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Cameroon

Executive Summary

In December 2018, the International Monetary Fund (IMF) completed the third review of Cameroon’s 2017 Extended Credit Facility (ECF), concluding that program performance had improved, though structural reforms remain delayed.  From June 2018, the ECF prescribed a package of reforms aimed at restoring external and fiscal sustainability and sustaining growth in Cameroon and Central African Economic and Monetary Community (CEMAC).  The IMF also commented that risks from heightened global uncertainty, insufficient adjustment at the regional level, and continued insecurity in the Anglophone regions are increasing.  Cameroon had hoped hosting the 2019 African Cup of Nations (CAN) soccer tournament would boost consumer spending, but lost the event in November 2018 due to serious delays in promised infrastructure improvements.  Delays are likely to increase the cost of the construction of the infrastructure earmarked for the tournament, now scheduled for 2021, and increase pressure on public finance and public debt.  Firms have claimed CEMAC is attempting to hoard foreign exchange as reserve buffers have failed to grow as expected.

Infrastructure, energy, and extractives remain priority areas for Cameroon.  The government offers incentives for investment in agriculture, technology, and manufacturing, especially when investments lead to the transformation of local commodities in Cameroon.  The government, under the auspices of the ECF, has ramped up tax collection on the relatively small number of companies that actually pay taxes, including foreign firms.  FDI inflows were lower than expected over the last year and the loss of CAN will lead to even lower foreign exchange inflows in 2019.

Cameroon’s ranking in the World Bank’s 2019 Doing Business Report – 166th out of 190 countries – and Transparency International’s 2018 Corruption Perceptions Index – 152nd out of 175 countries – accurately reflect a business climate growing more difficult.  The most important factors that affect the business climate are dysfunctions within public administration, corruption, and poor infrastructure.  These challenges contrast with the country’s huge potential in terms of untapped natural resources and its strategic position as the gateway to landlocked neighbors.

Key Sectors

% of GDP

1

Agriculture

19

2

Services and consumer retail

12

3

Manufacturing

8

4

Public Administration

8

5

Transportation

7

6

Banking and Finance

7

7

Real Estate and Infrastructure Construction

6

8

Extractive industry (Oil, Gas, Mining)

5

9

Information & Communication Technology

4

10

Utilities (Electricity, Water)

1

11

Tourism, Media and Leisure

1

12

Other

23

Source: Cameroon Ministry of Finance, IMF, World Bank

Sectors that have historically attracted significant investment are:

Agriculture

Agriculture has attracted significant investment over the past decade, mostly from the Cameroonian government.  Cameroon is often described as the breadbasket of Central Africa because it supplies foodstuffs to Nigeria (180 million people) and to the countries of CEMAC (50 million people).  Market opportunities exist in the transformation of raw crops into finished or semi-finished products.  Access to credit, poor infrastructure, securing land rights, and ongoing fighting between separatists and government security forces in the cocoa and coffee-growing regions are significant obstacles.

Transportation

The economy of Cameroon and those of neighboring countries suffer from Cameroon’s poor roads, limited capacity of the aging rails, and the unreliability of the national airline.  The government has engaged in an ambitious program to upgrade and build new transport infrastructure, but Chinese companies dominate the sector.  Incentives to invest exist, though administrative procedures cause long delays.

Information & Communication Technology

Information and communication technology is the fastest growing economic sector in Cameroon, though internet penetration is still one of the lowest in Sub-Saharan Africa.  The mobile sector is still concentrated in the hands of four companies, including the state-owned Cameroon Telecommunication (CAMTEL), which also functions as the market regulator.  Despite CAMTEL’s monopoly on the communication backbone, such as sub-marine fiber optic cables, faster internet broadband and 3G-4G offer lucrative investment opportunities.

Extractive industry (Oil, Gas, Mining)

Cameroon has been an oil exporter since 1977.  Oil production has stagnated as prices fluctuated, but the country can count on untapped gas reserves estimated at 3.5 billion cubic meters.  The government dominates the sector and generally operates a revenue-sharing business model with foreign investors.

Banking and Finance

The financial sector of Cameroon has 15 banks, 26 insurance companies, one state pension fund, and one state-owned mortgage bank.  In addition, the country has over 400 microfinance institutions, a state-owned postal bank, and a nascent stock market based in Douala.  According to the International Monetary Fund (IMF), the total financial assets represent 40 percent of the national GDP, two-thirds of which is held by banks.  Less than 15 percent of Cameroonians have access to financial services.  There are investment opportunities in subsectors of the financial industry, particularly in conventional banking, risk protection, or in the increasingly popular mobile money business.

Table 1: Key Metrics and Rankings

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2018

152 of 175

http://www.transparency.org/research/cpi/overview

World Bank’s Doing Business Report

2019

166 of 190

http://www.doingbusiness.org/en/rankings

Global Innovation Index

2018

111 of 126

https://www.globalinnovationindex.org/analysis-indicator

U.S. FDI in partner country ($M USD, stock positions)

2018

$9.0 m (2017)

http://www.bea.gov/international/factsheet/

World Bank GNI per capita

2018

$1,370

http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

Capital Markets and Portfolio Investment

The Cameroonian government is open to portfolio investment, though no efforts have been made to increase the capacity of the Douala Stock Exchange to encourage foreign participation.

The Douala Stock Exchange (DSX) is meant to be the stock market for all Economic and Monetary Community of Central Africa (CEMAC) member states.  It was created in 2001 and currently has only three companies listed and five sovereign bonds.  The regulatory system of the DSX permits portfolio investment, but the market is still in its infancy, suffering from low liquidity and bureaucratic inertia.

Cameroon has a limited capital market.  The Embassy is not aware of any policies that facilitate or restrict the free flow of financial resources to the product and factor markets.

CEMAC’s central bank, known by its French acronym BEAC, respects IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  In early 2019, international firms began to complain that receiving permission to draw on their foreign exchange accounts was becoming more difficult.

Foreign investors can get credit on the local market and the private sector has access to a variety of credit instruments.  Cameroon is connected to the international banking payment system.

Money and Banking System

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

The banking sector is generally healthy, but financial institutions suffer from under-performance on local debt and un-serviced loans from both commercial and individual debtors.

According to the World Bank, non-performing loans were 10.31 percent of total bank loans in 2016.

Cameroon has several international banks operating within the country, including:

  1. Afriland First Bank Group (approximately USD 6 billion in global assets in 2016)
  2. CitiBank (USD 1.917 trillion in global assets in 2018)
  3. Societee Generale (USD 1.47 trillion in global assets in 2018)
  4. Standard Chartered Bank Cameroon (USD 688 billion in global assets in 2018)
  5. Ecobank (USD 23.6 billion in global assets in 2015)

Cameroon is part of the six-member Economic and Monetary Community of Central Africa (CEMAC), which maintains a central bank, known by its French acronym, BEAC.

Foreign banks are allowed to establish operations in Cameroon.  They are subject to the same regulations as locally developed banks.  The Embassy is unaware of any lost correspondent banking relationships within the past three years.

There are no restrictions on foreigners establishing bank accounts, credit instruments, business financing or other such transactions.  Rules on all forms of mergers and acquisitions, including hostile, are governed by OHADA and are detailed in a lengthy body of commercial, legal, and accounting codes.  The OHADA sections on mergers and acquisitions are the Napoleonic version of our SEC regulations.

Foreign Exchange and Remittances

Foreign Exchange

While there are no legal restrictions, each request for a foreign exchange transaction requires a “dossier” that would include various documents.  The documents required vary based on the type of transaction to demonstrate the legitimacy of the planned purchase in foreign exchange that BEAC would approve.  The not yet formalized list of required documents from BEAC includes a significant number of required supporting documents for various purposes.  The IMF has stated that forex transactions of less than USD one million only require approval by local BEAC representatives in each country and should take place in a matter of days.  Forex transactions exceeding USD one million would require approval from BEAC headquarters in Yaounde and should occur in no more than 48 hours.

The Embassy is unaware of any restrictions on investment type and conversion of funds into world currencies.

The Central African CFA Franc is the currency of six independent states in Central Africa: Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon.  It is administered by BEAC and is currently pegged at roughly 656 CFA to one Euro.

Remittance Policies

The Embassy is unaware of any recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

There are no time limitations on transactions beyond the classic banking transactions timeline.  BEAC regulates remittances and banking transactions.  Foreign investors can remit convertible and negotiable instruments through legal channels recognized by BEAC.

Domestically, the remittance market is expanding.  Cameroon currently counts more than six million registered mobile money subscribers.  In addition, 1.5 million people are using four digital solutions currently offered by banks and mobile phone companies, namely ATM, mobile wallet, mobile debit card, and website.  These systems are supporting various forms of remittances and financial services.

Sovereign Wealth Funds

Cameroon does not have a sovereign wealth fund.

14. Contact for More Information

Mamouda Mbemap
Economic Specialist
U.S. Embassy Yaounde
+237 22220 1500
yaoundepolecon@state.gov

Congo, Democratic Republic of the

Executive Summary

The Democratic Republic of the Congo (DRC) is the second largest country in Africa and potentially one of the richest in the world in terms of natural resources.  With 80 million hectares (197 million acres) of arable land and 1,100 minerals and precious metals, the DRC has the resources to achieve prosperity for its people.  Despite its potential, the DRC often cannot provide adequate security, infrastructure and health care to its estimated 81 million inhabitants, of which 75 percent live on less than two dollars a day.

The country possesses untapped resources that attract investors and could make it a giant in the African and global economies, but it occupies the 184th place (of 190) in the World Bank’s Doing Business 2019 report.

Overall, businesses in the DRC face numerous challenges, including fragility of functional infrastructure and alleged corruption at all levels of government.  Though, the election of President Felix Tshilombo Tshisekedi has raised the hopes of the business community in the DRC, and there is optimism that this change in leadership heralds the beginning of a new era of transparency in the country.

Armed groups remain active in the eastern part of the country making for a fragile security situation that negatively affects the business environment.  A long cycle of delayed elections finally ended in December 2018, with the arrival in power of the new President Felix Tshilombo Tshisekedi, reducing long-standing political tensions.

Poor governance, corruption and a deficit of transport, energy, and telecommunications infrastructure continue to make the business climate difficult.  The infrastructure deficit is the main challenge as it hinders intra- and international trade.  The poor quality of DRC’s infrastructure leads to import and export costs that are reported to be among the highest in Africa.

Despite some reforms implemented by the government, investors continue to complain about corruption and the lack of reform in the mining and subcontracting sectors.

ANAPI (Agence de promotion des investissements au Congo) strives to coordinate the actions of the Government of the Democratic Republic of the Congo (GDRC) in an attempt to simplify administrative formalities and procedures, but its influence in the administrative sphere is still limited.  In 2018 business remained sluggish, with only the extractives sector exhibiting significant growth.

GDP growth in 2018 was 4.1 percent (compared to 3.7 percent in 2017), while the average rate of inflation was 27 percent (compared to 54 percent in 2017).  Despite this, the year-on-year increase in consumer prices dipped to approximately 7 percent by the 4th quarter of 2018.  The CDF stabilized against the USD, losing only 2.7 percent of its value in 2018 (compared to a depreciation rate of 23 percent in 2017).  In 2018, the financing of the elections was supported by USD 500 million in public funds, roughly 9 percent of the 2018 state budget.

According to the Governor of the Central Bank, the main challenge remains the insufficient mobilization of public revenues, which is estimated by various sources to be between 7 and 10 % of GDP, as compared to an average of 20% in sub-Saharan Africa.

The primary minerals sector is the country’s main source of revenue. Copper, cobalt, gold, coltan, diamond, tin and tungsten, along with oil from offshore fields, provide over 95 percent of the DRC’s export revenue.

The agricultural sector and the forestry sector present opportunities for economic diversification in the DRC.  Agriculture is the mainstay of the economy, as it employs approximately 60% of Congolese.  The National Strategic Development Plan (NSDP), currently being finalized, plans to use agricultural transformation to advance the DRC into a middle-income country by 2022, including through the establishment of agro-industrial parks in the country’s various regions, which will take into account the interests of small producers.  The industrialization of the forest-based sector would strengthen diversification efforts.

According to foreign investors, inadequate infrastructure and allegedly predatory taxation have greatly diminished the secondary sector.  Several breweries and bottlers, a number of large construction firms, and limited textiles production are still active.

The tertiary sector includes retail and wholesale sales, banking, transport and communication components.  Micro commerce dominates the retail sector; the banking sector is small in terms of capitalization, but diverse in terms of ownership; the highly competitive telecommunications industry is expanding into electronic banking.

The banking sector configuration in 2018 remains unchanged from the previous year.  There are currently 17 operational banks in the Congolese banking industry. This includes BIAC, which is in serious difficulty and will likely be dissolved and another, Byblos Bank RDC, which became Solidaire Banque following the withdrawal of its majority shareholder and has remained practically inactive.  The bank penetration rate is well below the sub-Saharan African average of 25%.  The nation’s economy is highly dollarized, which weakens monetary policy execution, financial development and systemic stability.

The DRC is finally opening up its insurance sector after years of hesitancy and delay. The new regulator ARCA (Autorité de Régulation et de Contrôle des Assurances), approved four new insurance companies and two insurance brokers on March 28th, 2019.  The insurance sector will hopefully stimulate the economy, by mitigating risk and financing economic development projects.

Reform of a non-transparent and often corrupt legal system is also a prerequisite for investors to benefit more fully from the DRC’s membership in the Organization for the Harmonization of Business Laws in Africa (OHADA).

The Embassy invites all prospective investors to visit www.travel.state.gov to read the latest country-specific information and travel warnings before traveling to the DRC.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 161 of 180 http://www.transparency.org/research/cpi/overview
World Bank Doing Business Report “Ease of Doing Business” 2019 184 of 190 http://www.doingbusiness.org/rankings
Global Innovation Index 2017 N/A of 126 http://www.globalinnovationindex.org/content/page/data-analysis
U.S. FDI in partner country ($M USD, stock positions) 2017 $76 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $460 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

6. Financial Sector

Capital Market and Portfolio Investment

The Congolese financial system continues to improve with new regulations and guidelines seeking to maintain stability and consolidate the system.  Although reforms have been initiated, the Congolese financial system remains small, heavily dollarized, characterized by fragile balance sheets, and cumbersome to use.  The GDRC backed away from its short-lived (2013-2016) de-dollarization program, and further reforms are needed to strengthen the financial system, support the expansion of the financial sector, and spur economic growth.  Shock resilience is undermined by inadequate risk-based controls, weak enforcement of regulations, low profitability, and excessive reliance on demand deposits.  The system is also characterized by a significant concentration of credit and exposure to systemic failure in the event of the insolvency of a large borrower.

Financial inclusion is increasing, but substantial progress is needed to develop payment systems, facilitate the use of financial services, and strengthen regulation of the non-banking sector. Consolidation and strengthening of microfinance along with reform of the pension sub-sector and continued privatization of the insurance sector could facilitate the expansion of financial services and attract long-term investors.

The DRC’s capital market remains underdeveloped and consists mainly of the issuance of treasury bonds.  There are no stock exchanges operating in the country, although a small number of private equity firms are actively investing in the mining industry.

The institutional investor base is not well developed, with only an insurance company and a state pension fund as participants.  The Central Bank of Congo (BCC), developed a market for short-term bonds, but most of these bonds are bought and held by local Congolese banks.  In the absence of private debt securities, the fixed-rate market is limited to government-issued treasury bonds with maturities of up to 28 days traded through commercial banks.

Access to the primary market is limited to commercial banks holding securities accounts at the BCC, and all investors, including institutional and individual investors, must submit bids through banks.  Commercial banks, which dominate the investor base, may trade in treasury bills in the secondary market, but in order to do so, bids and prices for which they agree to trade must be transparent and publicized.  There is no market for derivatives in the country.

The DRC suffers from a weak and fragile financial infrastructure.  National payment systems are not governed by central legislation, although the DRC’s National Payments and Settlement Committee is in the process of proposing legal reform through a draft bill that was proposed in 2016, has been adopted by the DRC Senate, and, as of the date of this report, is before the National Assembly for a second reading.

The Central Bank worked for a decade to implement reform on the national payment system via a gradual and interactive approach that identified and corrected deficiencies at each stage. This culminated with the Central Bank inaugurating in September 2017 an automated system that supports customer transfers, regulation of monetary policy operations, and the processing of transactions for the regional payment system-REPSS, set up by COMESA member countries. The system also includes an interbank automated clearing module for check payments, collections, and bills of exchange.

Borrowing options for small and medium enterprises (SME) are limited.  Maturities for loans are usually limited to 3-6 months, and interest rates typically hover around 16-21 percent.  Several companies complain that the inconsistency of the legal system, the often-cumbersome business climate, and the difficulty in obtaining inter-bank financing discourages banks from providing long-term loans.  There are limited possibilities to finance major projects in the domestic currency, the Congolese franc (CDF).  The Central Bank sets minimum capital requirements for local banks in CDF or its equivalent in USD.  Prior to 2016, the average was roughly USD 12 million per bank, but the economic downturn prompted the Central Bank to mandate an increase to USD 30 million by January 2019.  Foreign currency deposits account for almost 90 percent of bank holdings.

As for the insurance sector, the DRC Insurance Authority, ARCA, began implementing privatization of the sector in 2018, granting licenses to four private insurance companies.  These approvals came four years after passage of the 2015 Insurance Reform Law, and three years after the decree establishing ARCA as the regulator of the insurance sector.  Once the state owned insurance company SONAS is fully privatized, the DRC insurance sector should operate under competitive market conditions.  While analysts estimate that the DRC insurance market could be worth roughly USD 5 billion in ten years’ time, the current Congolese insurance market comprises roughly USD 80 million worth of insurance premiums for a penetration rate of only 0.5 percent.

Portfolio investment is absent in the DRC.  Cross-shareholding and stable shareholding arrangements are also not common.  There are occasional complaints about unfair privileges extended to certain investors in profitable sectors such as mining and telecommunications.

Money and Banking system

The Congolese financial system is growing but it remains fragile and operates primarily through the Central Bank.  The financial sector is comprised of 17 licensed banks, a national insurance company (SONAS), the National Social Security Institute (INSS), one development bank, SOFIDE (Société Financière de Development), a savings fund (CADECO), 102 microfinance institutions and cooperatives, 95 money transfer institutions which are concentrated in Kinshasa, Kongo Central, North and South Kivu and the former Katanga provinces, three electronic money institutions, and 23 foreign exchange offices. There is no secondary equity or debt market.

The Congolese Central Bank developed a charter of compliance with international financial rules that has been accepted by virtually all banks operating in DRC.  The stricter regulatory regime put in place after the global financial crisis increased bank compliance costs, however, and the resultant “de-risking” saw the bank lose two of its three remaining correspondent banks.  It currently works with one correspondent bank, Citigroup. All foreign banks accredited by the Congolese Central Bank are considered Congolese banks with foreign capital and fall under provisions and regulations covering the credit institutions’ activities in the DRC.

The financial system is mostly banking-based with aggregate holdings estimated at USD 5.1 billion, about 95 percent of the overall holdings of the financial system. Bank deposits account for about 90 percent of total deposits, with the balance held by microfinance institutions.  Among the five largest banks, four are local and one is controlled by foreign holdings.  The five largest banks hold almost 65 percent of bank deposits and more than 60 percent of total bank assets.

Bank financing is dominated by the collection of deposits, nearly 90 percent of which are denominated in U.S. dollars and held in demand accounts.  Bank operations are highly dollarized and financed largely by demand deposits.  Nearly 95 percent of loans are in dollars, and clients are mainly companies seeking working capital primarily for daily operations and import/export activities.  National and local government entities have significant balances in some banks (deposits in dollars used for investments) and also borrow funds from a few banks to finance administrative expenses.  Statistics on non-performing loans do not seem reliable.  According to the Central Bank’s regulatory framework, many banks only record the balance due rather than the total amount of the non-performing loan.

Transactions involving correspondence with associated foreign banks represent a significant part of the activities of DRC banks.  Correspondent accounts represent more than 30 percent of bank assets and more than 95 percent of interbank market activity.  They allow banks to settle transactions denominated in dollars, reflecting efforts to limit risks.  The profitability of the banks is fragile and has deteriorated over the last year, reflecting high operating costs and exchange rates.  Fees charged by banks are a major source of their revenues.

The banking system faces challenges in terms of net income and profitability.  In 2018, the banking system recorded a steady increase in net banking income and confirmed a strengthening and enrichment of banks.  Yet, the banking sector struggled to offset the increase in its cost/income ratio and the deterioration in the quality of its loan portfolio.

The DRC has roughly USD 4.6 billion of deposits in the banking system, up from USD 3.7 billion in 2017.  The 2018 Mining Code increased the percentage of export revenue that mining companies are required to repatriate from 40 percent to 60 percent.  This likely accounts for a good proportion of the increase in deposits, and will contribute to a further increase in 2019.  An estimated USD 10 billion of savings exist outside of banks informally.  Most deposits in the formal system are U.S. dollar-denominated.  A slight increase in bank penetration occurred after 2011 as the GDRC switched public employee payments from cash to bank transfers.

Bank penetration is roughly 6 percent or about 3.9 million accounts, which places the country among the most under-banked nations in the world.  Based on its strategic plan, the Central Bank seeks to increase the number of bank accounts to more than 20 million by 2030.  Banks are increasingly offering savings accounts that pay approximately 3 percent interest, but few Congolese hold savings in banks.

The overall balance sheet of the banks amounted to roughly USD 6.9 billion in 2018.  Credit volume is estimated at roughly USD 2.8 billion in comparison to USD 1.9 billion in 2017.  Credit remains scarce, short-term, and highly concentrated.  Domestic credit granted by banks increased from USD 1.9 billion in 2017 to USD 2.8 billion in 2018.  In 2018, the largest depositors in the banking system are private enterprises and households with 48 and 40 percent of deposits, respectively.  Public enterprises and central administration deposits comprise six percent and four percent, respectively.

Foreign Exchange and Remittance

Foreign Exchange

As part of broad economic reforms begun in 2001, the DRC adopted a free-floating exchange rate policy and lifted various restrictions on business transactions, including in the mining sector.  The international transfer of funds takes place freely when channeled through local commercial banks.  On average, bank declaration requirements and payments for international transfers take less than one week to complete.

The Central Bank is responsible for regulating foreign exchange and trade.  The only currency restriction imposed on travelers is a USD 10,000 limit on the amount an individual can carry when entering or leaving the DRC.  The GDRC requires that the Central Bank license exporters and importers.  The DRC’s informal foreign exchange market is large and unregulated and has tended to offer exchange rates not widely dissimilar from the official rate.  In practice, the nation’s economy remains highly dollarized.

On September 25, 2014, the Central Bank put into place new foreign exchange regulations. These regulations declared the Congolese franc (CDF) as the main currency in all transactions within the DRC.  Payment of fees related to education, medical care, water and electricity consumption, residential rents, and national taxes were mandated to be paid in CDF.  In the last several years, this requirement has been relaxed and where the parties involved and the appropriate monetary officials agree, exceptions may, and routinely are, made.

Any payments exceeding USD 10,000 must be executed within the banking system, unless there is no presence of banking entities.  The largest, albeit rarely used, banknote in circulation is the CDF 20,000 note (approximately USD 12.36).  Far more common are the CDF 500 and CDF 1,000 notes worth approximately USD 0.30 and USD 0.61 respectively.  U.S. banknotes printed after 2008 are readily accepted in virtually all transactions, with the exception of one-dollar bills.  Banks provide accounts denominated in either currency.  In September 2013, the GDRC embarked on a process of “de-dollarizing” the economy by requiring that tax records be kept in CDF and tax payments from mining companies be paid in CDF.  In March 2016, however, as a result of a dollar shortage, the GDRC began requiring mining and oil companies to pay their customs fees and taxes in U.S. dollars.

The economic forecast calls for continuing inflation and currency depreciation over the long term, but the currency has remained stable since August 2017.  The annualized inflation rate, which was stable at an average 1.4 percent from 2013 through 2015, increased to 54 percent in 2017 and decreased to 7.2 percent in 2018.  As of April 2018, foreign exchange reserves totaled USD 1 billion or 4.2 weeks of import cover in comparison to the 2017 level of USD 859 million 2.9 weeks of cover.  If government revenues from the extractive sectors continue to increase, the Central Bank will again have the option to support the CDF and maintain currency stability.

Remittance Policies

Although there is no legal restriction on converting or transferring funds related to investment, new exchange regulations will increase the time for in-country foreigners to repatriate export and re-export income from 30 to 60 days.  Foreign investors may remit through parallel markets when they are legally established and recognized by the Central Bank.

Sovereign Wealth Funds

The DRC has no reported Sovereign Wealth Funds, though the 2018 Mining Code discusses a Future Fund that is to be capitalized by a percentage of mining revenues.

14. Contact for More Information

Points of contact for inquiries from the public:

Jigar Bhatt
Economic Officer
BhattJ@state.gov

Elisée Kaozi
Commercial Assistant
KaoziEN@state.gov

Econ Section’s email address: KinshasaEcon@State.gov

Cote d’Ivoire

Executive Summary

Cote d’Ivoire offers a fertile environment for U.S. investment, and the Ivoirian Government is keen to deepen its economic cooperation with the United States.  The 2018 investment code is considered generous with incentives and few foreign investor restrictions. The most fruitful areas of investment for U.S. businesses are in oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation and renewable energy; IT services; and infrastructure.  In 2018, Cote d’Ivoire improved in the World Bank’s Doing Business ranking of 190 countries, moving from 139 to 122. Improvements in the business environment include the establishment of a one-stop shop for registering businesses, the implementation of a single tax user identification number for business creation, and the creation of an online tax payment for businesses.

Following a credible and peaceful election in 2015 in which President Ouattara was overwhelmingly re-elected to a second term, a new constitution was adopted in 2016 and a Senate established in April 2018.  Legislative and municipal elections in 2018 were marred by fraud and violence in certain locations, possibly setting the stage for a turbulent political situation in the lead up to the 2020 presidential elections.  The power struggle is dividing the country’s leaders and is deepening the rift between political parties, causing concerns for political transition in 2020.  Labor tensions led to a crippling teachers’ strike in 2019 during which many schools closed for nearly two months. Mutinies among disaffected military members in January and May 2017 briefly brought the country’s economy to a standstill and renewed worries about political stability, although the mutineers did not target foreigners and foreign interests.  To resolve the crisis, the government acceded to most of the mutinous soldiers’ demands for bonuses and back pay and promised to refocus its efforts to reform the military. Despite these promises, security sector reform remains incomplete, primarily due to a lack of government will. The government has also failed to make real progress on national reconciliation and transitional justice, undermining the full consolidation of democratic gains.  Cote d’Ivoire suffered its first terrorist attack in March 2016 on the beaches of Grand Bassam, for which al-Qaeda in the Islamic Maghreb claimed responsibility. Ivoirian security forces responded quickly, demonstrating that the capacity of the country’s special operations units has improved over the past few years.

Economically, Cote d’Ivoire is Africa’s second fastest growing economy and since 2012 has experienced rapid progress in all sectors.  The largest economy in francophone Africa, Cote d’Ivoire’s growth attracts migrants and a significant expatriate community.  The IMF expects GDP growth to continue at 7 percent in 2019, led by growth in the industrial and service sectors.

Despite improvements, doing business with the government remains a significant challenge.  The government has awarded a number of sole source contracts without competition and at times disregarded objective evaluations on competitive tenders.  An overly complicated tax system and the slowness and lack of transparency in government decision-making hinders investment. In August 2017, the Appeal Court of the Commercial Court of Abidjan was created, and other commercial jurisdictions will be progressively established throughout the country.

Legally, women do not face restrictions on investment development, but have historically faced discrimination and a lack of access to credit that has hindered their extent of business ownership.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 105 of 175 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 122 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 123 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $ – 146  http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2018 $ 1,580 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

6. Financial Sector

Capital Markets and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

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

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

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

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses.  Banks lend to the private sector, offering short-term and long-term loans and overdraft facilities. Foreign investors can acquire credit on the local market.

Money and Banking System

The banking sector is composed of 28 commercial banks and two credit institutionsBanks are expanding their networks, especially in the secondary cities outside Abidjan, as domestic investment has increased upcountry.  The total number of bank branches has more than doubled from 324 in 2010 to 709 branches in 2018.

Cote d’Ivoire’s banking sector is improving with most banks being compliant with the BCEAO’s new minimum capital requirements.  Some public banks have had large numbers of nonperforming loans. The government is restructuring and privatizing the commercial banking sector in order to reinvigorate the banks and remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 9 billion.

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

Foreign banks are allowed to establish operations in Cote d’Ivoire.  They are subject to prudential measures and regulations of the WAEMU Banking Commission.  Cote d’Ivoire did not lose any correspondent banking relationships in the past three years.  No known correspondent banking relationships are in jeopardy.

The U.S. government is not aware of the implementation of block chain technologies in banking transactions.

Alternative financial services available include mobile money and microfinance for payments, transfers, and finances.  Mobile money has become a very popular way to make payments and many Ivoirians prefer mobile money over banking, but mobile money has yet to expand to offering full financial services.

Foreign Exchange and Remittances

Foreign Exchange

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

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

Cote d’Ivoire is a member of the WAEMU, which uses the West African Franc (XOF), also known as the CFA.  The French Treasury holds the international reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro.

Remittance Policies

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

There are no time limitations on remittances.  Remittances for Ivoirians were about USD 381 million in 2018 or 0.7 percent of GDP.

Sovereign Wealth Funds

Cote d’Ivoire does not have a sovereign wealth fund.

14. Contact for More Information

Jeremy Chen (until June 2019)
Email: chenjh2@state.gov

Davinia Seay (after June 2019)
Email: seaydm@state.gov

Economic and Commercial Officer
B.P. 730 Abidjan Cidex 03, Cote d’Ivoire
Tel: +225 2249 4416

Gabon

Executive Summary

Gabon is a historically stable country located in a volatile region of the world and has significant economic advantages:  a small population (roughly 2 million), an abundance of natural resources, and a strategic location along the Gulf of Guinea.  After taking office in 2009, President Ali Bongo Ondimba introduced reforms to diversify Gabon’s economy away from oil and from traditional investment partners and to position Gabon as an emerging economy.  Gabon promotes foreign investment across a range of sectors, particularly in the oil and gas, infrastructure, timber, ecotourism, and mining sectors. Despite these efforts, Gabon’s economy remains dependent on revenue generated by the exportation of hydrocarbons.  Gabon’s commercial ties with France remain very strong, but the government continues to seek to diversify its sources by courting investors from the rest of the world. In 2018, the Gabonese government lifted exit visa requirements for U.S. citizens.

Although Gabon is taking steps towards making the country a more attractive destination for foreign investment, it remains a difficult place to do business, especially without in-country or francophone experience.  Foreign firms are active in the country, particularly in the extractive industries, but the difficulty involved in establishing a new business and the time it takes to finalize deals are impediments to increased U.S. private sector investment.  Although the Gabonese government is taking a more active role to ensure transparency in extractive industries, investors are still waiting for key reforms to be established in law and in practice. Gabon enacted a new mining code in 2015. Gabon proposed revisions to its 2014 hydrocarbons code to draw more investors with greater flexibility and attractive financial terms.  The Gabonese government expects to implement the new hydrocarbons code in 2019.   

Increased investment is constrained due to limited bureaucratic capacity, unclear lines of decision-making authority, a lack of a clearly-established and consistent process for companies to enter the market, lengthy bureaucratic delays, high production costs, a small domestic market, rigid labor laws, and limited and poor infrastructure.  The judicial system at times fails to enforce the rule of law and limits access to justice. Corruption and lack of transparency remain an impediment to investment. The Gabonese government inconsistantly applies customs regulations.

Economic conditions in Gabon weakened throughout 2017 and 2018.  In addition to budget constraints due to low oil prices, the government lacks fiscal transparency.  Many international companies, including U.S. firms, continue to have difficulties collecting timely payments from the Gabonese government, and some companies in the oil sector have closed down operations.  To address fiscal imbalances, Gabon signed in June of 2017 a three-year Extended Fund Facility arrangement of USD 642 million with the IMF.  While opportunities exist, the investment climate in Gabon will remain difficult as the government must have the politcal will to make prudent decisions.  In 2018, higher oil prices, new investment in the oil sector and export processing zones, and the increasing manganese production helped support a modest recovery of economic growth of about 2 percent (according to the IMF September 2018 report).

Table 1

Measure Year Index/ Rank Website Address
TI Corruption Perceptions Index 2018 124 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report “Ease of Doing Business” 2019 169 of 190 www.doingbusiness.org/rankings
Global Innovation Index 2018 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country (M USD, stock positions) 2017 – $251 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 $6,650 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

Capital Markets and Portfolio Investment

The Gabonese government encourages and supports foreign portfolio investment, but Gabon’s capital markets are poorly developed.  Gabon has been home to the Central Africa Regional Stock Exchange, which began operation in August 2008.  However, the Bank of Central African States is in the process of consolidating the Libreville Stock Exchange into a single CEMAC zone stock exchange to be based in Doala, Cameroon by July 2019.

There are no existing policies that facilitate the free flow of financial resources into the product and factor markets.

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

Foreign investors are authorized to get credit on the local market and have access to all the variety of credits instruments offered by the local banks, without any restrictions.

Money and Banking System

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

The IMF December 2018 report indicated “the banking sector appears broadly sound and profitable,” although the non-performing loan ration was relatively high at 11.3 percent in the first quarter of 2018.  Three public banks are under liquidation. Protracted low oil prices have had an impact on banking activities. Furthermore, CEMAC regulations on currency transfer established in 2000 began to be enforced in earnest in late 2018, restricting access to foreign currency.  At least one commercial bank lost its dollar correspondent banking relationship in 2018.   Gabon estimated the net deposit money of banks in the third quarter of 2018 at 435 billion CFA (USD 725 million).

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

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

Gabon’s financial system is shallow and financial intermediation levels remain low compared to other developing countries.  The government plays an important role in the financial sector. It controls two of the nine banks and has a stake in most of the others.  Domestic credit is limited and expensive in Gabon. The microfinance sector is only just starting to emerge in the country with few regulated microfinance institutions (MFIs) registered, covering only a limited segment of the population.  However, a substantial number of informal, unregulated MFIs are believed to operate in the country. Banks, even though highly liquid, are extremely prudent in providing credit. The majority of the population lacks access to any type of financial services, as even traditional informal mechanisms, prevalent in other African economies, are scarce.  In efforts to increase access to finance, Gabon has recently supported the establishment of a development and growth fund to support small and medium enterprises, as well as the creation of a specialized agency to promote private investment.

Foreign Exchange and Remittances

Foreign Exchange Policies

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

Gabon’s currency is CFA, which is convertible and tied to the Euro (EUR 1 equals CFA 656).  As of March 2019, 1 U.S. dollar is roughly equivalent to CFA 612.

Remittance Policies

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

Sovereign Wealth Funds

Gabon created a Sovereign Wealth Fund (SWF) in 2008.  Initially called the Fund for Future Generations (Fonds des Génerations Futures) and later the Sovereign Funds of the Gabonese Republic (Fonds Souverain de la République Gabonaise), the current iteration of Gabon’s SWF is referred to as Gabon’s Strategic Investment Funds (Fonds Gabonaise d’Investissements Stratégiques, or FGIS).  As of September 2013, the most recent FGIS report, the FGIS had a reported USD 2.4 billion in assets and was actively making investments.  The FGIS has the goals of allowing future generations to share income derived from the exploitation of Gabon’s natural resources, diversifying risk by investing surplus revenue, contributing to economic development, and encouraging investment in strategic sectors of Gabon’s economy.  Officially, 10 percent of Gabon’s annual oil revenues are dedicated to the sovereign wealth fund. Details regarding the FGIS’ assets and investments are not publicly available. Gabon’s sovereign wealth fund does not follow Santiago principles, nor does Gabon participate in the IMF-hosted International Working Group on SWFs.

14. Contact for More Information

Diana Costa
Political/Economic Officer
U.S. Embassy Libreville
+241 0145 7000
Librevilleeconomic@state.gov

Ghana

Executive Summary

Ghana’s macroeconomic situation has improved over the last three years under its extended credit facility agreement with the International Monetary Fund (IMF), which concluded in April 2019.  The fiscal deficit has narrowed, inflation has come down, and GDP growth has rebounded, driven primarily by increases in oil production. Ghana’s economy is projected to grow 8.8 percent in 2019, according to the IMF, after expanding over 8 percent in 2017 and an estimated 5.6 percent in 2018.  However, the economy remains highly dependent on the export of primary commodities such as gold, cocoa, and oil/gas, and consequently is vulnerable to potential slowdowns in the global economy and commodity price shocks. The Government of Ghana is seeking to diversify and industrialize, in particular through agro-processing, mining, and manufacturing.  It has made attracting foreign direct investment (FDI) a priority to support its industrialization plans and overcome an annual infrastructure funding gap of at least USD 1.5 billion.

While the economy is doing relatively well, high government debt, low government revenue, and high energy costs remain challenges.  Ghana has a population of 30 million with six million potential taxpayers of which only two million are actually registered to pay taxes.  As Ghana seeks to move beyond dependence on foreign aid, it must develop a solid domestic revenue base. On the energy front, Ghana has enough installed power generating capacity to meet current demand, but it needs to make the cost of electricity more affordable through more effective management of its power distribution system and diversification of its energy matrix, including through renewable energy.  

Among the challenges hindering foreign direct investment are: a burdensome bureaucracy, costly and difficult financial services, under-developed infrastructure, ambiguous property laws, a costly power and water supply, the high costs of cross-border trade, a shifting policy environment, lack of transparency, and an unskilled labor force.  Enforcement of laws and policies is weak. Public procurements are opaque and there are often issues with delayed payments. In addition, there are troubling trends in investment policy over the last five years, with the passage of local content regulations in the petroleum sector and the power sector.

Despite these challenges, Ghana’s abundant raw materials (gold, cocoa, and oil/gas), security, and political stability make it stand out as one of the better locations for investment in sub-Saharan Africa.  The investment climate in Ghana is relatively welcoming to foreign investment. There is no discrimination against foreign-owned businesses. Investment laws protect investors against expropriation and nationalization and guarantee that investors can transfer profits out of the country.  Ghana enjoys a lower degree of corruption than that of some regional counterparts, although companies have reported a high level of corruption in foreign investments. Among the most promising sectors are agribusiness; food processing; textiles and apparel; downstream oil, gas, and minerals processing; and mining-related services subsectors.

The government has acknowledged the need to foster an enabling environment to attract FDI, and is taking steps to overhaul the regulatory system and improve the ease of doing business, maintain fiscal discipline, combat corruption, and promote better transparency and accountability.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 78 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 114 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 107 of 126 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 $1,698 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $1,880 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

6. Financial Sector

Capital Markets and Portfolio Investment

Private sector growth in Ghana is constrained by financing challenges.  Businesses continue to face difficulty raising capital on the local market.  While credit to the private sector has increased, levels have remained stagnant over the last decade and high government borrowing has driven up interest rates beyond 25 percent and crowded out private investment.

Capital markets and portfolio investment are gradually evolving.  The longest-term domestic bonds are 15 years, with Eurobonds ranging up to 31-year maturities.  Foreign investors are only permitted to participate in bond auctions with maturities of two years or longer.  In 2018, foreign investors held about 30 percent (valued at USD 5.7 billion) of the total outstanding domestic securities.  Authorities are working to expand the secondary market to improve liquidity.

The rapid accumulation of debt over the last decade has raised debt sustainability concerns.  Ghana received debt relief under the Heavily Indebted Poor Country (HIPC) initiative in 2004, and began issuing Eurobonds in 2007.  Following a rebasing of GDP in 2018, total public debt, roughly evenly split between external and domestic, stands at approximately 58 percent of GDP.  Following the government’s strategy of increasing demand for longer-dated bonds, short-term debt declined from a share of 22.4 percent in 2017 to 17.3 percent in 2018.

The Ghana Stock Exchange (GSE) has 42 listed companies, four government bonds and one corporate bond. Both foreign and local companies are allowed to list on the GSE.  The Securities and Exchange Commission regulates activities on the Exchange. There is an 8 percent tax on dividend income. Foreigners are permitted to trade stocks listed on the GSE without restriction.  There are no capital controls on the flow of retained earnings, capital gains, dividends or interest payments. The GSE composite index (GGSECI) has exhibited mixed performance.

Money and Banking System

Banks in Ghana are relatively small with the largest in the country, Ecobank Ghana Ltd., holding assets totaling about USD 1.3 billion.  The Central Bank increased the minimum capital requirement for commercial banks from 120 million Ghana cedis (USD 24 million) to 400 million (USD 80 million) effective December 2018, as part of a broader effort to strengthen the banking industry.  As a result of the reforms and subsequent closures and mergers of some banks, the number of commercial banks dropped from 36 to 23. Eight are domestically controlled and the remaining 15 are foreign-controlled. In total, there are nearly 1,500 branches distributed across the sixteen regions of the country.

Overall, the banking industry in Ghana is well-capitalized with a capital adequacy ratio of 21.7 percent as of February 2019, which is above the 10 percent prudential and statutory requirement.  As of February 2019, the non-performing loans ratio had decreased to 18.2 percent from 21.6 percent in February 2018. Lending in foreign currencies to unhedged borrowers poses a risk, and widely varying standards in loan classification and provisioning may be masking weaknesses in bank balance sheets.  The BoG is taking steps to address weaknesses in the non-bank deposit-taking institutions sector (e.g., microfinance, savings and loan, and rural banks) and has also issued new guidelines to strengthen corporate governance regulations in the banks.

Recent developments in the non-banking financial sector indicate increased diversification, including new rules and regulations governing the trading of Exchange Traded Funds.  Non-banking financial institutions such as leasing companies, building societies, and savings and loan associations have increased access to finance for underserved populations, as have rural and mobile banking.  Currently, Ghana has no “cross-shareholding” or “stable shareholder” arrangements used by private firms to restrict foreign investment through mergers and acquisitions.

Foreign Exchange and Remittances

Foreign Exchange

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

For additional information regarding Ghana petroleum funds, please visit the 2018 Petroleum Annual Report at: https://www.mofep.gov.gh/sites/default/files/reports/petroleum/2018-Petroleum-Annual-Report.pdf 

14. Contact for More Information

Margo Siemer
Economic Section
No. 24 Fourth Circular Road, Cantonments, Accra, Ghana
233-030-274-1000
SiemerME@state.gov

Guinea

Executive Summary

Despite persistent corruption and fiscal mismanagement, the long-term economic prognosis for Guinea, buoyed by sizeable endowments of natural resources, energy opportunities, and arable land, remains promising. Constrained by an austere budget, Guinea has increasingly looked to foreign investment and the private sector to stimulate growth. China, Guinea’s largest trading partner, has dramatically increased its role in the last two years through investment agreements. Investors should proceed with caution, realizing that the potential for high profits comes with significant risk.

Blessed with abundant mineral resources, Guinea has the potential to be an economic leader in the extractives industry. Guinea is home to over half the world’s reserves of bauxite (aluminum ore), and bauxite accounts for over half of Guinea’s present exports. Most of the country’s bauxite is exported by the Compagnie des Bauxites de Guinee (CBG) [a joint venture between the Government of Guinea, U.S.-based Alcoa, the Anglo-Australian firm Rio Tinto, and Dadco Investments of the Channel Islands], via a designated port in Kamsar. Societe Miniere de Boke (SMB), a Franco-Sino-Singaporean conglomerate, has surpassed CBG as the largest single producer of bauxite in the world. New investment by SMB and CBG, in addition to new market entries, are expected to significantly increase Guinea’s bauxite output over the next five to ten years. The Aluminum Corporation of China (Chalco), the Guinea Alumina Corporation (GAC), and Alufer are relative newcomers to the bauxite industry and are still growing. Guinea also possesses over four billion tons of untapped high-grade iron ore, significant gold and diamond reserves, undetermined amounts of uranium, as well as prospective offshore oil reserves. Artisanal and medium-sized industrial gold mining in the Siguiri region is a significant contributor to the Guinean economy, but suspicion exists that much of the gold leaves the country clandestinely, without generating any government revenue. In the long term, the Government of Guinea projects that its greatest potential economic driver will be the Simandou iron ore project, which is slated to be the largest greenfield project ever developed in Africa. Chalco bought out Rio Tinto’s shares in the project in 2017, and the Guinean government is anxious to move forward with developing the iron ore concessions. The Guinean government is using Simandou revenue in long-term planning but the project has not moved toward producing anything since Rio Tinto’s departure. The infrastructure costs for the project are projected to be USD 20 billion, which is enormous considering Guinea’s GDP is less than USD 7 billion/year. When fully operational, the project could double Guinea’s GDP. In 2017, the governments of Guinea and China signed a USD20 billion framework agreement giving Guinea potentially USD1 billion per year in infrastructure projects in exchange for increased access to mineral wealth. The results of previous Chinese infrastructure projects, however, have been mixed: power projects have had a positive impact, but others, like the Nongo stadium, have been less successful.

Guinea’s abundant rainfall and natural geography bode well for hydroelectric and renewable energy production. The largest energy sector investment in Guinea is the 450MW Souapiti dam project (valued at USD2.1 billion), begun in late 2015 with Chinese investment, which likewise completed the 240MW Kaleta Dam (valued at USD526 million) in May 2015. Kaleta more than doubled Guinea’s electricity supply, and for the first time furnished Conakry with more reliable, albeit seasonal, electricity (May-November). Souapiti is due to begin regulating the water available to the Kaleta Dam in September 2019 and will begin to produce electricity in late 2020.  A third hydroelectric dam on the same river is in the early stages of development – Chinese mining firm TBEA is providing financing for the Amaria power plant (300 MW, USD1.2 bn investment), with financial negotiations for the Build-Operate-Transfer (BOT) arrangement in process leading to the final determination of the tariff to be paid by the Guinean energy operator EDG. With proper distribution infrastructure, these projects are expected to lead Guinea to become an energy exporter in West Africa. The government is also looking to invest in solar and other energy sources to compensate for lost hydroelectric production during Guinea’s dry season. To that end, U.S.-based Endeavor has started work on Project Te, a 50MW thermal plant on the outskirts of the capital.  The World Bank is sponsoring four 50MW solar projects in the Kankan region.

Agriculture and fisheries are other areas of opportunity and growth in Guinea. Already an exporter of fruits, vegetables, and palm oil to its immediate neighbors, Guinea is climatically well suited for large-scale agricultural production. However, the sector has suffered from decades of neglect and mismanagement, while the 2014-2015 Ebola crisis hit the agricultural workforce hard. Guinea is also an importer of rice, its primary staple crop. President Alpha Conde has expressed his personal desire to see Guinea’s long-term economy based on agriculture rather than extractives.

Guinea’s macroeconomic and financial situation is weak. The Ebola crisis stifled Guinea’s economic growth prospects in 2014 and 2015, leaving the government with few financial resources to invest in infrastructure. Lower natural resource revenues stemming from a drop in world prices and ill-advised government loans have strained an already tight government budget. However, improved macroeconomic discipline in 2016-2017 stabilized exchange rates, refilled government coffers, and increased government revenues. Much of this stabilization lasted until late 2017 when the government borrowed excessively from the Central Bank (BCRG), threatening its first 2018 International Monetary Fund (IMF) review. Still, growth for 2018 was a healthy 8.7 percent (down, however, from 10 percent in 2016), but the largely impoverished population felt little of that, placing the government under pressure to deliver tangible economic development. There is a shortage of credit, particularly for small and medium sized enterprises, and the government is increasingly looking to international investment to increase growth, provide jobs, and kick-start the economy.

In 2017, Guinea passed and implemented an anti-corruption law, but it has yet to be tested in court. The country has recently updated its Investment Code and renewed efforts to attract international investors, including a new investment promotion website put in place in 2016 by Guinea’s investment promotion agency (www.invest.gov.gn) to increase transparency and streamline investment. However, Guinea’s capacity to enforce its more investor-friendly laws is compromised by a weak and unreliable legal systemPresident Alpha Condé inaugurated the first Trade Court of Guinea on March 20, 2018.  The aim of the Trade Court is to improve the business environment for local and foreign investors but it remains to be seen what effect it will have.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 138 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report “Ease of Doing Business” 2019 152 of 190 http://www.doingbusiness.org/rankings 
Global Innovation Index 2018 119 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2016 $11  http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita (Atlas method 2017 $790 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

6. Financial Sector

Capital Markets and Portfolio Investment

Commercial credit for private and public enterprises is difficult and expensive to obtain in Guinea. The FY 2019 Millennium Challenge Corporation score for Access to Credit in Guinea dropped from 24 percent to 23 percent, and was at 50 percent in FY 2017. This means investors largely need to find their own source of capital (92.4 percent of firms are internally financed).

The legislature passed a Build, Operate, and Transfer (BOT) convention law in 1998 (changed to Public-Private Partnership or PPP in 2018), which provides rules and guidelines for PPP and related infrastructure development projects. The law lays out the obligations and responsibilities of the government and investors and stipulates the guarantees provided by the government for such projects. The Investment Code allows income derived from investment in Guinea, the proceeds of liquidating that investment, and the compensation paid in the event of nationalization, to be transferred to any country in convertible currency. The legal and regulatory procedures, based on French civil law, are not always applied uniformly or transparently.

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

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

Money and Banking System

Guinea’s financial system is small and dominated by the banking sector. It comprises 15 active banks and 22 microfinance institutions with a total of 155 branches across the country. Guinea also has ten insurance firms, three money-transfer companies and 45 currency exchange offices. Guinea’s banking sector is overseen by the BCRG and it serves as the agent of the treasury for overseeing banking and credit operations in Guinea and abroad. The BCRG manages the foreign exchange reserves on behalf of the State. The Office of Technical Assistance of the Department of the Treasury assesses that Guinea does not properly manage debt and that its treasury is too involved in the process, although improvements in 2017-2018 point to a better future. Further information on the BCRG can be found in French at http://www.bcrg-guinee.org  .

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

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

Credit to the private sector is low, but increasing, at around 14 percent of GDP in 2015 from five percent in 2010, with the Sub-Saharan African average around 60 percent. The banking sector is highly concentrated, technologically behind, and banks tend to favor short-term lending at high interest rates. While the microfinance sector grew strongly from a small base, microfinance institutions were hit hard during the Ebola crisis; they are not profitable and need capacity and technology upgrades. Finally, the efficiency and the use of payment services by all potential users needs to be improved, with an emphasis on greater financial inclusion. Guinea is a cash-based society driven by trade, agriculture, and the informal sector, which all function outside the banking sector. However, digital cellphone fund transfers are increasing their penetration in the country.

Generally, there are no restrictions on foreigners’ ability to establish bank accounts in Guinea. EcoBank is the preferred bank for most U.S. dealings with the U.S. Foreign Account Tax Compliant Act (FACTA) reporting requirements. Post was unable to find any information related to rules concerning hostile takeovers.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions or limitations placed on foreign investors for converting, transferring, or repatriating funds associated with an investment. Although there have been no recent changes to remittance policies, it is difficult to obtain foreign exchange in Guinea. Guinea has experienced significantly weakened liquidity levels over the last several years due to government mismanagement, populist policies, corruption, and a decrease in mining revenue due to lower global commodity prices. Liquidity levels of commercial banks are affected by tight reserve requirements (22 percent of deposits) that are in line with IMF performance criteria. The 2015 entry of Sino-Franco-Singaporean conglomerate SMB into the bauxite mining industry in Guinea coupled with a recovery of bauxite and alumina prices have meant projected budget surpluses for Guinea that were unfortunately eclipsed in 2017 by excess spending, but corrected in 2018.

Until December 2015, the exchange rate was managed by the BCRG and held to a four percent variance from the unofficial rate. The exchange rate has remained relatively stable since 2013 and has only recently depreciated versus the U.S. dollar. Between 2013 and 2015, the Guinean franc maintained a value between 7,000 and 7,500 GNF/USD. In late 2015, the unofficial rate reached a value 10 percent higher than the official rate, during which Guinea had nearly exhausted its foreign currency reserves. The IMF recommended the BCRG float the GNF and the official rate jumped to just over 9,000 GNF/USD by March 2016, where it now remains. The Annual Report on Exchange Arrangements and Exchange Restrictions, published by the IMF, describes the foreign exchange regimes of every IMF member. https://www.imf.org/en/Publications/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions/Issues/2017/01/25/Annual-Report-on-Exchange-Arrangements-and-Exchange-Restrictions-2016-43741  

Remittance Policies

Guinea has no limitations on the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, or management or technical service fees. The BCRG needs to be informed of any major transfers, and the wait time to remit investment returns is less than 60 days. Guinea is a member of the Inter-Governmental Action Group against Money Laundering in West Africa, but is not included on the Financial Action Task Force. Guinea does not have a country report in the 2018 International Narcotics Control Strategy Report.

There are no limits on the conversion of U.S. dollars to Guinean francs. Post knows of no issues related to currency conversion and does not see any issues with convertibility risks going forward. The official exchange rate retains the capacity for volatility, but is currently holding at approximately 9,100 GNF/USD (as of March 2019). A weakened economy largely resulting from low commodity prices caused the GNF to depreciate from an average of 7,000 GNF/USD in early 2015. Since mid-2016, the official exchange rate has been keeping pace with the rate in the parallel black market.

Guinea does not have a sovereign wealth fund.

14. Contact for More Information

John Stark, Economic and Commercial Officer
BP  603, Transversale 2 Ratoma
+224655104428
starkjr2@state.gov after June 2018, Rowan Canter at CanterRA@state.gov

Senegal

Executive Summary

Senegal’s stable political environment, favorable geographic position, high growth rate, and generally open economy offer attractive opportunities for foreign investment. The Government of Senegal welcomes foreign investment and has prioritized efforts to improve the business climate, although significant challenges remain. Senegal’s macroeconomic environment is stable. The currency – the CFA franc used in eight West African countries – is pegged to the euro. Repatriation of capital and income is relatively straightforward. Investors cite cumbersome and unpredictable tax administration, bureaucratic hurdles, opaque public procurement, a weak and inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. The government is working to address these problems and improve Senegal’s competitiveness.

Senegal is pursuing an ambitious development plan, the Plan Senegal Emergent (Emerging Senegal Plan, or “PSE”), to improve infrastructure, achieve economic reforms, and increase investment in strategic sectors. Under the PSE, the growth rate reached 7.2 percent in 2018 and exceeded 6 percent in each of the past four years. With good air transportation links, a newly opened international airport, and improving ground transportation, Senegal also aims to become a regional center for logistics, services, and industry. The government is developing port facilities, transportation infrastructure, the digital economy, and special economic zones (SEZ).

Senegal’s low ranking (141st out of 190 countries) in the 2019 World Bank’s Doing Business survey reflects the bureaucratic challenges foreign investors can face. Nevertheless, Senegal has made some improvements in its performance over the past several years and was cited as a top performer for improvements made in 2015 and 2016. The Government of Senegal continues to implement measures to reduce the cost of setting up a business.

While Senegal has a well-developed legal framework for protecting property rights, settlement of commercial disputes can be cumbersome and slow. The government has prioritized efforts to fight corruption, increase transparency, and improve governance. The government has launched a new Commercial Court which, when fully operationalized, will prioritize the resolution of business disputes. Senegal compares favorably with many African countries in corruption indicators, but companies report that problems with corruption and opacity persist. The United States and Senegal signed a Bilateral Investment Treaty (BIT) in 1983, which took effect in 1990.

France is historically Senegal’s largest source of foreign direct investment (FDI), but the government wants more diversity in its sources of investment. U.S. investment in Senegal has expanded since 2014, including investments in power generation, industry, and the offshore oil and gas sector. In addition to a developing petroleum industry, other sectors that have attracted substantial investment are agribusiness, mining, tourism, and fisheries. Other important investment partners include Mauritius, Indonesia, Morocco, China, Turkey, and the Gulf States.

Investors may consult the website of Senegal’s Investment Promotion Agency (APIX) at www.investinsenegal.com for information on opportunities, incentives and procedures for foreign investment, including a copy of Senegal’s investment code.

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 67 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 141 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 100 of 126 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $25 http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5&sId=1390030341854
World Bank GNI per capita 2017 $1,240 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

6. Financial Sector

Capital Markets and Portfolio Investment

Senegalese authorities take a generally positive view of portfolio investment.  Assisted by the debt management office of the Central Bank of West African States (BCEAO) and thanks to a well-functioning regional debt market, Senegal has historically issued regular debt instruments in local currency to manage its finances.  Beginning in 2011, the government began accessing international debt markets, issuing U.S. dollar-denominated eurobonds in 2011, 2014, 2017, and 2018. Some observers, including the IMF, have expressed mild concern over the recent rise in Senegal’s external debt, which reached 52 percent of GDP in 2018.

A handful of Senegalese companies are listed on the West African Regional Stock Exchange (BRVM), headquartered in Abidjan, Cote d’Ivoire.  The BVRM also has local offices in each of the WAEMU member countries, offering additional opportunities to attract foreign capital and access diversified sources of financing.

In 2018, the BCEAO launched the region’s first certification program for dealers in securities and other financial instruments.  Modeled on accreditation programs offered by the Chartered Institute for Securities and Investment (CISI), the new program was supported by the U.S. Treasury’s Office of Technical Assistance.

The government does not restrict payments for current international transactions.

Money and Banking System

While Senegal’s banking system is generally sound, the financial sector is under-developed. Senegal’s approximately twenty commercial banks, primarily based in France, Nigeria, Morocco, and Togo, follow generally conservative lending guidelines, with collateral requirements that most potential borrowers cannot meet.  Few firms are eligible for long-term loans, and small- and medium-sized enterprises have little access to credit. According to a 2014 government survey, less than 5 percent of enterprises receive financing from commercial banks. Senegal’s banking sector is regulated by the BCEAO, the regional central bank, and the WAEMU regional banking commission.  Increasingly available mobile money services offer Senegalese consumers alternatives to traditional banking and credit services.

Foreign Exchange and Remittances

Foreign Exchange

As one of the eight WAEMU countries, Senegal uses the CFA franc – issued by the BCEAO – as its currency.  The CFA franc is pegged to the euro. Senegal’s Investment Code includes guarantees of access to foreign exchange and repatriation of capital and earnings, although repatriation transactions are subject to procedural requirements of financial regulators, including limitations imposed by the BCEAO on the use of offshore accounts.  Local financial institutions routinely carry out commercial transfers in a timely fashion. The government limits the amount of foreign exchange that individual travelers may take outside Senegal. Departing travelers may take a maximum of 6 million CFA francs (approximately USD 10,000) in foreign currency and travelers checks upon presentation of a valid airline ticket.  Senegal’s Bilateral Investment Treaty with the United States includes commitments to ensuring free transfer of funds associated with investments.

Remittance Policies

Remittances from Senegal’s large diaspora represent around 9 percent of GDP and are one of the main resources for the country.  According to the last IMF review of Senegal’s economy, remittances remains a significant component of the current account but are expected to decline as a percent of GDP over the medium term.

Sovereign Wealth Funds

In 2012, Senegal established a sovereign wealth fund (Fonds Souverain d’Investissements Strategiques, or FONSIS) with a mandate to leverage public assets to support equity investments in commercial projects supporting economic development objectives, FONSIS invests primarily in strategic sectors defined in the Plan Senegal Emergent (PSE), including agriculture, fishing, infrastructure, energy, mining, tourism, and services.

Senegal maintains several taxes and funds allocated for specific purposes such as expanding access to transportation, energy, and telecommunications, including the autonomous road maintenance fund and the energy support fund.  For these funds, some information is included in budget annexes; these funds are subject to the same auditing and oversight mechanisms as ordinary budgetary spending. FONSIS reports that it abides by the Santiago Principles for sovereign wealth funds.

14. Contact for More Information

Cheikh Oumar Dia
Economic Specialist
U.S. Embassy, Route des Almadies, B.P. 49, Dakar, Senegal
+221 33 879 4867
diaco@state.gov

Investment Climate Statements
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