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Algeria

4. Industrial Policies

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to the energy, mining, defense, transportation infrastructure, and pharmaceuticals manufacturing sectors, and the 2021 budget law extended the requirement to importers of goods for resale in Algeria.

Any incentive offered by the Algerian government is generally available to any company, though there are multiple tiers of “common, additional, and exceptional” incentives under the 2016 investments law (www.joradp.dz/FTP/jo-francais/2016/F2016046.pdf). “Common” incentives available to all investors include exemption from customs duties for all imported production inputs, exemption from value-added tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction of tenancy fees during construction, and a 10-year exemption on real estate taxes. Investors also benefit from a three-year exemption on corporate and professional activity taxes and a 50 percent reduction for three years on tenancy fees after construction is completed. Additional incentives are available for investments made outside of Algeria’s coastal regions, to include the reduction of tenancy fees to a symbolic one dinar (USD .01) per square meter of land for 10 years in the High Plateau region and 15 years in the south of Algeria, plus a 50 percent reduction thereafter. The law also charges the state to cover, in part or in full, the necessary infrastructure works for the realization of the investment. “Exceptional” incentives apply for investments “of special interest to the national economy,” including the extension of the common tax incentives to 10 years. The sectors of “special interest” have not yet been publicly specified. An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives. There are no specific investment incentives for investors from underrepresented groups.

Regulations passed in a March 2017 executive decree exclude approximately 150 economic activities from eligibility for the incentives (www.joradp.dz/FTP/jo-francais/2017/F2017016.pdf). The list of excluded investments is concentrated on the services sector but also includes manufacturing for some products. All investments in sales, whether retail or wholesale, and imports business are ineligible.

The 2016 investments law also provided state guarantees for the transfer of incoming investment capital and outgoing profits. Pre-existing incentives established by other laws and regulations also include favorable loan rates well below inflation from public banks for qualified investments.

The government does not issue guarantees for private investments, or jointly financed foreign direct investment projects. In practice, however, the government is disinclined to allow companies that employ significant numbers of Algerians – whether private or public – to fail and may take on fiscal responsibilities to ensure continued employment for workers. President Tebboune’s administration also indicated more flexibility in considering alternative financing methods for future projects, which might include joint financing. The government does not offer specific incentives for clean energy investments, although the government announced in February 2022 that companies bidding on solar energy tenders would not be subject to the 51/49 investment rule.

Algeria does not have any foreign trade zones or free ports.

The Algerian government does not officially mandate local employment, but companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed. Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor. Some businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions. Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers, or via specific restrictions applicable to expatriate employees that are not applicable to Algerian employees. U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals. Government-imposed restrictions on routine international travel since March 2020 in response to COVID-19 initially caused difficulties for foreign companies attempting to rotate their expatriate staff into and out of Algeria, though the situation has improved since June 2021.

In 2017, the Algerian government began instituting forced localization in the auto sector. New regulations governing the sector issued in September 2020 would require companies producing or assembling cars in the country to achieve a local integration rate of at least 30 percent within the first year of operation, rising to 50 percent by the company’s fifth year of operation, however, the regulations remain under government review and have not gone into effect. Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria. Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce. Since January 2017, the Ministry has not issued any licenses, and the process of assigning new import quotas to qualified importers under the new 2020 specifications are on hold pending review by the government. As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years. For example, specifications released in 2020 governing consumer appliance manufacturing mandate local content thresholds, and a tender launched in December 2021 for 1000MWs of solar projects mandated local content thresholds.

Information technology providers are not required to turn over source codes or encryption keys, but all hardware and software imported to Algeria must be approved by the Agency for Regulation of Post and Electronic Communications (ARPCE), under the Ministry of Post and Telecommunications. In practice, the Algerian government requires public sector entities to store data on servers within the country.

5. Protection of Property Rights

Secured interests in property are generally recognized and enforceable, but court proceedings can be lengthy and results unpredictable. All property not clearly titled to private owners remains under government ownership. As a result, the government controls most real property in Algeria, and instances of unclear titling have resulted in conflicting claims of ownership, which has made purchasing and financing real estate difficult. Several business contacts have reported significant difficulty in obtaining land from the government to develop new industrial activities; the state prefers to lease land for 33-year terms, renewable twice, rather than sell outright. The procedures and criteria for awarding land contracts are opaque.

Property sales are subject to registration at the tax inspection and publication office at the Mortgage Register Center and are part of the public record of that agency. All property contracts must go through a notary.

Patent and trademark protection in Algeria remains covered by a series of ordinances dating from 2003 and 2005, and representatives of U.S. companies operating in Algeria reported that these laws were satisfactory in terms of both the scope of what they cover and the penalties they mandate for violations. A 2015 government decree increased coordination between the National Office of Copyrights and Related Rights (ONDA), the National Institute for Industrial Property (INAPI), and law enforcement to pursue patent and trademark infringements. An Algerian court ruled in favor of a U.S. pharmaceutical company in late 2020 in the first case of alleged patent infringement by a local producer pursued in the courts by a U.S. company.

ONDA, under the Ministry of Culture, and INAPI, under the Ministry of Industry, are the two entities within the Algerian government that protect IPR. ONDA covers literary and artistic copyrights as well as digital software rights, while INAPI oversees the registration and protection of industrial trademarks and patents. Despite strengthened efforts at ONDA, INAPI, and the General Directorate for Customs (under the Ministry of Finance), which have seen local production of pirated or counterfeit goods nearly disappear since 2011, imported counterfeit goods are prevalent and easily obtained. Algerian law enforcement agencies annually confiscate hundreds of thousands of counterfeit items, including clothing, cosmetics, sports items, foodstuffs, automotive spare parts, and home appliances. The government is currently drafting new legislation on counterfeiting and intellectual property to improve enforcement and interagency coordination.

Algeria is listed on the Watch List of USTR’s 2022 Special 301 Report (https://ustr.gov/issue-areas/intellectual-property/Special-301)for, among other reason, ineffective enforcement efforts against trademark counterfeiting and copyright piracy.

Resources for Intellectual Property Rights Holders:

Peter Mehravari
Patent Attorney
Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Abu Dhabi | U.S. Department of Commerce U.S. Patent & Trademark Office
Tel: +965 2259 1455 Peter.Mehravari@trade.gov

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

6. Financial Sector

The Algiers Stock Exchange has five stocks listed – each at no more than 35 percent equity. There is a small and medium enterprise exchange with one listed company. The exchange has a total market capitalization representing less than 0.1 percent of Algeria’s GDP. Daily trading volume on the exchange averages around USD 2,000. Despite the lack of tangible activity, the market is regulated by an independent oversight commission that enforces compliance requirements on listed companies and traders.

Government officials have previously expressed their desire to reach a capitalization of USD 7.8 billion and enlist up to 50 new companies. Attempts to list additional companies have been stymied by a lack both of public awareness and appetite for portfolio investment, as well as by private and public companies’ unpreparedness to satisfy due diligence requirements that would attract investors. Proposed privatizations of state-owned companies have also been opposed by the public. Algerian society generally prefers material investment vehicles for savings, namely cash. Public banks, which dominate the banking sector (see below), are required to purchase government securities when offered, meaning they have little leftover liquidity to make other investments. Foreign portfolio investment is prohibited – the purchase of any investment product in Algeria, whether a government or corporate bond or equity stock, is limited to Algerian residents only.

The banking sector is roughly 85 percent public and 15 percent private as measured by value of assets held and is regulated by an independent central bank. Publicly available data from private institutions and U.S. Federal Reserve Economic Data show estimated total assets in the commercial banking sector in 2017 were roughly 13.9 trillion dinars (USD 116.7 billion) against 9.2 trillion dinars (USD 77.2 billion) in liabilities. In response to liquidity concerns caused by the oil price decline and COVID-19 crisis, the bank progressively decreased the reserve requirement from 12 percent to 3 percent between March and September 2020.

The IMF and Bank of Algeria have noted moderate growth in non-performing assets since 2015, currently estimated between 12 and 13 percent of total assets. The quality of service in public banks is generally considered low as generations of public banking executives and workers trained to operate in a statist economy lack familiarity with modern banking practices. Most transactions are materialized (non-electronic). Many areas of the country suffer from a dearth of branches, leaving large amounts of the population without access to banking services. ATMs are not widespread, especially outside the major cities, and few accept foreign bankcards. Outside of major hotels with international clientele, hardly any retail establishments accept credit cards. Algerian banks do issue debit cards, but the system is distinct from any international payment system. The Minister of Commerce has announced multiple plans to require businesses to use electronic payments for all commercial and service transactions, though the most recent government deadline for all stores to deploy electronic payment terminals by the end of 2021 was indefinitely delayed. In addition, analysts estimate that between one-third and one-half  of the money supply circulates in the informal economy.

Foreigners can open foreign currency accounts without restriction, but proof of a work permit or residency is required to open an account in Algerian dinars. Foreign banks are permitted to establish operations in the country, but they must be legally distinct entities from their overseas home offices.

In 2015, the Financial Action Task Force (FATF) removed Algeria from its Public Statement, and in 2016 it removed Algeria from the “gray list.” The FATF recognized Algeria’s significant progress and the improvement in its anti-money laundering/counter terrorist financing (AML/CFT) regime. The FATF also indicated Algeria has substantially addressed its action plan since strategic deficiencies were identified in 2011.

Algeria’s sovereign wealth fund (SWF) is the “Fonds de Regulation des Recettes (FRR).” The Finance Ministry’s website shows the fund decreased from 4408.2 billion dinars (USD 37.36 billion) in 2014 to 784.5 billion dinars (USD 6.65 billion) in 2016. The data has not been updated since 2016. Algerian media reported the FRR was spent down to zero as of February 2017. Algeria is not known to have participated in the IMF-hosted International Working Group on SWFs.

7. State-Owned Enterprises

State-owned enterprises (SOEs) comprise more than half of the formal Algerian economy. SOEs are amalgamated into a single line of the state budget and are listed in the official business registry. To be defined as an SOE, a company must be at least 51 percent owned by the state.

Algerian SOEs are bureaucratic and may be subject to political influence. There are competing lines of authority at the mid-levels, and contacts report mid- and upper-level managers are reluctant to make decisions because internal accusations of favoritism or corruption are often used to settle political and personal scores. Senior management teams at SOEs report to their relevant ministry; CEOs of the larger companies such as national hydrocarbons company Sonatrach, national electric utility Sonelgaz, and airline Air Algerie report directly to ministers. Boards of directors are appointed by the state, and the allocation of these seats is considered political. SOEs are not known to adhere to the OECD Guidelines on Corporate Governance.

Legally, public and private companies compete under the same terms with respect to market share, products and services, and incentives. In reality, private enterprises assert that public companies sometimes receive more favorable treatment. Private enterprises have the same access to financing as SOEs, but they work with private banks, and they are less bureaucratic than their public counterparts. Public companies generally refrain from doing business with private banks and a 2008 government directive ordered public companies to work only with public banks. The directive was later officially rescinded, but public companies continued the practice. However, the heads of Algeria’s two largest state enterprises, Sonatrach and Sonelgaz, both indicated in 2020 that given current budget pressures they are investigating recourse to foreign financing, including from private banks. SOEs are subject to the same tax burden and tax rebate policies as their private sector competitors, but business contacts report that the government favors SOEs over private sector companies in terms of access to land.

SOEs are subject to budget constraints. Audits of public companies can be conducted by the Court of Auditors, a financially autonomous institution. The constitution explicitly charges it with “ex post inspection of the finances of the state, collectivities, public services, and commercial capital of the state,” as well as preparing and submitting an annual report to the President, heads of both chambers of Parliament, and Prime Minister. The Court makes its audits public on its website, for free, but with a time delay, which does not conform to international norms.

The Court conducts audits simultaneously but independently from the Ministry of Finance’s year-end reports. The Court makes its reports available online once finalized and delivered to the Parliament, whereas the Ministry withholds publishing year-end reports until after the Parliament and President have approved them. The Court’s audit reports cover the entire implemented national budget by fiscal year and examine each annual planning budget that is passed by Parliament.

The General Inspectorate of Finance (IGF), the public auditing body under the supervision of the Ministry of Finance, can conduct “no-notice” audits of public companies. The results of these audits are sent directly to the Minister of Finance, and the offices of the President and Prime Minister. They are not made available publicly. The Court of Auditors and IGF previously had joint responsibility for auditing certain accounts, but they are in the process of eliminating this redundancy. Further legislation clarifying whether the delineation of responsibility for particular accounts which could rest with the Court of Auditors or the Ministry of Finance’s General Inspection of Finance (IGF) unit has yet to be issued.

There has been limited privatization of certain projects previously managed by SOEs, and so far restricted to the water sector and possibly a few other sectors. However, the privatization of SOEs remains publicly sensitive and has been largely halted.

8. Responsible Business Conduct

Multinational, and particularly U.S. firms operating in Algeria, are spreading the concept of responsible business conduct (RBC), which has traditionally been less common among domestic firms. Companies such as Occidental, Cisco, Microsoft, Boeing, Dow, Halliburton, Pfizer, and Berlitz have supported programs aimed at youth employment, education, and entrepreneurship. RBC activities are gaining acceptance as a way for companies to contribute to local communities while often addressing business needs, such as a better-educated workforce. The national oil and gas company, Sonatrach, funds some social services for its employees and supports desert communities near production sites. Still, many Algerian companies view social programs as the government’s responsibility. While state entities welcome foreign companies’ RBC activities, the government does not factor them into procurement decisions, nor does it require companies to disclose their RBC activities. Algerian laws for consumer and environmental protections exist but are weakly enforced.

Algeria does not adhere to the OECD or UN Guiding Principles and does not participate in the Extractive Industries Transparency Initiative. Algeria ranks 73 out of 89 countries for resource governance and does not comply with rules set for disclosing environmental impact assessments and mitigation management plans, according to the most recent report by National Resource Governance Index published in 2017.

Department of State

Department of the Treasury

Department of Labor

14. Contact for More Information

U.S. Embassy Algiers
Political and Economic Section
5 Chemin Cheikh Bachir El-Ibrahimi, El Biar Algiers, Algeria (+213) 0770 082 153
(+213) 0770 082 153
Algiers_polecon@state.gov

Democratic Republic of the Congo

4. Industrial Policies

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

5. Protection of Property Rights

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

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

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

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

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

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

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

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

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

The DRC is not listed in the notorious market report.

6. Financial Sector

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

8. Responsible Business Conduct

The DRC has not defined Responsible Business Conduct (RBC) for most industries, but the Labor Code includes provisions to protect employees, and there are legal provisions that require companies to protect the environment. The Global Compact Network DRC, a public-private consortium affiliated with the United Nations, encourages companies operating locally to adopt sustainable and socially responsible policies.

The GDRC has taken actions of limited impact to support RBC by encouraging companies to develop and adhere to a code of ethics and respect for labor rights and the environment. However, the DRC does not possess a legal framework to protect the rights of consumers, and there are no existing domestic laws to protect individuals from adverse business impacts.

Reports of children working in the DRC’s artisanal mines has led to international pressure to find ways to ensure the DRC’s minerals supply chain is free of child labor. Concerns over the use of child labor in the artisanal mining of copper and cobalt have led to worries about the use of Congolese resources served to discourage potential purchasers. USG assistance programs to build capacity for labor inspections and enforcement are helping to address these concerns.

Development pressures have resulted in reports of violations of environmental rights. In one case, a prominent local businessman is seeking to develop a dam in a national park in the southeastern province of Haut Katanga. There is a case in eastern DRC of a local developer pressuring an environmental defender to end his activism.

There are no known high-profile and controversial cases of private sector entities having a negative impact on human rights.

With regard to human rights, labor rights, consumer protection, environmental protection, and other laws/regulations designed to protect individuals from the adverse effects of business, the GDRC faces many challenges in enforcing domestic laws effectively and fairly.

The GDRC has no known corporate governance, accounting, or executive compensation standards to protect shareholders.

There are independent NGOs, human rights organizations, environmental organizations, worker/trade union organizations, and business associations that promote or monitor RBC and report misconduct and violation of good governance practices. They monitor and/or defend RBC and are able to do their work freely.

The DRC has adopted OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas as defined by the United Nations Group of Experts, as well as various resolutions of the UN Security Council related to business and human rights in the Congolese mining sector. There are also existing domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas in DRC.

The DRC participates in the Extractive Industries Transparency Initiative (EITI), and the Voluntary Principles on Security and Human Rights. More information is available at https://www.itierdc.net/ . The DRC publishes reports on its revenue from natural resources. There are domestic transparency measures requiring disclosure of payments to governments and of RBC/Business and Human Rights policies or practices. The mining code provides domestic transparency measures requiring the disclosure of payments made to governments, though they appear to be infrequently enforced. PROMINES, a technical parastatal body financed by the GDRC and the World Bank, aims to improve the transparency of the artisanal mining sector. Amnesty International and Pact Inc. have also published reports related to RBC in the DRC mining sector.

The DRC has a private security industry but is not a party to the Montreux Document on Private Military and Security Companies. It does not support the International Code of Conduct or Private Security Service Providers, nor does it participate in the International Code of Conduct for Private Security Service Providers’ Association (ICoCA).

Department of State

Department of the Treasury

Department of Labor

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

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

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

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

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

14. Contact for More Information

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

Ethiopia

4. Industrial Policies

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

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

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

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

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

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

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

5. Protection of Property Rights

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

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

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

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

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

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

Embassy POC: Economic Officer, USEmbassyPolEconExternal@state.gov 

6. Financial Sector

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

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

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

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

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

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

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

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

7. State-Owned Enterprises

Ethiopia’s roughly 40 state-owned enterprises (SOEs) dominate major sectors of the economy. There is a state monopoly or state dominance in telecommunications, power, banking, insurance, air transport, shipping, railway, industrial parks, and petroleum importing. SOEs have considerable advantages over private firms, including priority access to credit, foreign exchange, land, and quick customs clearances. While there are no conclusive reports of credit preference for these entities, there are indications that they receive incentives, such as priority foreign exchange allocation, preferences in government tenders, and marketing assistance. Ethiopia does not publish financial data for most state-owned enterprises, but Ethiopian Airlines and the Commercial Bank of Ethiopia have transparent accounts

Ethiopia is not a member of the Organization for Economic Co-operation and Development (OECD) and does not adhere to the guidelines on corporate governance of SOEs. Corporate governance of SOEs is structured and monitored by a board of directors composed of senior government officials and politically affiliated individuals, but there is a lack of transparency in the structure of SOEs.

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

8. Responsible Business Conduct

Some larger international companies in Ethiopia have introduced corporate social responsibility (CSR) programs. Most Ethiopian companies, however, do not officially practice CSR, though individual entrepreneurs engage in charity, sometimes on a large scale. There are efforts to develop CSR programs by MOTRI in collaboration with the World Bank, U.S. Agency for International Development, and other institutions.

The government encourages CSR programs for both local and foreign direct investors but does not maintain specific guidelines for these programs, which are inconsistently applied and not controlled or monitored. The Addis Ababa Chamber of Commerce also has a corporate governance institute, which promotes responsible business conduct among private business enterprises.

The GOE does not publish data on the number of children who are victims of forced labor. The Ethiopian Central Statistics Agency’s 2015 National Child Labor Survey and 2021 Labor Force and Migration Survey did not assess forced labor.

On January 1, 2022, the U.S. Trade Representative (USTR) announced that due to human rights concerns related to the conflict in northern Ethiopia, Ethiopia no longer met the eligibility criteria for African Growth and Opportunity Act (AGOA) trade preferences. Ethiopia will continue to undergo AGOA’s annual review process and may regain eligibility once it meets the criteria.

The 2020 Investment Law requires all investors to give due regard to social and environmental sustainability values including environmental protection standards and social inclusion objectives. The 2002 Environmental Impact Assessment Proclamation number 299/2002 mandates any government agency issuing business licenses or permits for investment projects ensure that federal or relevant regional environmental agencies authorize the project’s implementation. In practice, environmental laws and regulations are not fully enforced due to limited capacity at government regulatory bodies.

In 2014, the Extractive Industry Transparency Initiative (EITI) admitted Ethiopia as a candidate-member. In 2019, EITI found Ethiopia made meaningful progress in implementing EITI standards. The Commercial Code requires extractive industries and other businesses to conduct statuary audits of their financial statements at the end of each financial year.

Department of State

Department of the Treasury

Department of Labor

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

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

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) (M USD) 2020/21** $111.3 2020 $107.6 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2021 $741 N/A N/A https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States (M USD, stock positions) 2020 N/A N/A N/A http://bea.gov/international/direct_
investment_multinational_companies_
comprehensive_data.htm
 
Total inbound stock of FDI as % host GDP 2020-21** 10% 2020 2.22% www.worldbank.org/en/country 

*National Bank of Ethiopia and Ethiopian Investment Commission

**Ethiopian Fiscal Year 2020-21, which begins on July 8, 2020.

Table 3: Sources and Destination of FDI
Data regarding inward direct investment are not available for Ethiopia via the IMF’s Coordinated Direct Investment Survey (CDIS) site ( http://data.imf.org/CDIS ).

14. Contact for More Information

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

Economic Officer, USEmbassyPolEconExternal@state.gov

Kenya

4. Industrial Policies

Kenya provides both fiscal and non-fiscal incentives to foreign investors (http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/).  The minimum foreign investment to qualify for GOK investment incentives is USD 100,000.  Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act (2004).  Investment incentives are revised annually through the government’s budget policy statement and the Finance Act based on government’s strategic priorities at a given time.

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

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

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

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

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

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

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

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

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

5. Protection of Property Rights

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

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

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

The major intellectual property enforcement issues in Kenya related to counterfeit products are corruption, lack of enforcement of penalties, insufficient investigations and seizures of counterfeit goods, limited cooperation between the private sector and law enforcement agencies, and reluctance of brand owners to file complaints with the Anti-Counterfeit Agency (ACA).  The prevalence of “gray market” products – genuine products that enter the country illegally without paying import duties – also presents a challenge, especially in the mobile phone and computer sectors.  Copyright piracy and the use of unlicensed software are also common.  Kenya’s score in the 2021 International Property Rights Index, which assesses intellectual and physical property rights, decreased marginally from 5.0 in 2020 to 4.98 in 2021, though its relative ranking improved, rising from 10 to 8 of 28 countries in Africa, and from 86 to 85 of 129 globally.

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

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

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

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

6. Financial Sector

Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa.  The 2021 Morgan Stanley Capital International Emerging and Frontier Markets Index, which assesses equity opportunity in 27 emerging economies, ranked the Nairobi Securities Exchange (NSE) as the best performing exchange in sub-Saharan Africa over the last decade.  The NSE operates under the jurisdiction of the Capital Markets Authority of Kenya.  It is a full member of the World Federation of Exchanges, a founding member of the African Securities Exchanges Association (ASEA) and the East African Securities Exchanges Association (EASEA).  The NSE is a member of the Association of Futures Markets and is a partner exchange in the United Nations-led Sustainable Stock Exchanges initiative.  Reflecting international confidence in the NSE, it has always had significant foreign investor participation.  In July 2019, the NSE launched a derivatives market that facilitates trading in future contracts on the Kenyan market.  The bond market is underdeveloped and dominated by trading in government debt securities.  The government’s domestic debt market, however, is deep and liquid.  Long-term corporate bond issuances are uncommon, limiting long-term investment capital.

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

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

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

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

In 2021, the Kenyan banking sector included 42 commercial banks, one mortgage finance company, 14 microfinance banks, nine representative offices of foreign banks, eight non-operating bank holdings, 69 foreign exchange bureaus, 19 money remittance providers, and three credit reference bureaus, which are licensed and regulated by the CBK.  Fifteen of Kenya’s commercial banks are foreign owned.  Major international banks operating in Kenya include Citibank, Absa Bank (formerly Barclays Bank Africa), Bank of India, Standard Bank, and Standard Chartered.  The 12 commercial banks listed banks on the Nairobi Securities Exchange owned 89 percent of the country’s banking assets in 2019.

The COVID-19 pandemic has significantly affected Kenya’s banking sector.  According to the CBK, in 2020, 32 out of 41 commercial banks restructured loans to accommodate affected borrowers.  Non-performing loans (NPLs) reached 14.6 percent by the end of 2021 – a three percent year-on-year increase.

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

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

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

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

7. State-Owned Enterprises

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

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

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

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

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

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

8. Responsible Business Conduct

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

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

Department of State

Department of the Treasury

Department of Labor

Kenya has a 2010 Kenya National Climate Change Response Strategy (NCCRS) that focuses on integrating adaptation and mitigation measures in all government planning, budgeting, and development objectives, and a collaborative and joint action with all stakeholders.  The NCCRS also proposes Kenya’s participation in carbon markets including the UN’s Clean Development Mechanism carbon offset scheme.  In 2020, Kenya submitted its second Nationally Determined Contribution committing to reduce its already low total greenhouse gas emissions an additional 32 percent by 2030.  Kenya develops five-year periodic National Climate Change Action Plans (NCCAP).  The current NCCAP (2018-2022) seeks to further sustainable development and create an environment to pursue low-carbon climate resilient development.  In 2016, Kenya published its Green Economy Strategy and Implementation Plan (2016-2030) which prioritizes investments and development pathways with higher green growth, cleaner environment, and higher productivity.  Kenya’s 2018 National Climate Finance Policy supports a Green Climate Fund and the tracking of climate related activities in the Integrated Financial Management Information System (IFMIS) through budget coding and tagging.

Kenyan government strategies involve a multi-stakeholder approach to climate change response.  This includes the national government, county government, non-governmental organizations, and private sector.  The National Environment Management Authority (NEMA) assesses all projects for compliance with set environmental and sustainability standards.  Projects cannot commence until meeting set criteria for environmental impact assessment and being cleared by NEMA.

Kenya’s climate policies are ranked favorably in global climate related indices, including: ClimateScope, the Green Growth Index, and The Green Future Index.  The rankings measure the degree to which economies are pivoting toward clean energy, industry, agriculture, and society through investment in renewables, innovation and green finance, which market is the most attractive for energy transition investment, and performance in achieving sustainability targets including the UN Sustainable Development Goals.  (https://global-climatescope.org/results/, https://greengrowthindex.gggi.org/wp-content/uploads/2021/01/2020-Green-Growth-Index.pdf, https://www.technologyreview.com/2021/01/25/1016648/green-future-index/)

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USD) 2020 $96.01 billion 2019 $101.01 billion https://data.worldbank.org/indicator/NY.GDP.
MKTP.CD?locations=KE
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $353 M BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $-16 M BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm
Total inbound stock of FDI as % host GDP 2019 1.2% 2020 0.1% https://unctad.org/webflyer/world-investment-report-2021

*Host Country Statistical Source: Central Bank of Kenya, Foreign Investment Survey 2020  

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

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

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

Senegal

4. Industrial Policies

Senegal’s Investment Code provides for investment incentives, including temporary exemption from customs duties and income taxes, for investment projects. Eligibility for investment incentives depends upon a firm’s size and the type of activity, amount of the potential investment, and location of the project. To qualify for significant investment incentives, firms must invest above CFA 100 million (approximately $165,000) or in activities that lead to an increase of 25 percent or more in productive capacity. Investors may also deduct up to 40 percent of retained investment over five years. However, for companies engaged strictly in “trading activities,” investment incentives may not be available. Senegal does not provide incentives for underrepresented investors such as women, nor does it provide specific incentives for clean energy investments.

Eligible sectors for investment incentives include agriculture and agro-processing, fishing, livestock, and related industries, manufacturing, tourism, mineral exploration and mining, banking, and others. All qualifying investments benefit from the “Common Regime,” which includes two years of exemption from duties on imports of goods not produced locally for small and medium-sized firms, and three years for all others. Also included is exemption from direct and indirect taxes for the same period.

Exemption from the Minimum Personal Income Tax and from the Business License Tax can be granted to investors who use local resources for at least 65 percent of their total inputs within a fiscal year. Enterprises that locate in less industrialized areas of Senegal may benefit from exemption of the lump-sum payroll tax of three percent, with the exemption running from five to 12 years, depending on the location of the investment. The investment code provides for exemption from income tax, duties, and other taxes, phased out progressively over the last three years of the relief period. Most incentives are automatically granted to investment projects meeting the above criteria.

An existing firm requesting an extension of such incentives must be at least 20 percent self-financed. To qualify for these benefits, firms are required to create at least 150 full-time positions for Senegalese nationals, contribute the hard currency equivalent of at least 100 million CFA ($165,000), and keep regular accounts that conform to Senegalese standards. In addition, firms must provide APIX with details on company products, production, employment, and consumption of raw materials.

In 2017, Senegal passed legislation to create Special Economic Zones (SEZ). Enterprises approved under the SEZ regime may be granted tax and customs concessions for up to 25 years. Benefits may include exemptions from duties and taxes on imports of goods, raw materials and equipment (except for community levies); application of a reduced 15 percent corporate tax rate; and exemption from certain taxes and charges, such as business and property taxes. To qualify for these benefits, companies must make a minimum investment of CFA 100 million ($165,000), create at least 150 jobs during their first year, and generate at least 60 percent of their revenue from exports. In November 2018, President Sall inaugurated the country’s first SEZ in the Dakar planned suburb of Diamniadio. The GOS has since launched two additional SEZs; one in Sandiara, 80 kilometers from the capital city Dakar, and the other in Ndiass, in the vicinity of Dakar’s International Airport. According to Senegalese officials responsible for digital economy development, the GOS has installed more than 150 kilometers of high-speed fiberoptic cable throughout Diamniadio to boost access and speeds for investors locating there.

Senegal’s Data Protection Act was passed in 2008. Senegal has mandatory requirements to register mobile device SIM cards and is a signatory to the Economic Community of West African States Supplementary Act on Personal Data Protection from 2010. There is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, nor are there measures that prevent or restrict companies from freely transmitting customer or other business-related data outside Senegal.

President Macky Sall inaugurated a 1,000 terabyte government data center in June 2021 with the intent to migrate all Senegalese government data and applications there and host them in the future. In March 2022, President Sall announced that national digital agency ADIE would become Société National Senegal Numerique (National Company for Digital Senegal, SEMUM) to accelerate Senegal’s digitalization.

5. Protection of Property Rights

The Senegalese Civil Code provides a framework, based on French law, for enforcing private property rights. The code provides for equality and non-discrimination against foreign-owned businesses. Senegal maintains a property title and a land registration system, but application is uneven outside of urban areas. Establishing ownership rights to real estate can be difficult. Once established, however, ownership is protected by law.

The GOS has undertaken several reforms to make it easier for investors to acquire and register property. It has streamlined procedures and reduced associated costs for property registration and developed new land tenure models intended to facilitate land acquisition by resolving conflicts between traditional and government land ownership. If the new models are widely adopted, the GOS and donors expect they will facilitate land acquisition and investment in the agricultural sector while providing benefits to traditional landowners in local communities.

The GOS generally pays compensation when it takes private property through eminent domain. Senegal’s housing finance market is under-developed, and few long-term mortgage-financing vehicles exist. There is no secondary market for mortgages or other bundled revenue streams. The judiciary is inconsistent when adjudicating property disputes. According to the World Bank, registering property requires an average of 41 days, compared to an average of 51.6 days in sub-Saharan Africa and 23.6 days in OECD countries. Five separate procedures are required.

Senegal maintains an adequate legal framework for protecting intellectual property rights (IPR), but the country has limited institutional capacity to enforce IPR laws. Senegal has been a member of the World Intellectual Property Organization (WIPO) since its inception. Senegal is also a member of the African Organization of Intellectual Property, a grouping of 15 Francophone African countries with a common system for obtaining and maintaining protection for patents, trademarks, and industrial designs. Local statutes recognize reciprocal protection for authors or artists who are nationals of countries adhering to the 1991 Paris Convention on Intellectual Property Rights. Patents may be registered with the Agence Sénégalaise pour la Propriété industrielle et l’Innovation technologique (Senegalese Agency for Industrial Property and Technical Innovation, ASPIT) and are protected for 20 years. An annual charge is levied during this period. Registered trademarks are protected for a period of 20 years. Trademarks may be renewed indefinitely by subsequent registrations. Senegal is a signatory to the Berne Convention for the Protection of Literary and Artistic Works. The Senegalese Copyright Office, part of the Ministry of Culture, protects copyrights. Bootlegging of music CDs is common and a source of concern for the local music industry. The Copyright Office has taken actions to combat media piracy, including seizure of counterfeit cassettes, CDs, and DVDs. In 2008, the government established a special police unit to improve enforcement of the country’s anti-piracy and counterfeit laws. The government has limited capacity to combat IPR violations or to seize counterfeit goods. Customs screening for counterfeit goods production is weak and confiscated goods occasionally re-appear in the market. Nevertheless, the GOS has raised awareness of the impact of counterfeit products on the Senegalese marketplace, especially regarding pharmaceuticals, and officers have participated in trainings offered by manufacturers to identify counterfeit products.

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

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at WIPO country profiles .

6. Financial Sector

Senegalese authorities take a generally positive view of portfolio investment. Assisted by the debt management office of the 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. In June 2021, the authorities issued a 775-million-Euro Eurobond’ its first Euro-denominated obligation. Some observers, including the IMF, have expressed concern over the continued rise in Senegal’s public debt, which has more than doubled over the last decade, in part due to the country’s significant investments associated with the PSE. With the ongoing effects of COVID-19 and the consequences of the political turmoil of March 2021, Senegal’s 2021 debt-to-GDP ratio rose to 73 percent, compared to 52 percent in 2018. In late 2020, Senegal took advantage of the G20’s Debt Service Suspension Initiative, receiving relief from $163 million in debt service payments (0.6 percent of GDP) through the end of 2021. The GOS aims to mitigate concerns about its public debt by containing energy subsidies, prioritizing concessional borrowing, and taking steps to increase government revenues.

Senegal does not have its own stock market. A handful of Senegalese companies are listed on the West African Regional Stock Exchange (BRVM), headquartered in Abidjan, Cote d’Ivoire. The BRVM 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, the new program was supported by the U.S. Treasury’s Office of Technical Assistance.

While Senegal’s banking system is generally sound, the financial sector is underdeveloped. Senegal’s 26 commercial banks, primarily based in France, Nigeria, Morocco, and Togo, follow 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 2016 government survey, about 17 percent of enterprises in the formal sector receive financing from commercial banks, compared to 6 percent for informal enterprises. Authorities have committed to implement the national financial inclusion strategy (2021-25) and achieve a financial inclusion rate of 65 percent of adults and 90 percent of SMEs. Senegal’s banking sector is regulated by the BCEAO and the WAEMU regional banking commission. Increasingly available mobile money services offer Senegalese consumers alternatives to traditional banking and credit services.

In 2012, Senegal established a sovereign wealth fund (Fonds Souverain d’Investissements Strategiques, 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 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.

7. State-Owned Enterprises

Senegal has generally reduced government involvement in SOEs during the last three decades. However, the GOS still owns full or majority interests in 24 SOEs, including the national electricity company (Senelec), Dakar’s public bus service, the Port of Dakar, National Post, the national rail company, and the national water utility. Senelec retains control over power transmission and distribution, but it relies increasingly on independent producers to generate power. The GOS has also retained control of the national oil company, PETROSEN, which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The GOS has modest and declining ownership of agricultural enterprises, including one involved in rice production. In 2018, the government revived the state-owned airline, Air Senegal. The GOS also owns a minority share in Sonatel-Orange Senegal, the country’s largest internet and mobile communications provider.

The Direction du Secteur Parapublic, an agency within the Ministry of Finance, manages the government’s ownership rights in SOEs. The GOS’s budget includes financial allocations to these enterprises, including subsidies to Senelec. SOE revenues are not projected in budget documents, but actual revenues are included in quarterly reports published by the Ministry of Finance. Senegal’s supreme audit institution (the Cour des Comptes) conducts audits of the public sector and SOEs.

The government has no program for privatizing the remaining SOEs.

8. Responsible Business Conduct

Following the lead of foreign companies, some Senegalese firms have begun adopting corporate social responsibility programs and responsible business conduct standards. However, this movement is not yet widespread.

Senegal’s 2016 Mining Code specifies the criteria and procedures by which the government awards natural resource extraction contracts or licenses. The code requires mining companies to participate in transparency reporting following the guidelines of the Extractive Industries Transparency Initiative (EITI). The GOS appears to follow the Mining Code and its implementing regulations in practice, although unregulated artisanal mining is common in some areas. Basic information on awards was publicly available online through the government’s official journal, and included details regarding geographic areas, resources under development, companies involved, and the duration of contracts. In January 2019, the government adopted a new Petroleum Code, which clarifies mechanisms for reserving revenues from oil and gas projects to the government. Senegal has been an active member of the EITI since 2013. In May 2018, the EITI Board declared Senegal the first country in Africa to have made “satisfactory progress” in implementing EITI standards. In October 2019, Senegal hosted the 41st quarterly meeting of the EITI Board, along with a conference on EITI implementation in Africa. The government’s EITI committee reports directly to the President.

Senegal’s long-term national economic development policy – the Plan Senegal Emergent (PSE) – includes a green growth program known as “Green PSE” (PSE Vert). Launched in December 2021, the Green PSE is structured around six priority sectors: agriculture, energy, industry, water and sanitation, forestry, and construction. The Green PSE aims to build Senegal’s capacity to access financial resources from the Green Climate Fund (GCF) and private sector investment. According to the PSE Operational Bureau within the Office of the President, the GOS will convene representatives from the six priority sectors in May 2022 to identify specific projects and a roadmap for their implementation.

In December 2020, the GOS published its Nationally Determined Contribution (NDC) to the 2015 Paris Agreement. Senegal’s NDC contains a greenhouse gas mitigation plan for transport, waste, energy, industry, forestry and agriculture and an adaptation plan for key climate impacts affecting Senegal, such as coastal erosion, declining agriculture, fishing, and livestock, risks to public health/biodiversity, and urban flooding. The NDC forecasts two emissions reduction scenarios: one accomplished with domestic resources (unconditional) and the other accomplished with a combination of domestic resources and foreign assistance (conditional). The unconditional scenario calls for a 5 percent reduction by 2025 and 7 percent by 2030, compared to business as usual. The conditional scenario calls for a 23 percent reduction by 2025 and a 29 percent reduction by 2030, compared to business as usual. Biodiversity is included in the adaptation plan of the NDC. The GOS has not formally instituted a net-zero carbon emissions policy. Senegal does not provide regulatory incentives or other policies to achieve policy outcomes that preserve biodiversity, clean air, or other desirable ecological benefits.

Senegal’s NDC addresses economy-wide greenhouse gas emissions, including private sector emissions. However, the NDC does not disaggregate public and private sector emissions. Senior GOS climate officials in associated with the National Climate Change Committee have told Post that during the first half of 2022 an inter-ministerial committee will meet to validate a monitoring, reporting, and verification mechanism for emissions. Senegal’s NDC states that the country will meet either its unconditional or conditional emissions reduction targets primarily through four principal means: i) increasing carbon sequestration through improved agroforestry and forest management; ii) transitioning from highly polluting fuel oil to cleaner burning fuels in the energy sector, as well as energy efficiency improvements; iii) improving the management of solid and liquid wastes; and iv) improving industrial processes. Each of these activities involves private sector participation. However, the NDC does not include specific sectoral emissions reductions targets attributable to private sector actors.

Bloomberg Markets ranks Senegal as the 13th most attractive market for energy transition investment among emerging markets and 40th globally: Climate Scope .

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2020 $25,051 Senegal GDP 
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $114 U.S. FDI in Senegal 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $0 Senegal FDI in United States 
Total inbound stock of FDI as % host GDP N/A N/A 2020 34.6% Total FDI in Senegal 

“0” reflects amounts rounded to +/- USD 500,000.

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy
From Top Five Sources/To Top Five Destinations (US Dollars, Millions) in 2019
Inward Direct Investment Outward Direct Investment
Total Inward $4,688 100% Total Outward $949 100%
France #1 $2,333 50% France #1 $409 43%
Mauritius #2 $636 14% Mali #2 $129 14%
Canada #3 $626 14% Cote d’Ivoire #3 $127 13%
Nigeria #4 $200 4% India #4 $93 10%
China #5 $180 4% Mauritius #5 $69 7%

Data 

14. Contact for More Information

Aichatou Fall
Economic Specialist
U.S. Embassy, Route des Almadies, B.P. 49, Dakar, Senegal
+221 33 879 4000
FallAX@state.gov 

Tanzania

4. Industrial Policies

The Tanzania Investment Center (TIC) offers a package of investment benefits and incentives to both domestic and foreign investors without performance requirements. A minimum capital investment of $500,000 if foreign owned or $100,000 if locally owned is required. (At the time of this publication, the government was revising these incentives. Investors are advised to consult the TIC for up-to-date information.)

Current investment incentives include the following:

  • Discounts on customs duties, corporate taxes, and VAT paid on capital goods for investments in mining, infrastructure, road construction, bridges, railways, airports, electricity generation, agribusiness, telecommunications, and water services.
  • 100 percent capital allowance deduction in the years of income for the above-mentioned types of investments – though there is ambiguity as to how this is accomplished.
  • No remittance restrictions. The GoT does not restrict the right of foreign investors to repatriate returns from an investment.
  • Guarantees against nationalization and expropriation. Any dispute arising between the GoT and investors may be settled through negotiations or submitted for arbitration.
  • Allowing interest deduction on capital loans and removal of the five-year limit for carrying forward losses of investors.

Investors may apply for “Strategic Status” or “Special Strategic Status” to receive further incentives. The criteria used to determine whether an investor may receive these designations are available on TIC’s website ( view TIC’s website ).

The government introduces waivers through the Public Finance Act with the aim of attracting investment in certain targeted sectors. In Financial year 2021/2022, the government introduced VAT exemption on entities with agreements with the GoT for the operation or execution of strategic projects, to the extent that the agreements provide for such exemption; a strategic project is defined as a project that has been so determined by the Cabinet of Ministers. The government also re-introduced VAT exemption for non-governmental organizations having agreements with the GoT, to the extent that the agreements provide for such exemption. The minister of finance may make regulations prescribing the manner of application, granting and monitoring of exemptions, which previously required the minister to appoint a technical committee for guidance on these matters.

The government does not currently offer any incentives for clean energy investments.

The Export Processing Zones Authority (EPZA) oversees Tanzania’s Export Processing Zones (EPZs) and Special Economic Zones (SEZs). EPZA’s core objective is to build and promote export-led economic development by offering investment incentives and facilitation services ( view EPZA ). Minimum capital requirements for EPZ and SEZ investors are $500,000 for foreign investors and $100,000 for local investors. Investment incentives offered for EPZs include the following:

  • An exemption from corporate taxes for ten years.
  • An exemption from duties and taxes on capital goods and raw materials.
  • An exemption on VAT for utility services and on construction materials.
  • An exemption from withholding taxes on rent, dividends, and interests.
  • Exemption from pre-shipment or destination inspection requirements.
  • SEZs offer similar incentives, excluding the ten-year exemption from corporate taxes.

The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar Free Economic Zones Authority (ZAFREZA) offer the following incentives:

Category “A” Free Economic Zone Developers: Development of Infrastructure

The developer of a Free Economic Zone shall benefit to the following incentives:

  • exemption from payment of taxes and duties for machinery, equipment, heavy duty vehicles, building and construction materials, and any other goods of capital nature to be used for purposes of development of the Free Economic Zone infrastructure.
  • exemption from payment of corporate tax for an initial period of ten years and thereafter a corporate tax, shall be charged at the rate specified in the Income Tax Act.
  • exemption from payment of withholding tax on rent, dividends ‘and interest for the first ten years.
  • exemption from payment of property tax for the first ten years.
  • remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation to and from the Free Economic Zone.
  • exemption from payment of stamp duty on any instrument executed in or outside the Free Economic Zone relating to transfer, lease or hypothecation of any movable or immovable property situated within the Free Economic Zone or any document, certificate, instrument, report or record relating to any activity, action, operation, project, undertaking, or venture in the Free Economic Zone;
  • treatment of goods destined into Free Economic Zones as transit goods; and
  • on site customs inspection of goods within Free Economic Zones.

Category “B” Free Economic Zones Operators: Approved Investors Producing for Sale into the Customs Territory

Approved Investors whose primary markets are within the customs territory shall be entitled to the:

  • remission of customs duty, value added tax and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
  • exemption from payment of withholding tax on interest on foreign sourced loan;
  • remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, one ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation into and from the Free Economic Zones;
  • exemption from pre-shipment or destination inspection requirements;
  • on site customs inspection of goods within Free Economic Zones;
  • access to competitive, modern and reliable services available within the Free Economic Zones; and
  • subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of:

(i) net profits or dividends attributable to the investment; (ii) payments in respect of loan servicing where a foreign loan has been obtained;

(ii) payments in respect of loan servicing where a foreign loan has been obtained; (iii) royalties, fees and charges for any technology transfer agreement;

(iii) royalties, fees and charges for any technology transfer agreement; (iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business;

(iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business; and

(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the licensed business.

Category “C” Free Economic Zone Operators: Approved Investors Producing for Export Markets

  • Approved Investors producing for export markets in non-manufacturing or processing sectors shall be entitled to the:
  • subject to compliance with applicable conditions and procedures, accessing the export credit guarantee scheme;
  • remission of customs duty, value added, and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
  • exemption from payment of corporate tax for an initial period of ten years and thereafter, a corporate tax shall be charged at the rate specified in the Income Tax Act;
  • exemption from payment of withholding tax on rent, dividends and interests for the first ten years;
  • exemption from payment of all taxes and levies imposed by the Local Government Authorities for products produced in the Free Economic Zones for a period of ten years;
  • exemption from pre-shipment or destination inspection requirements;
  • on site customs inspection of goods in the Free Economic Zones;
  • remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and vehicles and up to two buses for employees’ transportation to and from the Free Economic Zones;
  • treatment of goods destined into Free Economic Zones as transit goods;
  • access to competitive, modern and reliable services available within the Free Economic Zones; and
  • subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of:

(i) net profits or dividends attributable to the investment;

(ii) payments in respect of loan servicing where a foreign loan has been obtained;

(iii) royalties, fees and charges for any technology transfer agreement;

(iv) the remittance of proceeds in the event of sale or liquidation of the business enterprises or any interest attributable to the investment;

(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the business enterprise; twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;

  • twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;
  • hundred percent foreign ownership is allowed; and
  • no limit to the duration that goods may be stored in the Freeport Zones.

2. For purposes of this section, investors licensed primarily for export markets are investors whose exports are more than eighty percent of total annual production.

Incentives and allowances outside Free Economic Zones

1. Approved investor investing outside Free Economic Zones, may be granted the:

  • exemption from payment of import duty, excise duty Value Added Tax and other similar taxes on machinery, equipment, spare parts, vehicles and other input necessary and exclusively required by that enterprise during construction period indicated in the Investment Certificate;
  • exemption from payment of business license fee for the first three months of trial operation;
  • corporate tax exemption for up to five years;
  • hundred percent foreign ownership;
  • hundred percent retention of all profits after tax;
  • hundred percent allowance Research and Development; and
  • hundred percent allowance for free repatriation of profit after tax.

2. Without prejudice to the provisions of paragraph 1 of this Part, approved investor investing in manufacturing sector may further be granted the:

  • exemption from payment of any tax on all goods produced for exports;
  • exemption from payment of trade levy for raw materials and industrial inputs procured from Tanzania mainland;
  • exemption from payment of import duty, VAT, and other similar taxes on raw and packaging materials during project operations;
  • exemption of Income Tax on interest on registered borrowed capital; and
  • hundred percent allowance investment deduction on capital expenditure within five years.

3. Without prejudice to the provisions of paragraph 1 of this Part, Approved Investor investing in real estate business may also be granted the:

  • exemption of income tax on interest on borrowed capital;
  • stamp duty exemption;
  • hundred percent allowance investment deduction on capital expenditure within five years; and
  • capital gains tax on properties sold or purchased.

Tanzania’s export processing zones (EPZs) and special economic zones (SEZs) are assigned geographical areas or industries designated to undertake specific economic activities with special regulations and infrastructure requirements. EPZ status can also be extended to stand-alone factories at any geographical location. EPZ status requires the export of 80 percent or more of the goods produced. SEZ status has no export requirement, allowing manufacturers to sell their goods locally. There are currently 14 designated EPZ/SEZ industrial parks, 10 of which are in development, and 75 stand-alone EPZ factories.

The Non-Citizens (Employment Regulation) Act of 2015 (see Section 12 Labor Policies and Practices below) requires employers to attempt to fill positions with Tanzanian citizens before seeking work permits for foreign employees, and to develop plans to transition all positions held by foreign employees to local employees over time. The Act was amended in June 2021 to extend the time limit for work permits of non-citizen employees from the initial five years to eight years; applications are now submitted through the Online Work Permit Application and Issuance System (OWAIS). The amendment also allows an investor who has been granted incentives and registered with the TIC and Export Processing Zone Authority (EPZA) to employ up to ten non-citizens. Prior to the amendment, an investor could employ up to five non-citizens during the initial period of investment.

Because the local content (LC) initiative cuts across all economic sectors, the government decided that oversight of LC development should take a multi-sector approach, rather than being confined to a single ministry or sector. In 2015, the government directed the National Economic Empowerment Council (NEEC) to oversee implementation of local empowerment initiatives. The objective of the local content policy is to put local products and services – delivered by businesses owned and operated by Tanzanians – in an advantageous position to exploit opportunities emanating from inbound foreign direct investments. In 2015, the GoT enacted The Petroleum Act and, subsequently, issued The Petroleum (Local Content) Regulations 2017. Similarly, in 2017, the GoT amended mining laws, issuing The Mining (Local Content) Regulations 2018. (See Chapter 4: Laws and Regulations on Foreign Direct Investment for more on recent local content laws.)

Bank of Tanzania (BoT) regulations require banks to physically house their primary data centers in Tanzania or face steep penalties.

The GoT launched a USD 94 million National Internet Data Center (NIDC) in 2016, which is operated by the GoT’s Tanzania Telecommunications Company Limited (TTCL). Under the Tanzania Telecommunications Corporation (TTC) Act 2017, the TTC plans, builds, operates and maintains the “strategic telecommunications infrastructure,” which is defined as transport core infrastructure, data center and other infrastructure that the GoT proclaims “strategic” via official public notice.

5. Protection of Property Rights

All land is owned by the government and procedures for obtaining a lease or certificate of occupancy may be complex and lengthy. Less than 15 percent of land has been surveyed, and registration of title deeds is handled manually, mainly at the local level. Foreign investors may occupy land for investment purposes through a government-granted right of occupancy (“derivative rights” facilitated by TIC), or through sub-leases from a granted right of occupancy. Foreign investors may also partner with Tanzanian leaseholders to gain land access.

Land may be leased for up to 99 years, but the law does not allow individual Tanzanians to sell land to foreigners. There are opportunities for foreigners to lease land, including through TIC, which has designated specific plots of land (a land bank) to be made available to foreign investors. Foreign investors may also enter into joint ventures with Tanzanians, in which case the Tanzanian provides the use of the land (but retains ownership, i.e., the leasehold).

Secured interests in property are recognized and enforced. Though TIC maintains a land bank, restrictions on foreign ownership may significantly delay investments. Land not in the land bank must go through a lengthy approval process by local-level authorities, the Ministry of Lands, Housing, Human Settlements Development (MoLHHSD), and the President’s Office to be designated as “general land,” which may be titled for investment and sale.

The MoLHHSD handles registration of mortgages and rights of occupancies and the Office of the Registrar of Titles issues titles and registers mortgage deeds. Title deeds are recognized as collateral for securing loans from banks. In January 2018, the GoT amended the land law, requiring that loan proceeds secured by mortgaging underdeveloped land be used solely to develop the specific piece of land used as collateral. The changes apply to general land managed by the MoLHHSD’s Commissioner for Lands, who must receive a report from the lender showing how loan proceeds will be used to develop the land. The law does not apply to village land allocated by village councils, which cannot be mortgaged to a financial institution.

The GoT’s Copyright Society of Tanzania (COSOTA) is responsible for registration and enforcement of copyrighted materials, while the Business Registrations and Licensing Agency (BRELA) within the Ministry of Trade administers trademark and patent registration. It is the responsibility of the rights holders to enforce their rights where relevant, retaining their own counsel and advisors. The Fair Competition Commission (FCC) promotes competition, protects consumers against unfair market conduct, and has quasi-judicial powers to determine trademark and patent infringement cases. The FCC is also tasked with combating the sale of counterfeit merchandise. However, the Tanzania Medicines and Medical Devices Authority (TMDA) handles counterfeit human medicines, cosmetics, and packaged food materials, and its mandate is stipulated in the Tanzania Food, Drugs, and Cosmetics Act (TFDCA) as per the amendment of 2019. Despite its efforts, limited resources make it difficult for the GoT to adequately combat counterfeiting.

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

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

6. Financial Sector

Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly owned company. In 2013, the DSE launched a second-tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential. As March 2022, the total market capitalization was $7.076 billion, a 5.6 percent increase from March 2021 ($6.7 billion). The Capital Markets and Securities Authority (CMSA) Act facilitates the flow of capital and financial resources to support the capital market and securities industry. Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.

Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities. Only companies or citizens from EAC nations are permitted to participate in the government securities market. Even with this recent development allowing EAC participation, foreign ownership of government securities is still limited to 40 percent of each security issued.

Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE. Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval.

As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018. Currently, no mining companies are listed on the DSE.

Tanzania’s financial inclusion rate increased significantly over the past decade thanks to mobile phones and mobile banking. However, participation in the formal banking sector remains low. Low private sector credit growth and high non-performing loan (NPL) rates are persistent problems. The NPL ratios further deteriorated with the COVID 19 pandemic.

According to the IMF’s most recent Financial System Stability Assessment ( view assessment ), Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. The report found that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis.

The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market. The only U.S. bank operating in Tanzania is Citibank Tanzania Limited. Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks, however a special exemption is required from the Bank of Tanzania to open an account as a “foreign entity.” A foreign entity account is an account owned by a company without a registered, legal business presence in Tanzania.

The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report. Currently, there are two private credit bureaus operating in Tanzania: Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.

Tanzania does not have a sovereign wealth fund.

7. State-Owned Enterprises

Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, rail, telecommunications, insurance, aviation, and port sectors. SOEs generally report to ministries and are led by a board. Typically, a presidential appointee chairs the board, which usually includes private sector representatives. SOEs are not subjected to hard budget constraints. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees.

Specific details on SOE financials and employment figures are not publicly available.

As of June 2019, the GoT’s Treasury Registrar reported shares and interests in 266 public parastatals, companies and statutory corporations ( view the most recent Treasury Registrar report ).

The government retains a strong presence in energy, mining, telecommunication services, and transportation. The government is increasingly empowering the state-owned Tanzania Telecommunications Corporation Limited (TTCL) with the objective of safeguarding the national security, promoting socio-economic development, and managing strategic communications infrastructure. The government also acquired 51 percent of Airtel Telecommunication Company Limited and became the majority shareholder. In the past, the GoT has sought foreign investors to manage formerly state-run companies in public-private partnerships, but successful privatizations have been rare. Though there have been attempts to privatize certain companies, the process is not always clear and transparent. The GoT currently has 20 companies/assets awaiting privatization.

8. Responsible Business Conduct

The GoT’s National Environment Management Council (NEMC) undertakes enforcement, compliance, review, and monitoring of environmental impact assessments; performs research; facilitates public participation in environmental decision-making; raises environmental awareness; and collects and disseminates environmental information. Stakeholders, however, have expressed concerns over whether the NEMC has sufficient funding and capacity to handle its broad mandate.

There are no legal requirements for public disclosure of RBC, and the GoT has not yet addressed executive compensation standards. Dar es Salaam Stock Exchange (DSE) listed companies, however, must release legally required information to shareholders and the general public. In addition, the DSE signed a voluntary commitment with the United Nations Sustainable Stock Exchanges Initiative in June 2016, to promote long-term sustainable investments and improve environmental, social, and corporate governance. Tanzania has accounting standards compatible with international accounting bodies.

The Tanzanian government does not usually factor RBC into procurement decisions. The GoT is responsible for enforcing local laws, however, the media regularly reports on corruption cases where offenders allegedly avoid sanctions. There have also been reports of corporate entities collaborating with local governments to carry out controversial undertakings that may not be in the best interest of the local population.

Some foreign companies have engaged NGOs that monitor and promote RBC to avoid adversarial confrontations. In addition, some of the multinational companies who are signatories to the Voluntary Principles on Security and Human Rights (VPs) have taken the lead and appointed NGOs to conduct programs to mitigate conflicts between the mining companies, surrounding communities, local government officials and the police.

Tanzania is a member of the Extractive Industries Transparency Initiative (EITI) and in 2015 Tanzania enacted the Extractive Industries Transparency and Accountability Act, which demands that all new concessions, contracts and licenses are made available to the public. The government produces EITI reports that disclose revenues from the extraction of its natural resources.

Investors should be aware of human and labor rights concerns in the minerals and extractives sector, as well as agriculture. In May 2021 there was a high-profile USD 6 million out of court settlement for alleged breaches of human rights associated with third-party security operations at the Williamson Diamond Mine in Tanzania, which is 25% owned by the Government of Tanzania and 75% owned by Petra (UK). Petra (UK) agreed to pay claimants and committed to invest in programs dedicated to providing long-term sustainable support to the communities living around the Mine. Petra is also establishing a new and independent (“Tier 2”) Operational Grievance Mechanism (“OGM”). It will be managed by an independent panel and operate according to the highest international standards, as set out in the United Nations Guiding Principles on Business and Human Rights.

Department of State

Department of the Treasury

Department of Labor

Tanzania maintains a national climate strategy, and recently developed and submitted its second Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) in 2021.  Its second NDC builds on the 2021 National Climate Change Strategy (NCCS), the 2014 Zanzibar Climate Change Strategy (ZCCS) and other national climate change development processes.

Tanzania has also developed/adopted and implements various other policies, legislation, strategies, plans and programs to address climate change.  This includes Tanzania’s National Communications Plans (2003 and 2015); Natural Gas Policy (2013); the Zanzibar Environmental Policy (2014); the Renewable Energy Strategy (2014); the Natural Gas Act (2015); the National Forestry Policy (1998); the National Transport Master Plan (2013); the National Environmental Policy (1997 and 2022); the Zanzibar Environmental Policy (2013); the National Environmental Action Plan (2012-2017); the National REDD+ Strategy and Action Plan (2013); the National Climate-Smart Agriculture Program (2015-2025); and the National Environment Management Act (2004).

Despite Tanzania’s low greenhouse gas emissions, the country is committed to climate change mitigation and adaption strategies. Tanzania’s 2021 National Environmental Policy reflects the country’s commitment to reach net-zero carbon emissions by 2050. Strategies and policies exist, but specifics are lacking, as is data sharing on progress towards targets and goals.  The GoT’s second Nationally Determined Contribution (NDC) – submitted to UNFCCC in 2021 – highlights an overall mitigation goal of nationally reducing greenhouse gas (GHG) emissions by 30-35% relative to Business-As-Usual scenario by 2030, and indicates that it has formulated the cost of net-zero emissions by 2050, though the details are not clear.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USD) 2019 $63 billion 2020 $62.41 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (USD, stock positions) N/A N/A 2020 $1.47 million BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States (USD, stock positions) N/A N/A 2020 $ (-2) million BEA data available at https://www.bea.gov/international/
direct-investment-and-multinational-enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2020 1.5% UNCTAD data available at https://stats.unctad.org/handbook/Economic
Trends/Fdi.html
 

* Source for Host Country Data: host country data not publicly available.

Table 3: Sources and Destination of FDI

There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).

According to the Bank of Tanzania, the top sources for inward foreign investment into Tanzania are South Africa, Canada, Nigeria, Netherlands, United Kingdom, Mauritius, Kenya, United States, Vietnam, and France.

Data on outward direct investment is not available.

Table 4: Sources of Portfolio Investment

There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).

14. Contact for More Information

Economic Officer
U.S. Embassy Dar es Salaam
686 Old Bagamoyo Road
Msasani, Dar es Salaam
Tel: 255-22-229-4000
DarPolEconPublic@state.gov 

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