance premium income.  Starting in early 2021, the UK government, based on the review of the London listing regime led by Lord Hill, the UK’s former European Commissioner for Financial Services, has introduced a series of reforms to the UK’s listing regime to improve its competitiveness and enhance London’s attractiveness as a listing location for innovative and high growth businesses.  Further reforms are expected during 2022 based on reviews and consultations now underway.  In May 2017, the LSE launched a new market for non-equity securities, known as the International Securities Market (ISM).  This market is aimed at professional investors and is outside the scope of the UK Prospectus Regulation regime.  The Alternative Investment Market (AIM), established in 1995 as a sub-market of the London Stock Exchange, is specifically designed for smaller, rapidly expanding companies.  The AIM has a more flexible regulatory system than the main market and has no minimum market capitalization requirements.  Since its launch, the AIM has raised more than £68 billion ($95 billion) for more than 3,000 companies.

The UK banking sector assets totaled £10.3 trillion ($14.3 trillion) at the end of the first half of 2021, the third largest in the world and the largest in Europe.  In 2020, the financial services sector contributed £164.8 billion ($221 billion) to the UK economy, accounting for 8.6 percent of total economic output.  There were 1.1 million financial services jobs in the UK in Q1 2021, accounting for 3.3 percent of all jobs.  The long-term impact of Brexit and the pandemic on the financial services industry has been minor so far.  Some firms continue to move limited numbers of jobs outside the UK to service EU-based clients, but the UK is anticipated to remain a top financial hub.

The Bank of England (BoE) is the central bank of the UK.  According to its guidelines, foreign banking institutions are legally permitted to establish operations in the UK as subsidiaries or branches.  More than 200 foreign banks have branches in London, and London serves as an important center for global private and investment banking firms.  Responsibilities for the prudential supervision of a foreign branch are split between the parent’s home state supervisors and the PRA.  The PRA, however, expects the whole firm to meet the PRA’s threshold conditions.  The PRA expects new foreign branches to focus on wholesale and corporate banking and to do so at a level that is not critical to the UK economy.  The Financial Conduct Authority (FCA) is the regulator for all banks operating in the United Kingdom.  For foreign bank branches operating in the UK, the FCA’s Threshold Conditions and conduct of business rules apply, including rules in areas such as anti-money laundering.  Eligible deposits placed in foreign branches may be covered by the UK deposit guarantee program and therefore foreign branches may be subject to regulations concerning UK depositor protection.

There are no legal restrictions that prohibit foreign residents from opening a business bank account; setting up a business bank account as a non-resident is in principle straightforward.   In practice, however, most banks will not accept applications from overseas due to fraud concerns and the additional administration costs.  To open a personal bank account, an individual must at minimum present an internationally recognized proof of identification and prove residency in the UK.  This is a problem for incoming FDI and American expatriates.  Unless the business or the individual can prove UK residency, they will have limited banking options.

Foreign Exchange

The pound sterling is a free-floating currency with no restrictions on its transfer or conversion.  Exchange controls restricting the transfer of funds associated with an investment into or out of the UK are not exercised.

Remittance Policies

Not applicable.

The United Kingdom does not maintain a national wealth fund.  Although there have at time been calls to turn The Crown Estate – created in 1760 by Parliament as a means of funding the British monarchy – into a wealth fund, there are no current plans to do so.  Moreover, with assets of just under $20 billion, The Crown Estate would be small in relation to other national funds.

There are 20 partially or fully state-owned enterprises in the UK.  These enterprises range from large, well-known companies to small trading funds.  Since privatizing the oil and gas industry, the UK has not established any new energy-related state-owned enterprises or resource funds.

The privatization of state-owned utilities in the UK is now essentially complete.  With regard to future investment opportunities, the few remaining government-owned enterprises or government shares in other utilities are likely to be sold off to the private sector when market conditions improve.

Businesses in the UK are accountable for a due-diligence approach to responsible business conduct (RBC), or corporate social responsibility (CSR), in areas such as human resources, environment, sustainable development, and health and safety practices – through a wide variety of existing guidelines at national, EU, and global levels.  There is a strong awareness of CSR principles among UK businesses, promoted by UK business associations such as the Confederation of British Industry and the UK government.

The British government fairly and uniformly enforces laws related to human rights, labor rights, consumer protection, environmental protection, and other statutes intended to protect individuals from adverse business impacts.  The UK government adheres to the OECD Guidelines for Multinational Enterprises.  It is committed to the promotion and implementation of these Guidelines and encourages UK multinational enterprises to adopt high corporate standards involving all aspects of the Guidelines.  The UK has established a National Contact Point (NCP) to promote the Guidelines and to facilitate the resolution of disputes that may arise within that context.  The NCP is part of the Department for International Trade.  A Steering Board monitors the work of the UK NCP and provides strategic guidance.  It is composed of representatives of relevant government departments and four external members nominated by the Trades Union Congress, the Confederation of British Industry, the All Party Parliamentary Group on the Great Lakes Region of Africa, and the NGO community.

The results of a UK government consultation on CSR can be found here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/300265/bis-14-651-good-for-business-and-society-government-response-to-call-for-views-on-corporate-responsibility.pdf.  

Information on UK regulations and policies relating to the procurement of supplies, services and works for the public sector, and the relevance of promoting RBC, are found here: https://www.gov.uk/guidance/public-sector-procurement-policy.   

Additional Resources

Department of State

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

Department of the Treasury

• OFAC Recent Actions

Department of Labor

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

Climate Issues

In October 2021, the UK government introduced its Net Zero Strategy (NZS), which comprehensively sets out UK government plans to cut emissions, seize green economic opportunities, and use private investment to achieve a net zero economy by 2050.  The NZS allocates £7.8 billion ($10.5 billion) in new spending and aims to leverage up to £90 billion ($118 billion) of private investment by 2030.  In its latest spending review, Her Majesty’s Treasury’s (HMT) estimated that net-zero spending between 2021-22 and 2024-25 would total £25.5 billion ($34.5 billion).  HMG has committed to several policies in its NZS, including:

1.     Quadruple offshore wind capacity by 2030

2.      5GW of low carbon hydrogen production capacity by 2030

3.     End the sale of new gasoline and diesel cars and vans by 2030

4.    Install 600,000 heat pumps in homes by 2028

5.      Capture and store 10Mt of CO2 per year by 2030

6.      Restoring approximately 280,000 hectares of peat in England by 2050 and trebling woodland creation rates in England, contributing to the UK’s overall target of increasing planting rates to 30,000 hectares per year by the end of the Parliament

7.     Eco-labelling regulation introduction by the late 2020s

8.     Introduce Local Nature Recovery Strategies (LNRS), a spatial planning tool for nature, which allows local government and communities to identify priorities and opportunities for nature recovery and nature-based solutions across England

HMG’s public procurement policy states that contracting authorities should consider 1) creating new businesses, new jobs and new skills; 2) tackling climate change and reducing waste; 3) improving supplier diversity, innovation and resilience, alongside any additional local priorities in their procurement activities.

Through the Greening Finance Roadmap, HMT outlines the UK government’s intent to implement a detailed sovereign green taxonomy, which is expected to be published by the end of 2022, along with sustainable disclosure requirements that would serve as an integrated framework for sustainability throughout the UK economy.

The UK ranked fourth in the Global Energy Innovation Index (GEII), five spaces higher than its 2016 score.  The GEII is available here: https://itif.org/publications/2021/10/18/2021-global-energy-innovation-index-national-contributions-global-clean  

The UK ranked 17th in the Green Future Index (GFI), which noted that 40 percent of its energy is derived from renewable sources.  The GFI is available here: https://www.technologyreview.com/2021/01/25/1016648/green-future-index/  

The UK ranked 23rd in the Green Growth Index (GGI), a fall of eight spaces from its 2005 ranking.  The GGI is available here: https://greengrowthindex.gggi.org/wp-content/uploads/2021/01/2020-Green-Growth-Index.pdf  

Although isolated instances of bribery and corruption have occurred in the UK, U.S. investors have not identified corruption of public officials as a factor in doing business in the UK.

The Bribery Act 2010 amended and reformed UK criminal law and provided a modern legal framework to combat bribery in the UK and internationally.  The scope of the law is extra-territorial.  Under the Act, a relevant person or company can be prosecuted for bribery if the crime is committed abroad.  The Act applies to UK citizens, residents, and companies established under UK law.  In addition, non-UK companies can be held liable for a failure to prevent bribery if they do business in the UK.

Section 9 of the Act requires the UK government to publish guidance on procedures that commercial organizations can put in place to prevent bribery on their behalf.  It creates the following offenses: active bribery, described as promising or giving a financial or other advantage; passive bribery, described as agreeing to receive or accepting a financial or other advantage; bribery of foreign public officials; and the failure of commercial organizations to prevent bribery by an associated person (corporate offense).  This corporate criminal offense places a burden of proof on companies to show they have adequate procedures in place to prevent bribery ( http://www.transparency.org.uk/our-work/business-integrity/bribery-act/adequate-procedures-guidance/ ).  To avoid corporate liability for bribery, companies must make sure that they have strong, up-to-date and effective anti-bribery policies and systems.  It is a corporate criminal offense to fail to prevent bribery by an associated person.  The briber must be “associated” with the commercial organization, a term which will apply to, amongst others, the organization’s agents, employees, and subsidiaries.  A foreign corporation which “carries on a business, or part of a business” in the UK may therefore be guilty of the UK offense even if, for example, the relevant acts were performed by the corporation’s agent outside the UK.  The Act does not extend to political parties and it is unclear whether it extends to family members of public officials.

The UK formally ratified the OECD Convention on Combating Bribery in 1998 and ratified the UN Convention Against Corruption in 2006.

UK law provides criminal penalties for corruption by officials, and the government routinely implements these laws effectively.  The Serious Fraud Office (SFO) is an independent government department, operating under the superintendence of the Attorney General with jurisdiction in England, Wales, and Northern Ireland.  It investigates and prosecutes those who commit serious or complex fraud, bribery, and corruption, and pursues them and others for the proceeds of their crime.

All allegations of bribery of foreign public officials by British nationals or companies incorporated in the United Kingdom—even in relation to conduct that occurred overseas—should be reported to the SFO for possible investigation.  When the SFO receives a report of possible corruption, its intelligence team makes an assessment and decides if the matter is best dealt with by the SFO itself or passed to a law enforcement partner organization, such as the Overseas Anti-Corruption Unit of the City of London Police (OACU) or the International Corruption Unit of the National Crime Agency.  Allegations can be reported in confidence using the SFO’s secure online reporting form: https://www.sfo.gov.uk/contact-us/reporting-serious-fraud-bribery-corruption/ .

Details can also be sent to the SFO in writing:

SFO Confidential

Serious Fraud Office

2-4 Cockspur Street

London, SW1Y 5BS

United Kingdom

In March 2022, the UK strengthened its Unexplained Wealth Order (UWO) regime to enable law enforcement to investigate the origin of property and recover the proceeds of crime.  A UWO is an investigatory order placed on a respondent whose assets appear disproportionate to their income to explain the origins of their wealth.

A UWO requires a person who is a Politically Exposed Person (PEP) or reasonably suspected of involvement in, or of being connected to a person involved in, serious crime to explain the origin of assets (minimum combined value of £50,000) that appear to be disproportionate to their known lawfully obtained income.

A UWO is not (by itself) a power to recover assets.  However, any response from a UWO can be used in subsequent civil recovery proceedings.

A failure to respond will mean that the assets can be made subject to civil recovery action under the Proceeds of Crime Act 2002.

A person can also be found guilty of an offence if they provide false or misleading information in response to an UWO.

The UK’s terrorism threat level was at the third-highest rating (“substantial”) for most of 2021. On February 4, the UK lowered the threat level from “severe” to “substantial,” indicating a terrorist attack remains “likely” rather than “highly likely,” citing a “significant reduction in the momentum of attacks in Europe.”  On November 15, 2021, following the October 15, 2021 stabbing of David Amess MP and the November 14, 2021 Liverpool bombing, the UK increased the threat level to “severe” due to an overall change in the threat picture.  UK officials categorize Islamist terrorism as the greatest threat to national security, though they recognize the growing threat of racially and ethnically motivated terrorism (REMT), also referred to as “extreme right-wing” terrorism.  On November 18, the Home Office reported that in the year ending March 2021, the UK’s Prevent counterterrorism program received more referrals related to “extreme right-wing” radicalization (1,229) than “Islamist” radicalization (1,064) for the first time.  From March 2017 to December 2021, police and security services disrupted 32 plots, including 18 related to Islamist extremism; 12 to “extreme right-wing” extremism; and two to “left, anarchist, or single-issue terrorism.”

On February 9, 2022, the UK Government passed legislation designed to strengthen the political stability of Northern Ireland’s devolved Government.  This legislation allows the Northern Ireland Executive cabinet and the NI Assembly to continue to function for an extended period should either the First Minister or deputy First Minister resign from their positions in the Executive.  Northern Ireland’s terrorist threat level rating was reduced to substantial from severe in March 2022.

Environmental advocacy groups in the UK have been involved with numerous protests against a variety of business activities, including: airport expansion, bypass roads, offshore structures, wind farms, civilian nuclear power plants, and petrochemical facilities.  These protests tend not to be violent but can be disruptive, with the aim of obtaining maximum media exposure.

Brexit has waned as a source of political instability.  Nonetheless, the June 2016 EU referendum campaign was characterized by significant polarization and widely varying perspectives across the country.  Differing views about the future UK-EU relationship continue to polarize political opinion across the UK.  Some Scottish political leaders have indicated that the UK leaving the EU may provide justification to pursue another Referendum on Scotland leaving the UK.

Implementation of the Withdrawal Agreement has contributed to heightened political and sectarian tensions in Northern Ireland.  The Northern Ireland Protocol, part of the Brexit Withdrawal Agreement, entered into force on January 1, 2021.  The Protocol allows businesses based in Northern Ireland to export free from customs declarations, rules of origin certificates, and non-tariff barriers on the sale of goods to both Great Britain and the EU.  Under the terms of the Protocol, Northern Ireland remains a part of the UK customs territory but is subject to EU standards and customs regulations as far as trade in goods is concerned.  Goods shipped from Great Britain to Northern Ireland are subject to customs declarations but are tariff free unless deemed “at risk” of transshipment and use within the EU. Goods shipped to Northern Ireland from outside the EU are subject to the UK Global Tariff, unless deemed “at risk” of onward travel into the EU – in which case they would be liable to the EU’s Common Customs Tariff (CCT). Northern Ireland is included in the territorial scope of any free trade agreement the UK concludes with other countries, provided that such an agreement does not prejudice the application of the Protocol.  Northern Ireland remains in the UK VAT area but will align with EU VAT rules; lower VAT rates or exemptions in the Republic of Ireland may be applied in Northern Ireland.

Checks on goods entering Northern Ireland, both physical and documentary, are conducted at the region’s ports and airports, not at the land border with the Republic of Ireland, where goods flow freely between the two jurisdictions. However, not all Protocol checks have yet been fully implemented because of temporary grace periods implemented by the UK in coordination with the EU, which remain in force. The EU and UK continue to discuss potential changes to the Protocol to ease the flow of goods between Great Britain and Northern Ireland.

The UK formally departed the bloc on January 31, 2020, following the ratification of the Withdrawal Agreement, and completed its transition out of the EU on December 31, 2020.

The Conservative Party, traditionally the UK’s pro-business party, was, until the COVID-19 pandemic, focused on implementing Brexit, a process many international businesses oppose because they expect it to make trade in goods, services, workers, and capital with the UK’s largest trading partners more problematic and costly, at least in the short term.  In addition, the Conservative Party-led government has implemented a Digital Services Tax (DST), a two percent tax on the revenues of predominantly American search engines, social media services and online marketplaces which derive value from UK users and has legislated for an increase in the Corporation Tax rate from 19 percent to 25 percent.  The Labour Party’s leader, Sir Keir Starmer, is widely acknowledged to be more economically centrist than his predecessor.  In his first major economic speech following his election as Labour Party leader, Starmer declared his intention to repair and improve the party’s relationship with the business community but has proposed few policies as the UK’s political system contended with the COVID-19 crisis.

The UK’s labor force comprises more than 34.7 million workers.  The employment rate between November 2021 and January 2022 was 75.6 percent, with 29.7 million workers employed full-time. There were 1.3 million workers unemployed in January 2022, or 3.9 percent.  The female employment rate was 72.2 percent.

The most serious issue facing British employers is a skills gap derived from a high-skill, high-tech economy outpacing the educational system’s ability to deliver work-ready graduates.  The government has placed a strong emphasis on improving the British educational system in terms of greater emphasis on science, research and development, and entrepreneurial skills, but any positive reforms will necessarily lag in delivering benefits.  The UK’s skills base stands around the OECD average and continues to improve.

As of 2020, approximately 23.7 percent of UK workers belonged to a union.  Public-sector workers represented a much higher share of union members at 52 percent, while the private sector was 13 percent.  Manufacturing, transport, and distribution trades are highly unionized.  Unionization of the workforce in the UK is prohibited only in the armed forces, public-sector security services, and police forces.  Union membership has risen slightly in recent years, despite a previous downward trend.

In the 2019, a total of 234,000 working days were lost from 35 official labor disputes.  The Trades Union Congress (TUC), the British nation-wide labor federation, encourages union-management cooperation.

On April 1, 2022, the UK raised the minimum wage to £9.50 ($12.47) an hour for workers ages 23 and over.  The increased wage impacts about 2 million workers across Britain.

The 2006 Employment Equality (Age) Regulations make it unlawful to discriminate against workers, employees, job seekers, and trainees because of age, whether young or old.  The regulations cover recruitment, terms and conditions, promotions, transfers, dismissals, and training.  They do not cover the provision of goods and services.  The regulations also removed the upper age limits on unfair dismissal and redundancy.  It sets a national default retirement age of 65, making compulsory retirement below that age unlawful unless objectively justified.  Employees have the right to request to work beyond retirement age and the employer has a duty to consider such requests.

HMG brought forward new immigration rules on January 1, 2021.  The new rules have wide-ranging implications for foreign employees, students, and EU citizens.  The new rules are points-based, meaning immigrants need to attain a certain number of points in order to be awarded a visa.  The previous cap on visas has been abolished.  Applicants will need to be able to speak English and be paid the relevant salary threshold by their sponsor.  This will either be the general salary threshold of £25,600 ($33,600) or the going rate for their job, whichever is higher.  If applicants earn less–but no less than £20,480 ($26,880)–they may still be able to apply by “trading” points on specific characteristics against their salary.  For example, if they have a job offer in a shortage occupation or have a PhD relevant to the job.  More details are available here: https://www.gov.uk/guidance/new-immigration-system-what-you-need-to-know 

The DFC does not prioritize investments in the UK.  Export-Import Bank of the United States (Ex-Im Bank) financing is available to support major investment projects in the UK.  A Memorandum of Understanding (MOU) signed by Ex-Im Bank and its UK equivalent, the Export Credits Guarantee Department (ECGD), enables bilateral U.S.-UK consortia intending to invest in third countries to seek investment funding support from the country of the larger partner.  This removes the need for each of the two parties to seek financing from their respective credit guarantee organizations.

U.S. Embassy London
Economic Section
33 Nine Elms Ln
London SW11 7US
United Kingdom
+44 (0)20-7499-9000
LondonEconomic@state.gov