Transparency of the Regulatory System

Bureaucratic procedures necessary to start and maintain a business tend to be open, though slow, and regulatory procedures can be cumbersome to navigate.  However, in 2018, Botswana launched a Regulatory Impact Assessment Strategy that will work at improving the regulatory environment and ensuring that legislation is necessary and cost effective, reduce administrative burdens imposed by the regulatory environment to businesses, improve transparency, consultation, and government accountability.  Foreign investor complaints generally focus on the inefficiency and/or unresponsiveness of mid- and low-level government bureaucrats. The GoB has introduced a Performance Management System to improve the service and accountability of its employees. Unfair business practices or conduct can be reported to the Competition Authority, which seeks to level the playing field for all business operators and foster a conducive environment for business.  Bills in Botswana, including investment laws, go through a public consultation process and are available for public comment. Bills are also debated in Parliament whose sessions are open to the public.

The Companies Act of 2004 requires all companies registered in Botswana to prepare annual financial statements on the basis of generally accepted accounting principles.  It further requires every public company, including non-exempt private companies, to prepare their Financial Statement in accordance with the International Financial Reporting Standards.

The Public Procurement and Asset Disposal Board (PPADB) oversees all government tenders. Prospective government contractors are required to register with the PPADB.  The PPADB maintains a process by which tender decisions can be challenged; bidders can also challenge a tender procedure in the courts. The PPADB publishes its decisions concerning awarded tenders, prequalification lists, and newly registered contractors.

The PPADB Act calls for preferential procurement of citizen-owned contractors for works, service and supplies, as well as specific, disadvantaged women’s communities, though it states that such preferences must be time-bound, phased in and out as necessary, and consistent with the country’s external obligations and its “market-oriented, macroeconomic framework.”  When a procuring entity wishes to reserve a tender for citizen-only participation, it is required to publish a notice to that effect either in the bid document or the pre-qualification notice.

Health and safety laws, embodied in the Factories Act of 1973, provide basic protection for workers from unsafe working conditions.  Minimum working conditions required on work premises include cleanliness of the premises, adequate ventilation and sanitation, sufficient lighting and the provision of safety precautions.  Health inspectors and the Botswana Bureau of Standards carry out periodic checks at both new and operating factories.

International Regulatory Considerations

Botswana is a member of SACU and SADC.  Neither has authority over member state national regulatory systems.  Botswana is a member of the World Trade Organization (WTO) and notifies all draft technical regulations to the WTO’s Technical Barriers to Trade (TBT) Committee on Technical Barriers to Trade.

Legal System and Judicial Independence

The Constitution provides for an independent judiciary system.  Botswana’s legal system is based on Roman-Dutch law as influenced by English common law. This type of system cohabits with legislation, judicial decisions, and local customary law.  The courts enforce commercial contracts, and the judicial system is widely regarded as being fair. Both foreign and domestic investors have equal access to the judicial system. Botswana does not have a dedicated commercial court.  The Industrial Court, set up by the Trade Dispute Act of 2004, primarily addresses labor matters.

The GoB is planning to create a corps of commercially specialized judges within the civil court system.  Under the new system, commercial cases will be overseen by these commercial judges in order to expedite handling and ensure relevant expertise.  The country already has a specialized anti-corruption court that handles all corruption cases.

Some U.S. litigants have reported that the time to obtain and enforce a judgment in a commercial dispute is unreasonably long.  The turnaround time for civil cases is approximately two years. In an effort to create more efficient adjudications, the GoB has established land tribunal, industrial, small claims, and corruption courts.  During the past several years, some dockets have improved, but progress has been uneven.

Local laws are accessible through the Botswana Attorney General’s Office website (www.laws.gov.bw  ).  It can take up to 24 months for a law, once passed, to appear on the website.

Laws and Regulations on Foreign Direct Investment

Under Botswana’s Company Act, foreigners who wish to operate a business are required to register as well as obtain the relevant licenses and permits as prescribed by the Trade Act of 2008.

Licenses are required for a wide spectrum of businesses, including banking, non-bank financial services, transportation, medical services, mining, energy provision, and alcohol sales.  Although amendments to the Trade Act have eliminated the catchall miscellaneous business license category, investors have reported on local authorities insisting a business apply for a license even when it does not fall within the established categories.  In addition, some businesses have observed the enforcement of licenses, as well as the time taken for inspections to comply with licensing requirements, varies widely across local government authorities.

Competition and Anti-Trust Laws

Botswana has developed anti-trust legislation and policies to ensure appropriate competition in the business environment.  Under the Competition Act, the Competition Authority is now monitoring mergers and acquisitions. During the year 2016/2017 the Authority dealt with a number of cases to address the non-competitive business conduct and these included bid rigging cases.  The Competition Authority is empowered to reject mergers deemed not to be in the public best interest. It has interpreted this ability to mean that it can prohibit mergers that result in the concentration of a majority of shares in the hands of foreign investors.

Expropriation and Compensation

Section 8 of the country’s Constitution prohibits the nationalization of private property.  The GoB has never pursued a policy of forced nationalization and is highly unlikely to adopt one.  The Acquisition of Property Act provides a process for any expropriation, including parameters to determine market value and receive compensation.  The 2007 Amendment to the Electricity Supply Act allows the GoB to revoke an Independent Power Producer’s license and confiscate the operations, with compensation, for public interest purposes.

Dispute Settlement

ICSID Convention and New York Convention

It has ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).  It is also a member state to the International Centre for the Settlement of Investment Disputes (ICSID convention), and the Multilateral Investment Guarantee Agency (MIGA).

Investor-State Dispute Settlement

There are no known investment disputes involving U.S. persons.  Botswana accepts international arbitration to settle investment disputes.  Judgments by foreign courts recognized by the GoB are enforceable under the local courts where the appropriate bilateral agreements between the countries exist.

International Commercial Arbitration and Foreign Courts

There are no known complaints about transparency or discrimination by local courts in Botswana.

Bankruptcy Regulations

Botswana’s commercial and bankruptcy laws are comprehensive.  Secured and unsecured creditors enjoy similar rights under bankruptcy proceedings to those they would enjoy in the United States.

Investment Incentives

Botswana has several mechanisms in place to attract foreign direct investment (FDI).  The BITC assists local and foreign investors. BITC is responsible for promoting FDI, investor aftercare, and the promotion of locally manufactured goods in export markets.  It assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permits for essential staff. Investors’ requests for support from BITC and other agencies are evaluated based on the extent to which the proposed project assists in the GoB’s diversification efforts, contributes to the growth of priority sectors, and provides employment and training to Botswana citizens.  The GoB also makes grants available to investors who partner with citizens and will extend credit to investors presenting proposals that have undergone appropriate due diligence and that have completed a feasibility study. Foreign investors are encouraged to transfer technology to Botswana and skills to Botswana citizens with a view to preparing them for promotion into management positions.

Botswana offers a relatively low tax rate of 22 percent on corporate taxable income and 7.5 percent withholding tax on all dividends distributed.  MITI can grant manufacturing companies the reduced level of 15 percent taxable income. Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

The Minister of Finance and Economic Development has the authority to issue development approval orders which are used for specific projects, which include providing tax holiday and education and training grants.  The Minister must be satisfied that the proposed project will be beneficial to Botswana’s economy. Any firm, local or foreign, may apply for a Development Approval Order through the Permanent Secretary at the finance ministry.  Applications are evaluated against the following criteria: job creation for Botswana citizens; the company’s training plans for Botswana citizens; the company’s plans to localize non-citizen positions; Botswana citizen participation in company management; amount of equity held by Botswana citizens in the company; the location of the proposed investment; the project’s effect on the stimulation of other economic activities; and the project’s effect on reducing local consumer prices.  MITI also offers rebates on imported materials for manufactures that produce products for export.

In 2017, Parliament approved and implemented a special incentive package for Selebi-Phikwe geared to promote economic growth and diversification.  Some of the incentives include reduced corporate tax of 5 percent for the first five years and 10 percent thereafter (versus the 22 percent national tax rate), zero customs duty on imported raw materials, rebates for customs duty and value-added tax for any exports outside the SACU, and a minimum of 50 years on land leases (instead of the standard lease of 25 years).

Foreign Trade Zones/Free Ports/Trade Facilitation

Parliament established a new parastatal organization, the Special Economic Zones Authority (SEZA), with the mandate to develop and operate special economic zones around the country.  It has earmarked five geographic areas with a total of eight zones though they are not yet fully operational. In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas in the country including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selebi-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics).  The Special Economic Zones Act is available for sale in hard copy at the GoB bookshop. SEZA has prioritized four SEZs—Lobatse (leather park), Gaborone Fairgrounds (Financial Services), Gaborone Sir Seretse Khama Airport (Diamond and Logistics) and Pandamatenga (Agriculture)—and is actively recruiting investors, private developers, and manufacturers. The Botswana Unified Revenue Services has also introduced an electronic Customs Management System to replace the Automated System for Customs Data. This will pave the way for the National Single Window, an electronic trade platform that makes trading more secure and efficient.

Performance and Data Localization Requirements

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding an investment in Botswana.  Foreign investors are encouraged, but not compelled, to establish joint ventures with citizens or citizen-owned companies.

Foreign investors wishing to invest in Botswana are required to register the company in accordance with the Companies Act and comply with other applicable legislation.  Investors are encouraged, but not required, to purchase from local sources. The GoB does not require investors to locate in specific geographical areas, use a specific percentage of local content, permit local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use national sources of financing for private-sector investments.  However, GoB entities, including BITC, use the criteria of diversifying the economy, creating employment, and transferring skills to Botswana citizens in determining whether to assist foreign investors.

As a matter of policy, the GoB encourages foreign firms to hire qualified Botswana nationals rather than expatriates.  The granting of work permits for foreign workers may be made contingent upon establishment of demonstrable localization efforts.  The government may additionally require evidence that a local is being trained to assume duties currently being fulfilled by foreign worker, specially focused at the middle-management level.  The GOB offers incentives to companies that train local employees, including the deduction of 200 percent of training expenses when an accredited institution conducts the training.

Foreign and local business managers noted increasing difficulty obtaining work permits for foreign skilled workers and managers over the last decade.  Permits for foreign workers decreased from 20,000 to about 5,000 during that time. Business leaders cite difficulty securing work permits combined with local skills deficits and constrained labor productivity as one of the foremost business constraints in Botswana.  In March 2019, GoB reports suggest permits for foreign workers has increased to over 8,000 with approval rates in excess of 90 percent. Select grants are available to foreign investors who partner with Botswana citizens. The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens and ventures between citizens and foreign investors.  The majority of GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.

The GoB, the largest procuring entity in the country, has directed central government, local authorities and state-owned enterprises to purchase all products and services from locally based manufacturers and service providers if the goods and services are locally available, competitively priced, and meet tender specifications in terms of quality standards as certified or recognized by the Botswana Bureau of Standards.  Local preferences arise from numerous sources. In 2015, MITI instituted a program to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a 5 percent margin. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, in addition to a broad range consultancy services.  In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchasing of mining supplies with a 10 percent preference towards those produced locally. The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies and the GoB’s Public Procurement and Asset Disposal Board (PPADB) registers citizen-owned companies for preference purposes.

For a foreign firm to qualify with the Department of Industrial Affairs as a locally based manufacturer or service provider to sell goods or services to the government of Botswana, the firm first must be registered with the Registrar of Companies and possess a relevant license or waiver letter.  Few of these procedures can be completed online and in practice companies see the need to hire an agent on the ground to handle registrations. Tenders are generally designed based on the products available in the local market and with locally-based companies in mind. In addition, many tenders require local registration as a prerequisite for bids and the GoB frequently breaks up large-scale projects into a series of tenders.  All of these factors make it difficult to compete for tenders from outside Botswana.

Real Property

Property rights are enforced in Botswana.  The World Bank ranks Botswana 80 out of 190 in the Registering Property category.  There are three main categories of land in Botswana: freehold, state land, and tribal land.  Tribal and state land cannot be sold to foreigners. There are no restrictions on the sale of freehold land, but only about 5 percent of land in Botswana is freehold.  In the capital city of Gaborone, the number of freehold plots is limited.

State land represents about 25 percent of land in Botswana.  On application to the Department of Lands, both foreign-owned and local enterprises registered in Botswana may lease state land for industrial or residential use.  Commercial use leases are for 50 years and residential leases are for 99 years. Waiting periods tend to be long for leasehold applications, but subleases from current leaseholders are available.  In 2014, the GoB changed its implementing regulation to allow companies with less than five employees to operate in residential areas if their operations do not pose a health or safety risk to residents.

Tribal land represents 70 percent of land in Botswana.  To obtain a lease for tribal land, the investor must approach the relevant local Land Board.  Processes are unlikely to be streamlined or consistent across Land Boards.

Since independence, the trend in Botswana has been to increase the area of tribal land at the expense of both state and freehold land.  Landlord-tenant law in Botswana tends to be moderately pro-landlord.

In addition to helping investors who meet its criteria obtain appropriate land leaseholds, BITC has also built factory units for lease to industrialists with the option to purchase at market value.

Intellectual Property Rights

Botswana’s legal intellectual property rights (IPR) structure is adequate, although some improvements are needed.  The key challenge facing the GoB is effective implementation. The Companies and Intellectual Property Authority (CIPA) was established in 2014 and is comprised of three offices: the Companies and Business Office, the Industrial Property Office, and the Copyright Office.  Intellectual property is registered through CIPA. The priorities of this Authority are to strengthen and implement Botswana’s IPR regime and improve interagency cooperation. IPR infringement does occur in Botswana, primarily through the sale of counterfeit items in low-end sales outlets.  In 2017, CIPA cooperated with the Botswana Police to seize 12,923 counterfeit CDs and DVDs valued over USD 107,000.00. The U.S. government continues to work with the GoB to modernize and improve enforcement of IPR.

IPR is protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge and geographic indicators.  The 2000 Copyright and Neighboring Rights Act also protects art and literary works and the 1975 Registration of Business Names Act oversees corporate name and registration procedures. Other IPR-related Laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act.

Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.  For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

Resources for Rights Holders

Goitseone Montsho
Economic/Commercial Specialist
MontshoG@state.gov
+267 373-2431

Local lawyers’ list: https://bw.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Botswana has a reputation for a relative lack of corruption and a willingness to prosecute corrupt officials.  Transparency International ranks Botswana as the least corrupt country in Africa (34th worldwide). Investors with experience in other developing nations describe the relative lack of obstruction or interference by law enforcement or other government agents as among the country’s most important assets.  Nevertheless, private sector representatives note rising corruption levels in government tender procurements.

The major corruption investigation body is the Directorate on Corruption and Economic Crimes (DCEC).  Anecdotal reports on the DCEC’s effectiveness vary. The DCEC has embarked on an education campaign to raise public awareness about the cost of corruption and is also working with GoB departments to reform their accountability procedures.  Corruption is punishable by a prison term of up to 10 years, a fine of USD 50,000, or both. The GoB has prosecuted high-level officials. Corruption allegations have surfaced recently around pension fund management and government procurement procedures.

The 2000 Proceeds of Serious Crime Act expanded the DCEC’s mandate to include combatting money laundering.  The 2009 Financial Intelligence Act provides a comprehensive legal framework to address money laundering and establishes a financial intelligence agency (FIA).  The FIA, which operates under the Ministry of Finance and Development Planning, cooperates with various institutions, such as Directorate of Public Prosecutions, Botswana Police Service, Bank of Botswana, the Non-Banking Financial Institutions Regulatory Authority, the DCEC, and foreign FIAs to uncover and investigate suspicious financial transactions.  Botswana is a member of the Eastern and Southern Anti-Money Laundering Group, a regional standards-setting body for ensuring appropriate laws, policies and practices to fight money laundering and the financing of terrorism. In October 2018, Botswana was “gray-listed” by the Financial Action Task Force and is currently implementing an action plan to address shortcomings that led to the listing.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Botswana is not a party to the OECD Anti-bribery Convention but is a party to the 2005 UN Anti-corruption Convention.

Resources to Report Corruption

Contacts for agencies responsible for combating corruption:

Name: Brigadier Joseph Mathambo
Tittle: Director General
Organization: Directorate on Corruption and Economic Crime
Address: Madirelo Extension 6, Gaborone, Botswana
Telephone Number: +267 3914002/+267 3604200
Email: dcec@gov.bw

Name: Mr. Elijah Motshidi
Tittle: Executive Director (Acting)
Organization: Public Procurement & Asset Disposal Board
Address: Private Bag 0058, Gaborone, Botswana
Telephone Number: +267 3602000
Email: webmaster@ppadb.co.bwName: Mr. Abraham Sethibe

Tittle: Director
Organization: Financial Intelligence Agency
Address: Private Bag 0190, Gaborone, Botswana
Telephone Number: +267 3998400
Email: asethibe@gov.bw

One can also reach out to the Minister of the relevant Ministry for a particular tender and provide a copy of the complaint to the Public Procurement & Asset Disposal Board (PPADB) Executive Director.

The threat of political violence is low in Botswana.  Public demonstrations are rare and seldom turn violent.  The last large-scale strike which involved public sector employees, occurred in April to June 2011 and was not violent. In September 2015, roughly 200 people participated in a peaceful march organized by an opposition political party to protest water shortages in the capital.  In August 2016, police forcefully dispersed a small demonstration protesting unemployment outside the National Assembly. In February and March 2017, some student-led protests occurred at tertiary institutions necessitating police deployment, but were not overtly political. There were multiple reports of police brutality, including the use of rubber whips and rubber bullets.  Another peaceful march against corruption was held on March 28, 2018. This followed allegations of embezzlement of the National Petroleum Levy Funds by a company charged with the management of the funds together with some GoB officials.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

According to the Bank of Botswana, investment in Botswana totaled 84.75 billion pula in 2016, of which 31 billion pula were non-FDI investments.  Africa (33.3 percent) and Europe (64.4 percent) accounted for most of the 54 billion pula influx of FDI. Within these regions, South Africa and United Kingdom were the predominant players, accounting for 9.7 and 32.5 billion pula respectively.  Little data on FDI sources is available for countries and regions with limited investments in Botswana. Retail and Wholesale Trade surpassed the mining sector in 2016 to account for 38.9 percent of Foreign Investment inflows.

Table 4: Sources of Portfolio Investment

IMF Coordinated Direct Investment Survey data are not available for Botswana.  Equity securities represent 82 percent of Botswana’s portfolio investment assets abroad.  Information about country destination of these portfolio investments is not available.

Transparency of the Regulatory System

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

The 2010 Kenyan Constitution requires government to incorporate public participation before officials and agencies make certain decisions.  The draft Public Participation Bill (2018) would provide the general framework for such public participation. The Ministry of Devolution has produced a guide for counties on how to carry out public participation; many counties have enacted their own laws on public participation.  The Environmental Management and Coordination Act (1999) incorporates the principles of sustainable development, including public participation in environmental management. The Public Finance Management Act mandates public participation in the budget cycle. The Land Act, Water Act, and Fair Administrative Action Act (2015) also include provisions providing for public participation in agency actions.

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

International Regulatory Considerations

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

According to the Africa Regional Integration Index Report 2016, Kenya is a leader in regional integration policies within these regional blocs, with strong performance on regional infrastructure, productive integration, free movement of people, and financial and macro-economic integration.  The GOK maintains a Department of East African Community Integration within the Ministry of East Africa and Northern Corridor. Kenya generally adheres to international regulatory standards. The country is a member of the WTO and provides notification of draft technical regulations to the Committee on Technical Barriers to Trade (TBT).  Kenya maintains a TBT National Enquiry Point at http://notifyke.kebs.org  .  Additional information on Kenya’s WTO participation can be found at https://www.wto.org/english/thewto_e/countries_e/kenya_e.htm  .

Accounting, legal, and regulatory procedures are transparent and consistent with international norms.  Publicly listed companies adhere to International Financial Reporting Standards (IFRS) that have been developed and issued in the public interest by the International Accounting Standards Board.  The board is an independent, private sector, not-for-profit organization that is the standard-setting body of the IFRS Foundation. Kenya is a member of UNCTAD’s international network of transparent investment procedures.

Legal System and Judicial Independence

The legal system is based on English Common Law, and the 2010 constitution establishes an independent judiciary with a Supreme Court, Court of Appeal, Constitutional Court, and High Court.  Subordinate courts include: Magistrates, Khadis (Muslim succession and inheritance), Courts Martial, the Employment and Labor Relations Court (formerly the Industrial Court), and the Milimani Commercial Courts – the latter two of which both have jurisdiction over economic and commercial matters.  In 2016, Kenya’s judiciary instituted specialized courts focused on corruption and economic crimes. There is no systematic executive or other interference in the court system that affects foreign investors, however, the courts face allegations of corruption, political manipulation, and long delays in rendering judgments.

Laws and Regulations on Foreign Direct Investment

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

Competition and Anti-Trust Laws

The Competition Act (2010) created the Competition Authority of Kenya (CAK).  All mergers and acquisitions require the CAK’s authorization before they are finalized, and the CAK regulates abuse of dominant position and other competition and consumer-welfare related issues in Kenya.  In 2014, CAK imposed a filing fee for mergers and acquisitions set at one million Kenyan shillings (KSH) (approximately USD 10,000) for mergers involving turnover of between one and KSH 50 billion (up to approximately USD 500 million).  KSH two million (approximately USD 20,000) will be charged for larger mergers. Company takeovers are possible if the share buy-out is more than 90 percent, although such takeovers are rarely seen in practice.

Expropriation and Compensation

The 2010 constitution guarantees protection from expropriation, except in cases of eminent domain or security concerns, and all cases are subject to the payment of prompt and fair compensation.  The Land Acquisition Act (2010) governs due process and compensation in land acquisition, although land rights remain contentious and can cause significant project delays.

Dispute Settlement

ICSID Convention and New York Convention

Kenya is a member of the International Centre for Settlement of Investment Disputes, also known as the ICSID Convention or the Washington Convention, and the 1958 New York Convention on the Enforcement of Foreign Arbitral Awards.  Regarding the arbitration of property issues, the Foreign Investments Protection Act (2014) cites Article 75 of the Kenyan Constitution, which provides that “[e]very person having an interest or right in or over property which is compulsorily taken possession of or whose interest in or right over any property is compulsorily acquired shall have a right of direct access to the High Court.”

Investor-State Dispute Settlement

There have been very few investment disputes involving U.S. and international companies.  Commercial disputes, including those involving government tenders, are more common. The private sector cites weak institutional capacity, inadequate transparency, and inordinate delays in dispute resolution in lower courts.  The resources and time involved in settling a dispute through the Kenyan courts often render them ineffective as a form of dispute resolution.

International Commercial Arbitration and Foreign Courts

The government does accept binding international arbitration of investment disputes with foreign investors.  The Kenyan Arbitration Act (1995) as amended in 2010 is anchored entirely on the United Nations Commission on International Trade Law (UNCITRAL) Model Law.  Legislation introduced in 2013 established the Nairobi Centre for International Arbitration (NCIA), which seeks to serve as an independent, not-for-profit international organization for commercial arbitration, and may offer a quicker alternative to the court system.  In 2014, the Kenya Revenue Authority launched an Alternative Dispute Resolution (ADR) mechanism aiming to provide taxpayers with an alternative, fast-track avenue for resolving tax disputes.

Bankruptcy Regulations

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

Creditors’ rights are comparable to those in other common law countries, and monetary judgments typically are made in Kenyan shillings.  The Insolvency Act (2015) increased the rights of borrowers and prioritizes the revival of distressed firms. The law states that a debtor will automatically be discharged from debt after three years.  Bankruptcy is not criminalized in Kenya. Kenya moved up 38 ranks in the World Bank Group’s Doing Business 2019 report, moving to 57 of 190 countries in the “resolving insolvency” category.

Investment Incentives

The minimum foreign investment to qualify for GOK investment incentives is USD 100,000, a potential deterrent to foreign small and medium enterprise investment, especially in the services sector.  Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act (2004).

The government allows all locally-financed materials and equipment for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of VAT calculation – excluding motor vehicles and goods for regular repair and maintenance.  The National Treasury principal secretary, however, must approve such purchases. In a measure to boost the tourism industry, one-week employee vacations paid by employers are a tax-deductible expense. The 2015 amendments to Kenya’s VAT rules clarified some items that are VAT exempt.  In 2018, the Kenya Revenue Authority (KRA) exempted from VAT certain facilities and machinery used in the manufacturing of goods under Section 84 of the East African Community Common External Tariff Handbook. VAT refund claims must be submitted within 12 months of purchase.

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

The Finance Act (2014) amended the Income Tax Act (1974) to reintroduce capital gains tax on transfer of property located in Kenya.  Under this provision, gains derived on the sale or transfer of property by an individual or company are subject to tax at rates of at least five percent.  Sales and transfer of property related to the oil and gas industry are taxed up to 37.5 percent. 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); and the United Nations or its agencies.

Foreign Trade Zones/Free Ports/Trade Facilitation

Kenya’s Export Processing Zones (EPZ) and Special Economic Zones (SEZ) offer special incentives for firms operating within their boundaries.  By the end of 2016, Kenya had 65 designated EPZs, with 91 companies and 52,019 workers contributing KSH 63.1 billion (about USD 622 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 all firms in the zones are fully-owned by foreigners – mainly from India – while the rest are locally owned or joint ventures with foreigners.

While EPZs are focused on encouraging production for export, SEZs are designed to boost local economies by offering benefits for goods that are consumed both internally and externally.  SEZs will 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) must maintain an open investment environment to facilitate and encourage business by the establishment of simple, flexible, and transparent procedures for investor registration.  The rules also empower county governments to set aside public land for establishment of industrial zones.

Companies operating in the SEZs will receive the following benefits:  all SEZ supplies of goods and services to companies and developers will be exempted from VAT; the corporate tax rate for enterprises, developers, and operators will be 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), and Kisumu (700 sq. km). The Third Medium Term Plan of Kenya’s Vision 2030 economic development agenda calls for a study for an SEZ at Dongo Kundu, and an SEZ was also under consideration at a location near the Olkaria geothermal power plant.

Performance and Data Localization Requirements

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

The Public Procurement and Asset Disposal Act (2015) offers preferences to firms owned by Kenyan citizens and to products manufactured or mined in Kenya.  Tenders funded entirely by the government with a value of less than KSH 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 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 certain circumstances. Procuring entities will be 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 GOK does not currently have any laws requiring data localization, though the draft Data Protection Bill (2018) would impose restrictions on the transfer of data in and out of Kenya, functionally requiring data localization.  The draft bill is similar to the European General Data Protection Regulation requirements on data processing. The GOK’s 2016 draft ICT Policy stated a preference for legislated data localization, but was never implemented.

Real Property

Foreigners cannot own land in Kenya, though they can lease it in 99-year increments.  The cumbersome and opaque process required to acquire land raises concerns about security of title, particularly given past abuses relating to the distribution and redistribution of public land.  The Land (Extension and Renewal of Leases) Rules (2017) has stopped the automatic renewal of leases and now ties renewals to the economic output of the land that must be beneficial to the economy.  If property legally purchased remains unoccupied, the property ownership can revert to other occupiers, including squatters. Privately-owned land comprised six percent of the total land area in 1990; government land was about 20 percent of the total and included national parks, forest land and alienated and un-alienated land.  Trust land is the most extensive type of tenure, comprising 64 percent of the total land area in 1990.

Mortgages and liens exist in Kenya, but the recording system is not reliable – Kenya has only some 40,000 recorded mortgages in a country of 42 million people – and there are often complaints of property rights and interests not being enforced.  The legal infrastructure around land ownership and registration has changed in recent years, and land issues delayed several major infrastructure projects coming into 2019. Kenya’s 2010 Constitution required all 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, and confiscate the land if it determines the land has not been used productively.  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. The GOK has not yet effectively implemented this provision. Work continues on the National Land Information Management System, but fully digitized, border-to-border cadastral data is still many years in the future.

The 2010 Constitution and subsequent land legislation created the National Land Commission, an independent government body mandated to review historical land injustices and provide oversight of government land policy and management.  This had the unintended side effect of introducing coordination and jurisdictional confusion between the commission and the Ministry of Lands. In February 2015, President Kenyatta commissioned the new National Titling Center with a promise to increase the 5.6 million title deeds issued since independence to 9 million.  According to the Ministry of Lands and Physical Planning, 8.6 million title deeds have now been processed. Land grabbing resulting from double registration of titles, however, remains prevalent. Property legally purchased and unoccupied can revert ownership to other parties.

Intellectual Property Rights

The major intellectual property enforcement issues in Kenya related to counterfeit products are corruption, lack of penalty enforcement, failure to impound imports of counterfeit goods at the ports of entry, and reluctance of brand owners to file a complaint with the Anti-Counterfeit Agency (ACA).  The prevalence of “gray market” products – genuine products that enter the country illegally without paying import duties – also presents a challenge, especially in the mobile phone and computer sectors. Copyright piracy and the use of unlicensed software are also emerging challenges.

In an attempt 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 standardization mark.  Several categories of imported goods, specifically food products, electronics, and medicines, must have an import standardization mark (ISM). Under this program, U.S. consumer-ready products may enter the Kenyan market without altering the U.S. label but must also carry an ISM.  Once the product qualifies for a Confirmation of Conformity, KEBS will issue the ISM free of charge.

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 IP offices, please see the World Intellectual Property Organization’s country profiles at http://www.wipo.int/directory/en/  .

Many businesses deem corruption to be pervasive and entrenched in Kenya.  Transparency International’s (TI) 2018 Global Corruption Perception Index ranks Kenya 144 out of 180 countries, one place lower than in 2017 and Kenya’s score of 27 remains below the sub-Saharan Africa average of 32.  Historical lack of political will, little progress in prosecuting past corruption cases, and the slow pace of reform in key sectors were reasons cited for Kenya’s chronic low ranking. Corruption has been reported to be an impediment to FDI, with local media reporting allegations of high-level corruption related to health, energy, ICT, and infrastructure contracts.  There are many reports that corruption often influences the outcomes of government tenders, and U.S. firms have had limited success bidding on public procurements. In 2018, President Kenyatta began a public campaign against corruption and Kenya’s anticorruption agencies now appear to be coordinating more effectively, including bringing cases against senior officials in an effort to secure high-level convictions.

Kenyan law provides for criminal penalties for official corruption, but no high-level officials were successfully prosecuted and convicted for corruption in 2018.  Relevant legislation and regulations include the Anti-Corruption and Economic Crimes Act (2003), the Public Officers Ethics Act (2003), the Code of Ethics Act for Public Servants (2004), the Public Procurement and Disposal Act (2010), the Leadership and Integrity Act (2012), and the Bribery Act (2016).  The Access to Information Act (2016) also provides mechanisms through which private citizens can obtain information on government activities; implementation of this act is ongoing. The Ethics and Anti-Corruption Commission (EACC) monitors and enforces compliance with the above legislation.

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

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

On August 31, 2016, the president signed into law the Access to Information Act (2016).  The law allows citizens to request government information and requires government entities and private entities doing business with the government proactively to disclose certain information, such as government contracts.  The act also provides a mechanism to request a review of the government’s failure to disclose requested information, along with penalties for failures to disclose. The act exempts certain information from disclosure on grounds of national security.

The private sector-supported Bribery Act (2016) stiffened penalties for corruption in public tendering and requires private firms participating in such tenders to sign a code of ethics and develop measures to prevent bribery.  Both the Bill of Rights of the 2010 Constitution and the Access to Information Act (2016) provide protections to NGOs, investigative journalism, and individuals involved in investigating corruption. The Witness Protection Act (2006) calls for the protection of witnesses in criminal cases and created an independent Witness Protection Agency.  A draft Whistleblowers Protection Bill (2016) is currently stalled in Parliament.

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

Resources to Report Corruption

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

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

Report corruption online: http://www.eacc.go.ke/default.asp?pageid=62 

Contact at “watchdog” organization:

Samuel Kimeu
Executive Director
Transparency International Kenya
Phone:  +254 (0)722-296-589
Email: skimeu@tikenya.org

Report corruption online: https://www.tikenya.org/ 

Political tensions over the protracted and contentious 2017 election cycle spilled well into 2018.  In March 2018, however, President Kenyatta and opposition National Super Alliance (NASA) leader Raila Odinga publicly shook hands and pledged to work together to heal the political, social, and economic divides revealed by the election.  The 2017 electoral period had been marred by violence that claimed the lives of nearly 100 Kenyans, a contentious political atmosphere pitting the ruling Jubilee Party against NASA, and political interference and attacks by both sides on key institutions.  In November 2017, the Kenyan Supreme Court unanimously upheld the October 2017 repeat presidential election results and President Uhuru Kenyatta’s win in an election boycotted by NASA leader Odinga. The court’s ruling brought a close to Kenya’s protracted 2017 election cycle, a period that included the Supreme Court’s historic September 2017 annulment of the August 2017 presidential election and the unprecedented repeat election.

The United States’ Travel Advisory for Kenya advises U.S. citizens to exercise increased caution due to the threat of crime and terrorism, and not to travel to counties bordering Somalia and to certain coastal areas due to terrorism.  Instability in Somalia has heightened security concerns and led to increased security measures aimed at businesses and public institutions around the country. Tensions flare occasionally within and between ethnic communities. Regional conflict, most notably in Ethiopia, Somalia, and South Sudan, sometimes have spill-over effects in Kenya.  There could be an increase in refugees escaping drought and instability in neighboring countries, adding to the large refugee population already in Kenya from several countries. Security expenditures represent a substantial operating expense for businesses in Kenya.

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

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Source:  IMF Coordinated Direct Investment Survey (CDIS). Figures are from 2012 (latest available).  IMF no longer publishes Kenya data as part of its CDIS.

Table 4: Sources of Portfolio Investment

Source:  IMF Coordinated Portfolio Investment Survey (CPIS). Figures are from 2012 (latest available).  IMF no longer publishes Kenya data as part of its CPIS.

Transparency of the Regulatory System

Business regulations in Lesotho are on the whole reasonable, but variable—modern and flexible in some areas and outdated and retrogressive in others—due to the government’s piecemeal approach to reform.  For example, the regulatory framework for utilities and the financial sector is modern, but mining regulation and the industrial and trading licensing system need improvements. The regulatory environment is generally weak, but has minimum impact in hindering competition or distorting business and investment practices.  The legal, regulatory, and accounting systems are transparent and consistent with international norms. The accounting systems for companies are regulated by the Companies Act of 2011 and Financial Institutions of 2012. International Financial Reporting System (IFRS) is the current financial system used by companies. Rule-making and regulatory mechanisms exist at the local, national, and supra-national levels although the most relevant for foreign investors is the national level.  There are no informal regulatory processes managed by the private sector or non-governmental organizations.

There are no private sector or government efforts to restrict foreign participation in consortia or organization that set industry standards.  Lesotho has a centralized online location where key regulatory actions are published. However, the website is poorly maintained and rarely updated — https://lesotholii.org/  .  The government printing office also publishes government gazettes which can be purchased by the public.

Businesses in Lesotho are regulated by the Companies Act of 2011, which changed the process of registering private and public shareholding companies in Lesotho.  The act has made business registration easier by abolishing the requirement for an inspection of the proposed company premises before the company is registered, eliminating the need for a legal representative when registering a business, and providing standard articles of incorporation.  The act also envisages electronic company registration as well as electronic regulatory filing. In December 2014, Lesotho launched an Online Companies Registry System, which has simplified company registration. The act also allows foreign companies to register; companies must do so within 10 days of opening a business in Lesotho.  The company must nominate a person who is either resident or maintains a full-time office within Lesotho upon whom notices and processes can be served and register the principal place of business of the company in Lesotho.

Every firm intending to engage in business must obtain a trader’s license.  The issuance of traders’ licenses is governed by the Trading Enterprises Order of 1993, as amended in 1996, and the Trading Enterprises Regulations of 1999, as amended in 2011.  Trading licenses are required for a wide range of services; some enterprises can require up to four licenses for one location. To repeal the current Trade Enterprise Order, the GOL has drafted the Business Licensing and Registration Bureau bill.  The bill, which is yet to be presented in Parliament, would address licensing and registration areas that hinder economic development. Manufacturing licenses are covered by the Industrial Licensing Act of 1969 and the Pioneer Industries Encouragement Act of 1969.  For the majority of manufacturing license applications, environmental certificates issued by the National Environmental Secretariat (NES) are sufficient. Where manufacturing activities are assumed to have actual or potential environmental impacts, however, an Environmental Impact Assessment is required, which must be approved by the NES.  The introduction of the (OBFC) improved the industrial and trading license system. The OBFC has also streamlined other bureaucratic procedures, including those for licenses and permits.

The GOL modernized the regulatory framework for utilities through the establishment of the independent Lesotho Communications Authority (LCA), which regulates the telecommunications sector, and the Lesotho Electricity and Water Authority (LEWA), which regulates the energy and water sectors.  The two authorities set the conditions for entry of new competitive operators. Currently, the LCA has permitted Econet Telecom Lesotho (ETL) to maintain a monopoly on fixed-line and international services, while permitting competition in mobile telephone services. The LEWA allows both the Lesotho Electricity Company and the Water and Sewerage Company to maintain monopolies in their respective sectors.

The Mines and Minerals Act of 2005, the Precious Stones Order (1970), and the Mine Safety Act (1981), provide a regulatory framework for the mining industry.  The Commissioner of Mines in the Ministry of Mines, supported by the Mining Board, is authorized to issue mineral rights to both foreigners and local investors.  On approval, it takes about a month for both prospecting and mining licenses to be issued.

The Central Bank of Lesotho (CBL) regulates financial services under the Financial Institutions Act of 2012.  

Tourism enterprises are required to secure licenses under the Accommodation, Catering and Tourism Enterprise Act of 1997.  The Act provides for a Tourism Licensing Board that issues and renews licenses for camp sites, hotels, lodges, restaurants, self-catering establishments, bed and breakfasts, youth hostels, resorts, motels, catering, and guest houses.  Applicants for any of the above licenses must apply to the Board three months before its next meeting. A number of government departments, specifically the Ministries of Health and Tourism, the police and, when the property is in Maseru, the Maseru City Council, must inspect properties and submit inspection reports to the Board on prescribed forms.  Licenses are granted for one year and can be renewed.

Parliamentary committees may, but are not required to, publish proposed laws and regulations in draft form for public comment.  Parliament may also hold public gatherings to explain the contents of the proposed laws, and these provide opportunities for comment on proposed laws and regulations.  The committees generally hold such consultations for laws that are perceived to be sensitive, such as the Land Act, the Penal Code, and the Children’s Welfare and Protection Act.

Regulations are developed to enforce the law, to implement objectives of legal frameworks, and to ensure compliance.  The following steps are followed when regulations are developed:

The initiating ministry or agency writes a cabinet memo reflecting objectives and benefits of the regulations.  The cabinet memo is then widely circulated to relevant stakeholders to reflect how the regulations will impact them and to seek concurrence.  The initiating agency then makes a cabinet presentation to seek cabinet approval to draft the regulations. The initiating agency drafts regulations and holds meetings with relevant stakeholders to obtain their input.  The initiating ministry of agency or agency holds workshops with relevant stakeholders to validate regulations. Draft regulations are submitted to Attorney General for certification. A Parliament presentation and updates of the draft are made.  A presentation to the Senate and updates of the regulations are made. Parliament tables the regulations and a provision of royal ascent is made by the King, His Majesty Letsie III. The regulations are published and the public is given a period of 14 days to review the regulations after which their comments are incorporated and the regulations are finalized and gazetted.  The last step is to sensitize the public on the new regulations.

Information on debt obligations is publicly available, including online.  The government produces an Annual Public Debt Bulletin, which covers debt management operations, debt portfolio, debt service, and loan guarantees.  The government also publishes a Medium Term Debt Strategy paper. More information is available at www.finance.gov.ls/  

International Regulatory Considerations

Lesotho is a member of the Southern African Development Community (SADC) and the Southern African Customs Union (SACU).  SADC aspires to deepen regional integration and sustainable development through four successive phases: a SADC Free Trade Area (FTA), Customs Union, Common Market and the Monetary Union.  The SADC FTA was fully implemented in 2012 within 12 SADC Member States when the maximum tariff liberalization was completed. Lesotho’s products enjoy duty free access to SADC countries, which has a total population of 277 million.  For more information about SADC, visit: www.sadc.int  .

Lesotho is a member of the World Trade Organization (WTO) and there is a new National Notification Authority within the Department of Trade that is charged with notifying the WTO Committee on Technical Barriers to Trade of all draft technical regulations.  The Notification Authority is not yet operational; its launch was planned for the 2017/18 fiscal year, but is still pending the establishment of all the necessary supporting and coordinating structures.

Lesotho ratified the Trade Facilitation Agreement (TFA) on January 4, 2016.  To date, there has been a 0 percent rate of implementation commitment. Lesotho’s regulatory systems are independent and not intertwined with regional regulations.  In cases where there are gaps with national regulations, the country uses regional regulations to close them. The government does not reference or incorporate U.S. or other country’s regulatory systems.  The government strives to provide notification of Technical Barriers to Trade (TBT). More information is located at: https://www.tfadatabase.org/members/lesotho  .

Legal System and Judicial Independence

The legal system in Lesotho is based on Roman–Dutch Law and English Common Law, combined with Customary Law.  The judicial system is made up of the High Court, the Court of Appeal, subordinate courts and the Judicial Service Commission (JSC).  The High Court has jurisdiction to hear the most serious civil and criminal cases and appeals from the lower courts. It has supervisory jurisdiction over all the courts in Lesotho.  The Court consists of the Chief Justice, who is appointed by the head of state on the advice of the prime minister, and a number of junior judges, appointed by the chief of state on the advice of the JSC.  Appeals from the High Court come before the Court of Appeal, which meets twice a year.                               

There is no trial by jury.  Rather, judges make rulings alone, or in criminal trials, with two other judges as observers.  There are magistrates’ courts in each of the 10 districts, and more than 70 central and local courts.  General laws in Lesotho operate alongside customary laws. Customary law consists of the customs of the Basotho, written and codified in the Laws of Lerotholi, which are applied in local customary courts.  Whether customary or general law will be applied in a case is generally determined by the nature of the case, criminal or civil, and the people involved. It is usual for common law to be implemented in urban areas, while customary law is more often found in rural areas.  Local courts, or Basotho Courts, are the courts of first instance for any matter involving customary law. Appeals from local courts come before the central courts, and appeals from the central or local courts come before the judicial commissioners’ courts, from which further appeals may be made to the High Court.  Lesotho has accepted compulsory International Court of Justice jurisdiction.

Lesotho has a written and consistently applied commercial law.  The judicial system is procedurally and substantively fair, upholds the sanctity of contracts, and enforces contracts in accordance with their terms and on a non-discriminatory basis.  The government enforces judicial decisions through officers of the court, and, if necessary, through criminal proceedings. The judicial system is, however, inefficient—courts are overburdened, and cases can take years to resolve.  Freedom House Southern Africa noted politicization, chronic underfunding, and structural problems in its 2012 report, “Politics of Judicial Independence in Lesotho.”

A Commercial Court was established in 2010 in an effort to improve the country’s capacity in resolving commercial cases though backlogs can delay processing times.  Foreign investors have equal treatment before the courts in disputes with national parties or the government. The SADC Protocol on Finance and Investment enables investors to refer a dispute with the State to international arbitration if domestic remedies have been exhausted.  Lesotho is a signatory of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and also accepts ad hoc arbitration. Lesotho is a member of the International Center for the Settlement of Investment Disputes, and the Arbitration International Investment Disputes Act of 1974 commits Lesotho to accept binding international arbitration of investment disputes.

Laws and Regulations on Foreign Direct Investment

Lesotho’s overarching FDI policy is the 2015 National Investment Policy of Lesotho, produced with the assistance of UNCTAD.  FDI policy instruments also include the Companies Act of 2011 and the Financial Institutions Act of 2012, as well as legislation covering mining, tourism, and manufacturing—particularly the textile industry.  The Companies Act of 2011 and the Financial Institutions Act of 2012 are the principal laws that regulate incoming foreign investment through acquisitions, mergers, takeovers, purchases of securities and other financial contracts and greenfield investments.  There is no investment law per se. Instead, a licensing regime and established practice, supplemented by investment treaties, govern conduct toward the entry of foreign investment. In 2018, there were no major cases relating to foreign investment. 2018 judgments are available at https://lesotholii.org/courtnames/high-court/2018  .  The “One Stop Business Facilitation Centre” (OBFC) hosts the Lesotho Trade Information Portal, a single online authoritative source of all laws, regulations, and procedures for importing and exporting.  The portal provides transparency and predictability to trade transactions and reduces the time and cost of trading across borders. The OBFC web site is: http://www.obfc.org.ls/business/default.php  .

Competition and Anti-Trust Laws

The government proposed a draft competition bill focused on improving the regulation of investments.  Its goal is to “provide the legal basis for undistorted competition and thus contribute to transparency and predictability in domestic markets.”  However, the bill did not pass prior to the previous government losing a vote of no-confidence, and it is being reintroduced by the new government.  The bill is awaiting approval by the Attorney General. Since the bill is still pending, there are no agencies established to review transactions for competition-related concerns.  However, various government sectors deal with competition-related issues through use of available institutional guidelines and procedures. The government is also drafting a consumer protection bill.

Expropriation and Compensation

The constitution provides that the acquisition of private property by the state can only occur for specified public purposes.  Further, the law provides for full and prompt compensation at fair market value. Affected persons may appeal to the High Court as to whether the action is legal and compensation is adequate.  The constitution is silent on whether compensation may be paid abroad in the case of a non-resident; such an additional provision would usually be contained in a foreign investment law. The government has no history of discriminating against U.S. or other foreign investments, companies or representatives in expropriation.  The only local ownership law is the Trading Enterprises Act.

Dispute Settlement

ICSID Convention and New York Convention

Lesotho is a member of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.  There is no specific domestic legislation providing for enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement

The government is a signatory to a treaty in which binding international arbitration of investment disputes is recognized.  Lesotho has no Bilateral Investment Treaty (BIT) with the United States. The government has little history of investment disputes involving U.S. or other foreign investors or contractors in Lesotho.  However, in the last two years, one case has arisen in which the government has publicly alleged the parent U.S. firm of a local subsidiary has failed to pay dividends it owes the government, which has a 49 percent stake in the venture.  No legal action thus far has been taken. Within the past four years, a foreign company managing the government fleet of vehicles had its contract abruptly terminated and a foreign firm with a contract to print identification documents had a contractual dispute with the government.  The Directorate on Corruption and Economic Offences (DCEO) launched an investigation against the latter for alleged corruption. Foreign investors have full and equal recourse to the Lesotho courts for commercial and labor disputes. Courts are regarded as fair and impartial in cases involving foreign investors.  The government has also publicly alleged hospitality companies, communication companies, and mining companies have failed to declare profits and dividends, but no legal action has been taken. Local courts recognize and enforce foreign arbitral awards issued against the government.

International Commercial Arbitration and Foreign Courts

Lesotho readily accepts binding international arbitration of investment disputes.  Lesotho has entered into a number of bilateral investment agreements that provide for international arbitration.  For instance, under the Bilateral Investment Treaty with United Kingdom, an investor may take a dispute with the government to international arbitration.  However, Lesotho does not have a bilateral investment treaty with the United States. The government has stated that Lesotho’s courts would readily accept and enforce foreign arbitral awards—there have been no such awards to date. 

Bankruptcy Regulations

The Companies Act is the principal commercial and bankruptcy law.  According to the law, creditors, equity shareholders, and holders of other financial contracts of a bankrupt company have a right to nominate a person to be a liquidator, and if the creditors and the shareholders nominate different persons, the person nominated by the creditors shall be the liquidator.  All claims against a bankrupt company shall be proved at a meeting of creditors, equity shareholders, and the court, or the liquidator may fix a time or times within which creditors of the company are to prove their claims. If the claim is rejected by the liquidator, the claimant may apply to the court by motion to set aside the rejection.  Creditors who will act as witnesses are entitled to witness fees, to be paid out of the funds of the company, as they would be entitled to if they were witnesses in any civil proceedings. Creditors are paid first in a bankruptcy; equity shareholders and holders of other financial contracts then follow. According to the Labor Code, workers have the right to recover pay and benefits from local and foreign firms in bankruptcy before creditors, equity shareholders, and holder of other financial contracts, regardless of the provisions of any other law in Lesotho.  Monetary judgments are usually made in the local currency. An amount of a claim based on a debt or liability denominated in a foreign currency shall be converted into Lesotho currency at the rate of exchange on the date of commencement of the liquidation. The country’s credit bureau is operated by a South African company called Compuscan. Compuscan Lesotho was established in 2014 with the mandate to improve access to credit by facilitating the exchange on prospective debtors. The process is two-fold: lenders are seeking easier and faster access to competitively priced loans, while credit providers hope to make safer and more reliable financial decisions in order to drive their growth.

Investment Incentives

There are no incentives for, and no performance requirements imposed on, foreign investors as a condition of investment.  However, there are tax, factory space, and financial incentives available to manufacturing companies establishing themselves in Lesotho, such as: no withholding tax on dividends distributed by manufacturing firms to local or foreign shareholders, unimpeded access to foreign exchange, export finance facility, and long-term loans.  These incentives are applied uniformly to both domestic and foreign investors. For more information, see http://www.lndc.org.ls  .  The incentives are specified in government administrative policies and regulations.

Foreign Trade Zones/Free Ports/Trade Facilitation

Although Lesotho does not have any free or foreign trade zones, on March 21, 2018, the country signed the declaration, not the agreement, on the African Continental Free Trade Area (AfCTA). The main objective of the AfCTA is to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for the establishment of the Continental Customs Union and the African Customs Union.  The labor-intensive textile manufacturing companies that export beyond the SACU market, however, enjoy the benefits of free trade zones since they can import raw materials then export finished products duty and tax free.  The LNDC maintains five industrial areas with direct road links to attract foreign investors. These areas are mainly occupied by foreign manufacturing firms which enjoy the same investment opportunities as local entities.  Feasibility studies for the construction of a sixth industrial area at the Belo Industrial Estate in Botha-Bothe district have been conducted, and the construction of shells commenced in 2018.

Performance and Data Localization Requirements

With the exception of textile companies that export to the United States under the African Growth and Opportunity Act (AGOA), which are bound by SACU regulations to export all their products, there is no requirement that investors purchase from local sources or export a certain percentage of output, or only have access to foreign exchange in relation to their exports.  The GOL does not impose “offset” requirements, whereby major procurements are approved only if the foreign supplier invests in manufacturing, research and development or service facilities in the country related to the items being procured. The GOL does not impose conditions on permission to invest, with the exception of land titling, which requires the entity to have at least 20 percent local ownership.  The government does not impose forced localization, but it does have mandates for local employment with an exception on shareholders and investors.

Requirements for visas and residence permits are not discriminatory; however, procedures are lengthy and not integrated.  For executive positions, work permits to foreign nationals are generally issued and renewed without significant delay; for technical positions, firms have to provide justification based on local skill shortage.  The procedures for obtaining permits are transparent although foreign investors complain about excessive fees charged and long delays in processing. Work permits for the manufacturing sector are issued at the One Stop Business Facilitation Centre (OBFC), while all other sectors need to lodge their applications with the office of the Labor Commissioner.  The maximum period provided for a work permit is one year and is not in line with the type of work permit issued. For more information on requirements for visas, residence permits and work permits, please visit: http://www.obfc.org.ls/business/default.php  

The GOL does not follow a policy of “forced localization” designed to force foreign investors to increase investment and/or employment in the local economy.  The government does not force foreign investors to establish and maintain data storage within Lesotho; however, foreign investors are required to keep records of local sales and employees’ remuneration locally for tax purposes.

Real Property

The right to private property is protected under the law.  All foreign and domestic private entities may freely establish, acquire, and dispose of interests in business enterprises.  Under the Land Act of 2010, foreign nationals are permitted to buy and hold land provided they have a local partner with at least 20 percent ownership.  Lesotho has no competition or overall competition regulator. The Industrial Licensing Act 1969, which allowed businesses to apply for protection against competition for up to 10 years, was repealed in 2014.

Secured interests in property, both movable and real, are recognized and enforced under the Land Act 2010.  The concept of a mortgage exists; and mortgages are protected under the Deeds Registry Act of 1967. Secured interests, including mortgages, are recorded and filed by the Deeds Registry.  Through the support of the Millennium Challenge Corporation, the government of Lesotho significantly improved the process of registering land titles; peaking at 88 under the “Registering Property” index of the World Bank’s Doing Business Report in 2014.

Commercial banks are the only financial mechanisms/sources available in Lesotho for securitization of properties for lending purposes.  In cases in which land is accepted as collateral, the banks work with the Land Administration of Authority (LAA) to develop secured lending capabilities for investors.  LAA is an autonomous government body established to modernize and improve land administration and to reduce land transactions costs and the time it takes to acquire or dispose of a leasehold title to land.

All allocated land in Lesotho is held under title (Form C’s).  However, the Land Administration Act (LAA) encourages titleholders to register their titles into leases so they are recorded in a formal registration system.  LAA undertook a Scheme of Regularization in 2011 to assist title holders acquire leases. This followed the establishment of the LAA, funded by the U.S. Government through the Millennium Challenge Corporation (MCC).  Presently, LAA is awaiting publication of a Regularization Gazette to continue with regularization of land parcels, mainly for commercial plots in four urban areas of Berea, Botha-Bothe, Mohale’s Hoek, and Quthing.

Land titles (leases) as well as secondary land transactions (transfers, mortgages, subleases, and mining leases) are registered in the Deeds Registry and can be enforced in the Land Courts, Magistrate Courts, and High Court.  Mortgages are registered in the Deeds Registry, which serves as a reliable recording system. For more information please visit www.laa.org.ls  .

Intellectual Property Rights

Legal structures to protect intellectual property rights (IPR) are relatively strong.  Investors complain that enforcement is somewhat weak, although infringements and theft are not common.  Lesotho respects international IPR laws and is a member of the World Intellectual Property Organization (WIPO) as well as the African Intellectual Property Organization.

Protection of IPR is regulated by the Industrial Property Order of 1989 and the Copyright Act of 1989, which conform to the standards set out in the Paris Convention and Berne Convention.  The laws protect patents, industrial designs, trademarks, and grant of copyright, but they do not protect trade secrets or semi-conductor chip lay-out design. The Law Office is responsible for enforcement of the Industrial Property Order, while the Ministry of Tourism, Sports and Culture is responsible for enforcement of copyright (reflecting the law’s focus on protection of artistic works).  The Deeds Registry carries out registration.

Two bills with IP related regulations are yet to be passed in Lesotho Parliament.  The Ministry of Communications, Science and Technology in liaison with the Lesotho Communications Authority (LCA) have finalized the drafting of the Computer Crime and Cyber Security bill and the Electronic Transactions and Commerce bill.  If enacted, the bills will improve the protection of IPR by addressing cyber-crime and protecting electronic transactions.

Lesotho is not included in 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 IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

Resources for Rights Holders

Contact at Mission:

Matt Jamrisko
Political and Economic Officer
+266 2231-2666
MaseruCommercial@state.gov

Local Lawyers List:

NALEDI CHAMBERS INCORPORATED
1st Floor, Metropolitan Building
Kingsway
Maseru, Lesotho
Tel.  : +266 22 314 986
Fax   : +266 22 310521
naledichambersinc@tlmail.co.ls

In Lesotho, the Directorate on Corruption and Economic Offences (DCEO) has a mandate to prevent and to combat corruption.  The country has laws, regulations, and penalties to combat corruption of public officials. Parliament passed anti-corruption legislation in 1999 that provides criminal penalties for official corruption.  The DCEO is the primary anticorruption organ and investigates corruption complaints against public sector officials. The Amendment of Prevention of Corruption and Economic Offences Act of 2006 enacted the first financial disclosure laws for public officials.  On February 5, 2016, the government issued regulations to initiate implementation of the financial disclosure laws for public officials who must file their declarations annually by April 30. The law may also be applied to private citizens if deemed necessary by the DCEO.  The law prohibits direct or indirect bribery of public officials, including payments to family members of officials and political parties. While the government made significant efforts to implement the law, some officials have engaged in corrupt practices with impunity. The DCEO has claimed it cannot effectively implement the law because it lacks adequate resources.  The Money Laundering and Proceeds of Crime Act of 2008 (amended in 2017) and Public Financial Management and Accountability Act of 2011 serve as additional anti-corruption laws. The Prevention of Corruption and Economic Offences Act (section 14 (1)) and Public Procurement Regulations of 2007 have provisions that address conflict-of-interest in awarding government procurement contracts.  Section 6 (g) (h) (i) of the Prevention of Corruption and Economic Offences Act of 1999 encourages private companies to develop internal controls to prevent corruption. Corruption is most pervasive in government procurement, awarding licenses, and customs fraud.

In 2013, the DCEO indicted both a sitting minister and a former minister for separate incidents of corruption.  A court case regarding a sitting Minister (since resigned) was recently dismissed due to a missing police docket while the other case still has not yet had a final resolution.  In an effort to prevent corruption and economic offences, the DCEO encourages companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.  Many companies have effective internal controls, ethics, and programs to detect and prevent bribery. 

No U.S. firms have identified corruption as an obstacle to foreign direct investment in Lesotho.  One U.S. firm recently claimed a solicitation of a bribe in a government tendering process. The ministry suspended the tender and stated it would be rebid.  Giving or accepting a bribe is a criminal act under the Prevention of Corruption and Economic Offences Act of 2006, the penalty for which is a minimum of 10,000 maloti (USUSD 667) or 10 years imprisonment.  Local companies cannot deduct a bribe to a foreign official from taxes. Corruption is common in government procurement.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Lesotho acceded to the UN Anticorruption Convention in 2005, but it is not yet a signatory to the OECD Convention on Combating Bribery.  Lesotho acceded to the African Union Convention on Preventing and Combating Corruption in 2003. The country is also a member of the Southern African Development Community Protocol against corruption, Southern African Forum against corruption, African Peer Review Mechanism (APRM), and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).

The country is currently undertaking a National Benchmark Survey to determine the effectiveness of an overall anti-corruption strategy.  In 2018, a Special Anti-Corruption Sub-Committee of ministerial principal secretaries was established to capacitate principal secretaries to identify corruption, implement preventative measures, and to hold perpetrators accountable.

Resources to Report Corruption

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

Sefako Seema
Prosecutor
DCEO

or

Mamello Mafelesi
Prosecutor
DCEO
P.O.  Box 16060, Maseru, 100 Lesotho
+266 2231-3713
info@dceo.org.ls

Since 2012, Lesotho has been governed through coalition governments which have not lasted beyond three years.  (Note: the constitution states that elections should be held every five years). The nation has been increasingly polarized and the political environment unpredictable.  However, the arrest of LDF members previously involved in human rights abuses and the appointment of a new commander has stabilized the security sector significantly.

In August 2014, the army attacked three police stations and killed one police officer.  The then Prime Minister, some ministers, and police officers fled to South Africa. Following the incident, the Southern African Development Community (SADC) provided VIP protection for the Prime Minister and former Minister of Gender and Youth, Sports and Recreation; also Leader of the Basotho National Party (BNP); and facilitated the February 28, 2015 snap elections.  The elections were peaceful and widely regarded as free and fair, and a seven-party coalition government emerged. In May and June 2015, more than 20 soldiers were detained and tortured in connection with an alleged mutiny. On June 25, 2015 former army Commander Maaparankoe Mahao was killed by other soldiers, leading to a SADC Commission of Inquiry which concluded that excessive use of force was used in an attempt to arrest him and recommended that those involved in the killing and other crimes should be prosecuted.  The Commission also found no evidence of alleged mutiny. It further recommended constitutional, public service, judicial, parliamentary and security reforms. In fulfillment of one of the SADC recommendations, the then army commander retired on December 1, 2016. He is currently facing charges for January 2014 bombings at the now First Lady’s, her neighbor’s, and former police commissioner’s residences, as well as the killing of a police officer in August 2014. He is also charged in Mahao’s murder. Over 30 other soldiers are facing charges for various crimes including the 2015 killing of the army commander.

On March 1, 2017, the government lost a vote of no-confidence in parliament for the first time in Lesotho’s history, prompting a snap election.  The June 3, 2017 elections (third in five years) were declared free and fair. A new four-party coalition was formed. In September 2017, another army commander was also killed in his office following a confrontation over the handing over of army suspects to the police.  The perpetrators, also army soldiers, were immediately killed by bodyguards and one more suspect is facing a court martial. In response, the government invited SADC troops, police, intelligence, and civilian personnel to Lesotho as a stabilization and training mission. The contingent arrived in December 2017 and departed in November 2018.

In August and September 2017, two opposition politicians including the former Deputy Prime Minister and Leader of the Lesotho Congress for Democracy (LCD) fled the country citing security concerns.  They returned in November 2018 to participate in the first plenary of the Multi-Sectoral National Dialogue aimed at finding solutions to Lesotho’s protracted political problems.

In August 2018, factory workers staged violent protests demanding a minimum wage increase.  Workers blocked roads with stones and other debris, set fires, and broke windows of local businesses.

The All Basotho Convention (ABC) held its National Executive Committee (NEC) elective conference in February 2019.  The conference elected Professor Nqosa Mahao as the Deputy Leader, reportedly contrary to Prime Minister Thabane’s wishes.  Party officials aligned to Thabane filed a court case challenging the conference election outcome. Thabane has stated that if not resolved, the ongoing ABC intra-party rivalry will lead to government collapse.

The Central Bank of Lesotho (Modeling and Forecasting Division) collects the provided data and publicly distributes them.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Data on Lesotho not available from the IMF Website

Table 4: Sources of Portfolio Investment

Data not available; Lesotho is not one of the economies reporting on the IMF’s CPIS data.

Transparency of the Regulatory System

Investors face myriad requirements for permits, approvals, and clearances that take substantial time and effort to obtain.  The difficulty of navigating the system provides opportunities for corruption and bribery when officials facilitate routine transactions.  Regulations in the areas of labor, health and safety, and the environment often go unenforced, or are selectively enforced.  In addition, civil servants have threatened to enforce antiquated regulations that remain on the books to obtain favors or bribes.

Draft bills are usually made available for public comments through the business associations or relevant sectors or in public meetings.  Changes to laws and regulations are published in the National Gazette.  Public comments are usually limited to input from a few private sector organizations, such as CTA.  There have been complaints of short comment periods and that comments are not properly reflected in the National Gazette.  The GRM is considering a law that would make public consultation on future legislation mandatory.

International Regulatory Considerations

Mozambique is a member of SADC (Southern African Development Community).  In June 2016, the SADC EPA Group, which includes Mozambique, Botswana, Lesotho, Namibia, South Africa, and Swaziland, signed an Economic Partnership Agreement with the European Union. Mozambique exports aluminum under the EPA agreement.

The GRM ratified the Trade Facilitation Agreement (TFA) in July 2016 and notified the WTO in January 2017.  A National Trade Facilitation Committee was established to coordinate the implementation of the TFA.

Legal System and Judicial Independence

Mozambique’s legal system is based on Portuguese civil law and customary law.  In December 2005, the Parliament approved major revisions to the Commercial Code – the result of a collaborative effort starting in 1998 between the Mozambican government, the private sector, and donors.  The previous Commercial Code was from the colonial period, with clauses dating back to the 19th century, and it did not provide an effective basis for modern commerce or resolution of commercial disputes.  The revised code went into effect July 1, 2006.  In April 2018, the Council of Ministers passed new provisions for the Commercial Code, which were debated and approved in Parliament.

Laws and Regulations on Foreign Direct Investment

The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, and Decree No. 56/2009, approved in October 2009, form the legal basis for foreign direct investment in Mozambique. Operating within these regulations, APIEX analyzes the fiscal and customs incentives available for a particular investment.  Investors must establish foreign business representation and acquire a commercial representation license.  During project development, investors must document their community consultation efforts related to the project.  If the investment requires the use of land, the investor will also have to present, among other documents, a topographic plan or an outline of the site where the project will be developed.

If the investment involves an area under 1,000 hectares and the investment is up to approximately USD 25 million, the governor of the province where it will be located can approve the investment.  APIEX has the authority to approve any project between USD 25 million and approximately USD 40 million.  The Minister of Economy and Finance must approve national or foreign investment between approximately USD 40 million and USD 225 million.  If the investment (national or foreign) occupies an area of 10,000 hectares or an area superior to 100,000 hectares for a forestry concession, or it amounts to more than USD 225 million, the project must be approved by the Council of Ministers.

On February 21, 2017, the GRM approved a new regulation to facilitate visas for foreign nationals intending to invest in projects in Mozambique.  The measure reduced the minimum investment amount required from USD 50 million to USD 500,000 for an investment visa.  Under the new visa regulations, citizens of nations that have Mozambican embassies or consulates may now also request visas upon entry for the purposes of short-term tourism and/or business.  The new border visa is valid for stays of up to 30 days and allows two entries.  It cannot be renewed or extended in Mozambique.

Competition and Anti-Trust Laws

Law 10/2013, passed on April 11, 2013, and known as the Competition Law, established a modern legal framework for competition in Mozambique and created the Competition Regulatory Authority.  A budget has still not been allocated to this body, and the GRM needs to appoint a board of directors.  The framework is inspired by the Portuguese competition enforcement system.  Violating the prohibitions contained in the Competition Law (either by entering into an illegal agreement or practice or by implementing a concentration subject to mandatory filing) could result in a fine of up to 5 percent of the turnover of the company in the previous year.  Competition Regulatory Authority decisions may be appealed in the Judicial Court in Maputo, for cases leading to fines or other sanctions, or to the Administrative Court for merger control procedures.

Expropriation and Compensation

While there have been no significant cases of nationalization since the adoption of the 1990 Constitution, Mozambican law holds that “when deemed absolutely necessary for weighty reasons of national interest or public health and order, the nationalization or expropriation of goods and rights shall (result in the owner being) entitled to just and equitable compensation.” No American companies have been subject to expropriation issues in Mozambique since the adoption of the 1990 Constitution.

Dispute Settlement

ICSID Convention and New York Convention

Mozambique acceded in 1998 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

For disputes between U.S. and Mozambican companies where a Bilateral Investment Treaty (BIT) violation is alleged, recourse via the international Alternative Dispute Resolution may also be available.  No investment disputes in the past ten years have involved U.S. investors. Investors who feel they have a dispute covered under the BIT should contact the U.S. Embassy.

International Commercial Arbitration and Foreign Courts

In 1999, the Parliament passed Law no. 11/99 (Law on Arbitration), which allows access to modern commercial arbitration for foreign investors.  The Judicial Council approved Resolutions No. 1/CJ/2017 and No. 2/CJ/2017 in 2017, creating the Regulations of Mediation Services in Judicial Courts and the Judicial Mediators’ Code of Conduct.  These new resolutions are designed to promote the mediation process as an alternative to litigation.

The Center of Arbitration, Conciliation, and Mediation (CACM) offers commercial arbitration. During 2018, CACM handled 20 cases of commercial arbitration, and another five cases are in process.  CACM has 298 arbitrators, 11 of which are international.  One of the main constraints to the use of arbitration is that many contracts do not incorporate a clause that allows conflicts to be resolved via arbitration instead of in the courts.

Bankruptcy Regulations

In June 2014, the GRM passed a comprehensive legal regime for bankruptcy, streamlining the bankruptcy process and setting the rules for business recovery.  Globally, Mozambique stands at 84 of 190 economies on the ease of resolving insolvency issues, according to the 2018 Doing Business Report.

Investment Incentives

The Code of Fiscal Benefits contains specific incentives for entities that intend to invest in certain geographical areas within Mozambique that have natural resource potential but which lack infrastructure and have low levels of economic activity.  Rapid Development Zones (RDZ) were also created to facilitate investment.  Investments in these zones are exempt from import duties on certain goods and are granted an investment tax credit equal to 20 percent of the total investment (with a right to carry the credit forward for five years).  Additional modest incentives are available for professional training and the construction and rehabilitation of public infrastructure, including, but not limited to roads, railways, water supply, schools, and hospitals.

The Code of Fiscal Benefits, Law No. 4/2009, passed in 2009, is available at: https://investmentpolicyhubold.unctad.org/InvestmentLaws/laws/108 .  The Regulations for the Code of Fiscal Benefits are set forth in Decree No. 56/2009, which was approved in October 2009.  APIEX can assist companies with the investment incentives stipulated in the Code of Fiscal Benefits

Foreign Trade Zones/Free Ports/Trade Facilitation

Mozambique has seven free trade zones in the country, which provide a variety of fiscal exemptions depending on the sector of investment as well as the project location.  Investors should pay close attention to documents and procedures requested in order to establish a business locally or to request fiscal and customs incentives if investing in an industrial free zone. Information regarding business registration and administrative practices are available at: http://www.portaldogoverno.gov.mz/por/Empresas/Registos .

Performance and Data Localization Requirements

The government generally does not require investors to purchase from local sources, nor does it require technology or proprietary business information to be transferred to a local company; however, a proposed “Local Content” law could create additional requirements in this realm.

Regulations for new mining and petroleum laws may require investors to give preference to local sources available in Mozambique if the goods or services are of an internationally comparable quality and competitively priced.

Companies may hire foreign workers only when there are not sufficient Mozambican workers available that meet specific job qualifications.  The Ministry of Labor enforces quotas for foreign workers as a percentage of the workforce within individual private companies.  All investments must specify the number and category of Mozambican and foreign workers.

There are currently no data localization policies in effect in Mozambique.  The government agency responsible for enforcing IT policies and rules is:

UTICT – Unidade Tecnica de Implementacao da Politica de Informatica
Technical Implementation Unit for IT Policy
Tel: (258) 21 309 398; 21 302 241
Mobile (258) 305 3450
Email: cpinfo@infopol.gov.mz

Real Property

The legal system recognizes and protects property rights to buildings and movable property. Private ownership of land, however, is not allowed in Mozambique.  Land is owned by the State. The government grants land-use concessions called DUATs (Direitos de Uso e Aproveitamento de Terra, or a land-use title) for periods of up to 50 years, with options to renew for an additional 50 years.  Essentially, land-use concessions serve as proxies for land titles.  There is no robust market in land user rights and land use titles are not easily transferable.  The process to award land concessions is not transparent and the government at times has granted overlapping land concessions.  It takes an average of 90 days to issue a land title for most of the concessions.  The Mozambican banking community uses property other than land – cars, private houses, and infrastructure – as collateral, as it is not possible to securitize property for lending purposes.

Investors should be aware of the requirement to obtain endorsement of their projects in terms of land use and allocation at a local level from the affected communities.  APIEX assists investors in finding land for development and obtaining appropriate documentation, including agricultural land.  The government advises companies on relocating individuals currently occupying land designated for development; however, companies are ultimately responsible for planning and executing resettlement programs.

Intellectual Property Rights

The Parliament passed a copyright and related rights bill in 2000, which, when combined with the 1999 Industrial Property Act, brought Mozambique into compliance with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  The law provides for the security and legal protection of industrial property rights, copyrights, and other related rights.  In addition, Mozambique is a signatory to the Bern Convention, as well as the New York and Paris Conventions.

Despite enforceable laws and regulations protecting intellectual property rights (IPR) and providing recourse to criminal or administrative courts for IPR violations, it remains difficult for investors to enforce their IPR.  The registration process is relatively simple and private sector organizations have been working with various government entities on an IPR taskforce to combat IPR infringement and related public safety issues.

IPR enforcement in Mozambique remains sporadic and inconsistent.  Mozambique’s National Inspectorate of Economic Activities (INAE) has increased seizures of counterfeit goods since 2017, confiscating Hewlett-Packard (HP) toner cartridges, Nike, Adidas, and Ralph Lauren and other falsely branded merchandise in several large busts, but raids and prosecutions are limited. Pirated copies of audio, videotapes, DVDs, and other counterfeit goods are commonly sold in Mozambique.

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

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=MZ 

The National Assembly passed an anti-corruption bill in 2004.  Mozambique established an anti-corruption unit, the Central Office for Fighting Corruption (GCCC), within the Office of the Attorney General to investigate corruption-related crimes.  In 2005, the government passed Decree 22/2005, which created provincial-level offices to combat corruption.  The 2012 Law on Public Integrity banned government officials and parliamentarians from simultaneously holding positions in SOEs.  Mozambique passed a Right to Information law in 2014, which came into force in January 2016, although there have been cases of some journalists being denied requests for information.

Though Mozambique has made progress developing the legal framework to combat corruption, the policies and leadership necessary to ensure effective implementation have been insufficient.

Mozambique fell five places to 158 out of 180 countries in Transparency International’s 2018 Corruption Perceptions Index.  Corruption is a concern across the government, and senior officials often have conflicts of interest between their public roles and their private business interests.  There are also frequent reports of corruption and bribe-seeking among Mozambican police forces.

A few civic organizations and journalists remain vocal on corruption-related issues.  One NGO, the Center for Public Integrity (Portuguese acronym -CIP), continues to publicly pressure the government to act against corrupt practices.  CIP finds that many local businesses are closely linked to the government and have little incentive to promote transparency.  Despite strong rules prohibiting the bribery of public officials, enforcement remains limited.

In 2018, there was an increase in the number of corruption cases involving high-level government officials, including the former Minister of Transport and Communications and the former Mozambique ambassador to the United States, who were convicted by the courts for abuse of power.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

Ana Maria Gemo
Central Anti-Corruption Office (Gabinete Central de Combate a Corrupcao)
Avenida 10 de Novembro, 193
+258 82 3034576
gabinetecorrupção@yahoo.com.br

Contact at “watchdog” organization

Fatima Mimbire
Project Coordinator Extractive Industries
Center for Public Integrity (Centro de Integridade Publica)

Rua Fernão Melo e Castro, 124
+258 82 5293957
fatima.mimbire@cipmoz.org

Between 2013 and 2016, Mozambique experienced waves of politically motivated violence due to a simmering armed conflict between GRM forces and the main opposition party Renamo.  Tensions peaked in 2016, a year that saw GRM forces deploy armed convoys along the country’s two main commercial highways to counter Renamo attacks.  Thousands of Mozambicans sought asylum in neighboring Malawi to avoid the conflict.  International human rights organizations described alleged human rights violations against the refugees and their families carried out by GRM forces, as well as allegations of mass graves.  Political killings, attacks on public transportation, and kidnappings were also attributed to Renamo by Human Rights Watch.

After a cessation of hostilities was declared in December 2016, the GRM and Renamo made significant progress towards a lasting peace in 2017 and 2018.  The GRM and Renamo agreed to a power-sharing decentralization package in February 2018, which was incorporated into the Mozambican Constitution by Parliament in May 2018, and will allow for the first time, the election of provincial governors during the October 2019 elections.  Work continues on the implementation of the second element of the peace process having to do with the disarmament, demobilization, and reintegration of Renamo combatants.

On the security front, the GRM faces significant challenges in its efforts to combat transnational and organized crime, prevent the spread of violent extremism, and curb poaching and illegal wildlife trafficking.  Since 2017, Islamic extremists have carried out unprecedented attacks against government facilities and communities in Cabo Delgado province, killing scores of government security personnel and local villagers, often exhibiting extreme brutality.  The frequency and severity of the attacks increased in 2018.  On February 21, 2019, an attack was carried out against a convoy of a contractor working for an international oil company, the first attack on a multinational project by the extremists.  These attacks highlight long-simmering economic and social risk factors for radicalization in the north and underscore the need for national counterterrorism and countering violent extremism (CVE) strategies.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Transparency of the Regulatory System

Draft bills, proposed legislation, and draft regulations are normally not available for public comment and are not required to be, although there are consultations on such documents throughout the government.  Depending on the topic, bills are customarily drafted within the relevant ministry with minimal stakeholder or public consultation and then presented to the parliament for debate. Comments on draft legislation and regulations may also be solicited through public meetings or targeted outreach to stakeholder groups.  Such comments are also not required to be made public and generally are not. There is no formal process of appeal or reconsideration of published regulations. Approved legislation and regulations are published in the Government Gazette, the official journal of the government of Namibia.

Public finances are generally transparent, with the annual budget and mid-term budget reviews published on the Ministry of Finance’s website and in the Government Gazette.  The Bank of Namibia publishes the government of Namibia’s debt position – including explicit and contingent liabilities – in its annual reports and quarterly bulletins.

International Regulatory Considerations

Namibia is a member of the International Organization for Standardization.  The coordinating bureau for standards in the country is the Namibian Standards Institution.  As a member state, Namibia’s regulations conform to SACU and SADC agreements. Namibia is a member of the World Trade Organization (WTO) and notifies the Committee on Technical Barriers to Trade on draft technical regulations.

Legal System and Judicial Independence

The Namibian court system is independent and is widely perceived to be free from government interference.  Namibia’s legal system, based on Roman Dutch law, is similar to that of South Africa. The system provides effective means to enforce property and contractual rights, but the speed of justice is generally very slow.

Laws and Regulations on Foreign Direct Investment

The Foreign Investment Act provides for liberal foreign investment conditions and equal treatment of foreign and local investors.  With limited exceptions, all sectors of the economy are open to foreign investment. There is no local participation requirement in the FIA, but the Namibian government is increasingly emphasizing the need for investors to partner with Namibian-owned companies and/or to have a majority of local employees in order to operate in the country.

The FIA reiterates the protection of investment and property provided for in the Namibian Constitution.  It also provides for equal treatment of foreign investors and Namibian firms, including the possibility of fair compensation in the event of expropriation, international arbitration of disputes between investors and the government, the right to remit profits, and access to foreign exchange.

The FIA will be replaced by the revised NIPA once revisions are complete and approved by Parliament.  The NIPA provides for transparent admission procedures for investors, the reservation of certain categories of business and sectors, and the establishment of an Integrated Client Service Facility or one-stop-shop for investors.

Competition and Anti-Trust Laws

The Competition Act of 2003 establishes the legal framework to “safeguard and promote competition in the Namibian market.”  The Competition Act establishes a legal and regulatory framework that attempts to safeguard competition while boosting the prospects for Namibian businesses and recognizing the role of foreign investment.  The act is intended to promote:

• The efficiency, adaptability, and development of the Namibian economy;
• Competitive prices and product choices for customers;
• Employment and advancement of the social and economic welfare of Namibians;
• Expanded opportunities for Namibian participation in world markets;
• Participation of small enterprises in the economy by ensuring a level playing field; and
• Greater enterprise ownership particularly among the historically disadvantaged.

The Act established the Namibia Competition Commission (NaCC), which was officially launched in December 2009.  The NaCC has the mandate to review any potential mergers and acquisitions that might limit the competitive landscape or adversely impact the Namibian economy.  The Minister of MITSMED is the final arbiter on merger decisions and may accept or reject a NaCC decision. Any investor can file an appeal with the ministry, though no formal process for doing so has been established.

Expropriation and Compensation

The Namibian Constitution enshrines the right to private property but allows the state to expropriate property in the public interest subject to the payment of just compensation.  The Agricultural (Commercial) Land Reform Act 6 of 1995 (ACLRA) is the primary legal mechanism allowing for expropriation, but the government has adhered to a “willing seller/willing buyer” policy as part of land reform programs.  In 2004, the government announced it would proceed with land expropriations after much criticism about the slow pace of land reform. To date the government has only expropriated farms from a small number of owners, and in each instance ultimately either compensated the owner or returned the land.  In March 2008 Namibia’s High Court ruled against the government in Gunter Kessl v. Ministry of Lands and Resettlement in the sole instance in which appropriation was legally challenged, and in doing so established a strong legal precedent protecting individual land rights.  Non-binding resolutions adopted at the Second National Land Conference in 2018 resolved to abolish the “willing seller/willing buyer” policy and bar foreign-ownership of agricultural land; however, no legislation formalizing these resolutions has been proposed.  The Namibian Constitution makes pragmatic provision for different types of economic activity and a “mixed economy” (Article 98), accepts the importance of foreign investment (Article 99), and enshrines the principle that the ownership of natural resources is vested in the Namibian state (Article 100).  Section 11 of the FIA reiterates the commitment to market compensation in the case of expropriation in terms of Article 16 of the Constitution. Holders of a Certificate of Status Investment must be compensated in foreign currency and can opt for international arbitration if any disputes arise.

Dispute Settlement

ICSID Convention and New York Convention

Namibia signed but has not ratified the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).  The ICSID and New York Convention are therefore not applicable.

Investor-State Dispute Settlement

The FIA allows for the settlement of disputes by international arbitration for investors that have obtained a Certificate of Status Investment (CSI) that includes a provision for international arbitration.  The FIA stipulates that arbitration “shall be in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law in force at the time when the Certificate was issued” unless the CSI stipulated another form of dispute resolution.

International Commercial Arbitration and Foreign Courts

As the “one-stop-shop” for investors, the Namibia Investment Centre (NIC) should be the body that first learns of an investment dispute between a foreign investor and a domestic enterprise.  The NIC has not yet received a report of an investment dispute. Investment disputes can be handled by the courts.

There is no domestic arbitration body in Namibia.  Investors without a CSI that encounter a dispute have to address their dispute in the Namibian courts or in the court system which has jurisdiction according to the investor’s contract.  The Namibian court system is independent and is widely perceived to be free from government interference, including when SOEs are involved in investment disputes.

Bankruptcy Regulations

The Companies Act of 1973, amended in 2004, governs company and corporate liquidations while the Insolvency Act 12 of 1936, as amended by the Insolvency Amendment Act of 2005, governs insolvent individuals and their estates.  The Insolvency Act details sequestration procedures and the rights of creditors. Through the law, all debtors (whether foreign or domestic) may file for both liquidation and reorganization, and a creditor may file for both liquidation and reorganization. As reorganization (judicial management) is rarely successful; however, the most likely insolvency procedure is liquidation.  International credit monitoring agency TransUnion is a licensed credit bureau in Namibia.

Investment Incentives

Incentives are mainly aimed at stimulating manufacturing, attracting foreign investment to Namibia, and promoting exports.  To take advantage of the incentives, companies must be registered with MITSMED and the Ministry of Finance. Tax and non-tax incentives are accessible to both existing and new manufacturers.  MITSMED has produced a brochure on Special Incentives for Manufacturers and Exporters that is available from the Namibia Investment Centre (NIC).

The Namibian Government aims to stimulate economic growth and employment and to establish Namibia as a gateway location in Southern African region.  To this end, the government has introduced numerous incentives that are largely concentrated on stimulating manufacturing in Namibia and prompting exports into the region and to the rest of the world.  General tax regulations that are indicative of the government’s commitment are:

• Non–resident Shareholders’ Tax is only 10 percent;
• Dividends accruing to Namibian companies or resident shareholders are tax-exempt;
• Plant, machinery and equipment can be fully written off over a period of three years;
• Buildings of non-manufacturing operations can be written off, 20 percent in the first year and the balance at 4 percent over the ensuing 20 years;
• Import or purchase of manufacturing machinery and equipment is exempted from Value Added Tax (VAT); and,
• Preferential market access to EU, USA, and other markets for manufacturers is provided.

The government does issue guarantees, but reluctantly.  Joint financing for foreign direct investment is occasionally implemented through the Namibia Development Corporation or another, sector-relevant state-owned enterprise.

Foreign Trade Zones/Free Ports/Trade Facilitation

Namibia has an Export Processing Zone (EPZ) regime that offers favorable conditions for companies wishing to manufacture and export products.  The government of Namibia has announced plans to repeal the EPZ Act and replace it with Special Economic Zones. Existing EPZ users will be accommodated, and new applications are still accepted under the current regime.  The government has not yet tabled a proposal for the Special Economic Zones.

There are 19 EPZ companies in operation, most of which were closely linked to minerals beneficiation, including Namzinc (which produces Special High Grade zinc at the Skorpion zinc mine), Namibia Custom Smelters (which produces blister copper from imported copper concentrates), and a variety of diamond cutting and polishing operations (which cut and polish locally and internationally sourced rough diamonds).

To make manufacturing in Namibia more competitive, government has introduced a further package of tax and non-tax special incentives, applicable to both existing and new manufacturing enterprises, exporters, and EPZ enterprises.  Companies operating under the EPZ regime are free to locate their operations anywhere in Namibia. Through the Offshore Development Company (ODC), EPZ enterprises also have access to factory facilities rented at economical rates.

Namibia offers one of the most favorable EPZ regimes of the region.  Normally, Namibian companies pay corporate income tax, general and additional sales duties, as well as stamps and transfer duties.  The EPZ companies do not pay any of these taxes and duties. Only personal income tax on employees’ income are paid, and there is a Non- Resident Shareholders’ Tax of 10 percent when dividends are exported.  Currency conversion is guaranteed, and financial transactions (the transfer of dividends, profits and dis-investment) may be undertaken by banks without the involvement of the Central Bank. The EPZ companies may not, however, borrow money in the domestic money market.

The EPZ incentives are:

• Corporate tax holiday
• Exemption from import duties on imported intermediate and capital goods
• Exemption from sales tax, stamp and transfer duties on goods and services required for EPZ activities

• Reduction in foreign exchange controls
• Guarantee of free repatriation of capital and profits
• Permission for EPZ investors to hold foreign currency accounts locally
• Access to streamlined regulatory service (‘one-stop-shop’)
• Refund of up to 75 percent of costs of pre-approved training of Namibian citizens
• No strike or lock-outs allowed in EPZs
• Provision of factory facilities for rent at economical rates

Performance and Data Localization Requirements

The government actively encourages partnerships with historically disadvantaged Namibians. The Equity Commission requires all firms to develop an affirmative action plan for management positions and to report annually on its implementation.  Namibia’s Affirmative Action Act strives to create equal employment opportunities, improve conditions for the historically disadvantaged, and eliminate discrimination. The Equity Commission facilitates training programs, provides technical and other assistance, and offers expert advice, information, and guidance on implementing affirmative action in the work place.

In certain industries, the government has employed specific techniques to increase Namibian participation.  In the fishing sector, for example, companies pay lower quota fees if they operate Namibian-flagged vessels based in Namibia with crews that are predominantly Namibian.

Investors often complain about the lengthy and administratively burdensome process of obtaining work permits in Namibia.  Although the government cites the country’s high unemployment rate as its motivation for a strict policy on work permits, Namibia’s labor force does not yet meet many of the skills needed to fill jobs that foreigners currently hold.

The Namibian government does not have “forced localization” requirements for data storage.  Domestic content is encouraged. State owned enterprises are including local ownership/participation requirements in procurement actions.

Economic empowerment legislation for previously disadvantaged groups, called the New Equitable Economic Empowerment Framework, is under consideration in the legislature.  A bill is expected to be introduced in 2019 and is expected to contain provisions relating to ownership, management, value addition, human resource capacity building, job creation, and corporate social responsibility.

Real Property

The Namibian Constitution guarantees all persons the right to acquire, own and dispose of all forms of property throughout Namibia, but also allows Parliament to make laws concerning expropriation of property (see Expropriation and Compensation Section) and to regulate the right of foreign nationals to own or buy property in Namibia.  There are no restrictions on the establishment of private businesses, size of investment, sources of funds, marketing of products, source of technology, or training in Namibia. All deeds of sales are registered with the Deeds Office. Property is usually purchased through real estate agents and most banks provide credit through mortgages.  The Namibian Constitution prohibits expropriation without just compensation.

Intellectual Property Rights

Namibia is a party to the World Intellectual Property Organization (WIPO) Convention, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.  Namibia is also a party to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks and the Patent Cooperation Treaty. Namibia is a signatory to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.

The responsibility for intellectual property rights (IPR) protection is divided among three government ministries.  The Ministry of Industrialisation, Trade, and SME Development (MITSMED) oversees industrial property and is responsible for the registration of companies, private corporations, patents, trademarks and designs through its Business and Intellectual Property Authority (BIPA).  The Ministry of Information and Communication Technology (MICT) manages copyright protection, while the Ministry of Environment and Tourism (MET) protects indigenous plant varieties and any associated traditional knowledge of these plants.

Two copyright organizations, the Namibian Society of Composers and Authors of Music (NASCAM) and the Namibian Reproduction Rights Organization (NAMRRO), are the driving forces behind the government’s anti-piracy campaigns.  NASCAM administers IPR for authors, composers and publishers of music. NAMRRO protects all other IPR including literary, artistic, broadcasting, satellite, traditional knowledge, and folklore.

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

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

The Anti-Corruption Act of 2003 created an Anti-Corruption Commission (ACC), which began operations in 2006.  The ACC attempts to complement civil society’s anti-corruption programs and support existing institutions such as the Ombudsman’s Office and the Office of the Attorney General.  Anti-corruption legislation is in place to combat public corruption. In a nationwide survey commissioned by the ACC and released in 2016, corruption was listed at the third-most important development challenge facing Namibia (6 percent, after unemployment at 37 percent and poverty at 30 percent).  78 percent of survey respondents rated corruption as “very high” in Namibia. The highest result comes from those in rural areas,

Namibia has signed and ratified the UN Convention against Corruption and the African Union’s African Convention on Preventing and Combating Corruption.  Namibia has also signed the Southern African Development Community’s Protocol against Corruption.

Resources to Report Corruption

Paulus Noa
Director
Namibia Anti Corruption Commission
Corner of Montblanc & Groot Tiras Street, Windhoek
+264-61-370-600
anticorruption@accnamibia.org

Namibia is a stable multiparty and multiracial democracy.  The protection of human rights is enshrined in the Namibian Constitution, and the government generally respects those rights. Political violence is rare and damage to commercial projects and/or installations as a result of political violence is considered unlikely.  The State Department’s Country Report on Human Rights for Namibia provides additional information.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

*Namibia Statistics Agency

Table 3: Sources and Destination of FDI (2017)

Table 4: Sources of Portfolio Investment

Data not available.

Transparency of the Regulatory System

Nigeria’s legal, accounting, and regulatory systems comply with international norms, but enforcement remains uneven.  Opportunities for public comment and input into proposed regulations sometimes occur. Professional organizations set standards for the provision of professional services, such as accounting, law, medicine, engineering, and advertising.  These standards usually comply with international norms. No legal barriers prevent entry into these sectors.

Ministries and regulatory agencies develop and make public anticipated regulatory changes or proposals and publish proposed regulations before their application.  The general public has the opportunity to comment through targeted outreach, including business groups and stakeholders, and during the public hearing process before a bill becomes law.  There is no specialized agency tasked with publicizing proposed changes and the time period for comment may vary. Ministries and agencies do conduct impact assessments, including environmental assessments, but impact assessment methodology may vary.  The National Bureau of Statistics reviews regulatory impact assessments conducted by other agencies. Laws and regulations are publicly available.

Fiscal management occurs at all three tiers of government: national, 36 state governments and Federal Capital Territory (FCT), and 774 local governments.  Revenues from oil and non-oil sources are collected into the federation account and then shared among the different tiers of government by the Federal Account Allocation Committee (FAAC) in line with a statutory sharing formula.  All state governments are allowed to collect internally generated revenues, which vary from state to state. However, the fiscal federalism structure does not compel states to be accountable to the federal government or transparent about revenues generated or received from the federation account.  The national government’s finances are more transparent as budgets are made public and the financial data are published by agencies such as the CBN, Debt Management Office, and the National Bureau of Statistics. However, the financial dealings of the state-owned oil company, the Nigerian National Petroleum Corporation, are very opaque.

The Debt Management Office (DMO) puts Nigeria’s total debt stock at USD 79.4 billion as of December 2018 – USD 25.2 billion or nearly 32 percent of which is external.  Debts owed by state governments rose 110 percent from USD 5.92 billion between 2014 and 2017, during which the national government had allocated USD 4.8 billion to bail out several states that could not pay salaries.  The total debt figures presented by the DMO usually do not include off-balance-sheet financing such as sovereign guarantees.

International Regulatory Considerations

Foreign companies operate successfully in Nigeria’s service sectors, including telecommunications, accounting, insurance, banking, and advertising.  The Investment and Securities Act of 2007 forbids monopolies, insider trading, and unfair practices in securities dealings. Nigeria is not a party to the WTO’s Government Procurement Agreement (GPA).  Nigeria generally regulates investment in line with the WTO’s Trade-Related Investment Measures (TRIMS) Agreement, but the government’s local content requirements in the oil and gas sector and the ICT sector may conflict with Nigeria’s commitments under TRIMS.

In December 2013, the National Information Technology Development Agency (NITDA), under the auspices of the Ministry of Communication, issued the Guidelines for Nigerian Content Development in the ICT sector.  These guidelines require original ICT equipment manufacturers, within three years from the effective date of the guidelines, to use 50 percent local manufactured content and to use Nigerian companies in providing 80 percent of value added on networks.  The guidelines also require multinational companies operating in Nigeria to source all hardware products locally; all government agencies to procure all computer hardware only from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally, use only locally manufactured SIM cards for telephone services and data, and to use indigenous companies to build cell towers and base stations.  Enforcement of the guidelines is largely inconsistent.  The Nigerian government generally lacks the capacity and resources to monitor labor practices, technology compliancy, and digital data flows.  There are reports that individual Nigerian companies periodically lobby the National Assembly and/or NITDA to address allegations (warranted or not) against foreign firms that they are in non-compliance with the guidelines.

The goal is to promote development of domestic production of ICT products and services for the Nigerian and global markets, but the guidelines pose impediments and risks to foreign investment and U.S. companies by interrupting their global supply chain, increasing costs, disrupting global flow of data, and stifling innovative products and services.  Industry representatives remain concerned about whether the guidelines would be implemented in a fair and transparent way towards all Nigerian and foreign companies. All ICT companies, including Nigerian companies, use foreign manufactured products as Nigeria does not have the capacity to supply ICT hardware that meets international standards.

Nigeria is a member of the Economic Community of West African States (ECOWAS), which implemented a Common External Tariff (CET) beginning in 2015 with a five-year phase in period.  An internal CET implementation committee headed by the Fiscal Policy/Budget Monitoring and Evaluation Department of the Nigeria Customs Service was set up to develop the implementation work plans that were consistent with national and ECOWAS regulations by the year 2020.  The country has also put in place a CET monitoring committee, domiciled at the Ministry of Finance consisting of a number of Ministries, Departments and Agencies (MDAs) that have issues related to the CET. Under the CET, Nigeria applies five tariff bands: zero duty on capital goods, machinery, and essential drugs not produced locally; 5 percent duty on imported raw materials; 10 percent duty on intermediate goods; 20 percent duty on finished goods; and 35 percent duty on goods in certain sectors such as palm oil, meat products, dairy and poultry that the Nigerian government seeks to protect.  Under the CET, ECOWAS member governments are permitted to assess import duties higher than the maximum allowed in the tariff bands (but not to exceed a total effective duty of 70 percent) for up to 3 percent of the 5,899 tariff lines included in the ECOWAS CET.

Legal System and Judicial Independence

Nigeria has a complex, three-tiered legal system comprised of English common law, Islamic law, and Nigerian customary law.  Common law governs most business transactions, as modified by statutes to meet local demands and conditions. The Supreme Court sits at the pinnacle of the judicial system and has original and appellate jurisdiction in specific constitutional, civil, and criminal matters as prescribed by Nigeria’s constitution.  The Federal High Court has jurisdiction over revenue matters, admiralty law, banking, foreign exchange, other currency and monetary or fiscal matters, and lawsuits to which the federal government or any of its agencies are party. The Nigerian court system is slow and inefficient, lacks adequate court facilities and computerized document-processing systems, and poorly remunerates judges and other court officials, all of which encourages corruption and undermines enforcement.  Judges have frequently failed to appear for trials.  In addition, the pay for court officials is low, and they often lack proper equipment and training.

Although the constitution and law provide for an independent judiciary, the judicial branch remains susceptible to pressure from the executive and legislative branches.  Political leaders have influenced the judiciary, particularly at the state and local levels.

The World Bank’s publication, Doing Business 2019, ranked Nigeria 92 out of 190 on enforcement of contracts, a significant improvement from previous years.  The Doing Business report credited business reforms for improving contract enforcement by issuing new rules of civil procedure for small claims courts which limit adjournments to unforeseen and exceptional circumstances but noted that there can be variation in performance indicators between cities in Nigeria (as in other developing countries).  For example, resolving a commercial dispute takes 476 days in Kano but 447 days in Lagos. In the case of Lagos, the 447 days includes 40 days for filing and service, 265 days for trial and judgment and 142 days for enforcement of the judgment with total costs averaging 42 percent of the claim. In Kano, however, filing and service only takes 21 days with enforcement of judgement only taking 90 days, but trial and judgment accounts for 365 days with total costs averaging lower at 28.4 percent of the claim.  In comparison, in OECD countries the corresponding figures are an average of 582 days and averaging 21.2 percent of the claim and in sub-Saharan countries an average of 655 days and averaging 42.3 percent of the claim.

Laws and Regulations on Foreign Direct Investment

The NIPC Act of 1995 allows 100 percent foreign ownership of firms, except in the oil and gas sector where investment remains limited to joint ventures or production-sharing agreements.  Laws restrict industries to domestic investors if they are considered crucial to national security, such as firearms, ammunition, and military and paramilitary apparel. Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990.  The Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest, but the Embassy is unaware of specific instances of such interference by the government.

Competition and Anti-Trust Laws

After years of debate, the Nigerian government enacted the Federal Competition and Consumer Protection Act in February 2019.  The bill repealed the Consumer Protection Act of 2004 and replaced the previous Consumer Protection Council with a Federal Competition and Consumer Protection Commission while also creating a Competition and Consumer Protection Tribunal to handle issues and disputes arising from the operations of the Act.  Under the terms of the Act, businesses will be able to lodge anti-competitive practices complaints against other firms in the Tribunal.  The bill prohibits agreements made to restrain competition, such as agreements on price fixing, price rigging, collusive tendering, etc. (with specific exemptions for collective bargaining agreements and employment, among other items). The bill empowers the President of Nigeria to regulate prices of certain goods and services on the recommendation of the Commission.

The law prescribes stringent fines for non-compliance.  A general fine imposed by this law for offences committed by companies is an amount up to 10 percent of the company’s annual turnover in the preceding business year.  The law will supersede previous systems whereby particular regulatory agencies had consumer protection oversight and the Investment and Securities Act had provisions on competition.

Expropriation and Compensation

The Nigerian government has not expropriated or nationalized foreign assets since the late 1970s, and the NIPC Act of 1995 forbids nationalization of a business or assets unless the acquisition is in the national interest or for a public purpose.  In such cases, investors are entitled to fair compensation and legal redress. A U.S.-owned waste management investment expropriated by Abia State in 2008 is the only known U.S. expropriation case in Nigeria.

Dispute Settlement

ICSID Convention and New York Convention

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

Investor-State Dispute Settlement

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

Section 26 of the NIPC Act of 1995 provides for the resolution of investment disputes through arbitration as follows:

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

Nigeria is a signatory to the 1958 Convention on Recognition and Enforcement of Foreign Arbitral Awards.  Nigerian courts have generally recognized contractual provisions that call for international arbitration. Nigeria does not have a bilateral investment treaty or free trade agreement with the United States.

International Commercial Arbitration and Foreign Courts

Bankruptcy Regulations

Reflecting Nigeria’s business culture, entrepreneurs generally do not seek bankruptcy protection.  Claims often go unpaid, even in cases where creditors obtain judgments against defendants. Under Nigerian law, the term bankruptcy generally refers to individuals whereas corporate bankruptcy is referred to as insolvency.  The former is regulated by the Bankruptcy Act of 1990, as amended by the Bankruptcy Decree 109 of 1992. The latter is regulated by Part XV of the Companies and Allied Matters Act Cap 59 1990 which replaced the Companies Act, 1968.  The Embassy is not aware of U.S. companies that have had to avail themselves of the insolvency provisions under Nigerian law.

Investment Incentives

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act, Cap 17, Laws of the Federation of Nigeria, 2004 provides incentives to pioneer industries deemed beneficial to Nigeria’s economic development and to labor-intensive industries, such as apparel.  There are currently 99 industries and products that qualify for the pioneer status incentive through the NIPC, following the addition of 27 industries and products which were added to the list in late 2017. The government has added a stipulation calling for a review of the qualifying industries and products to occur every two years.  Companies that receive pioneer status may benefit from a tax holiday from payment of companies income tax for an initial period of three years, extendable for one or two additional years. A pioneer industry sited in an economically disadvantaged area is entitled to a 100 percent tax holiday for seven years and an additional 5 percent depreciation allowance over and above the initial capital depreciation allowance.  Additional tax incentives are available for investments in domestic research and development, for companies that invest in local government areas (LGAs) deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for a number of other investment scenarios. For a full list of incentives, refer to the Nigerian Investment Promotion Commission website at: https://www.nipc.gov.ng/investment-incentives/.

The Nigerian Export Promotion Council administers an Export Expansion Grant (EEG) scheme to improve non-oil export performance.  The program was suspended in 2014 due to concerns about corruption on the part of companies who collected the grants but did not actually export, but was revised and relaunched in 2018.  The federal government set aside 5.12 billion naira (roughly USD 14.2 million) in the 2019 budget for the EEG scheme. The Nigerian Export-Import (NEXIM) Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms for the importation of machinery and raw materials used for generating exports. Repayment terms are typically up to seven years, including a moratorium period of up to two years depending on the loan amount and the project being finance.  Agencies created to promote industrial exports remain burdened by uneven management, vaguely-defined policy guidelines, and corruption.

The NIPC states that up to 120 percent of expenses on (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and are connected with the business from which income or profits are derived. Also, for the purpose of R&D on local raw materials, 140 percent of expenses are allowed.  For cases in which the research is long-term, it will be regarded as a capital expenditure and will be written off against profit.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Nigerian Export Processing Zone Authority (NEPZA) allows duty-free import of all equipment and raw materials into its export processing zones.  Up to 100 percent of production in an export processing zone may be sold domestically based on valid permits and upon payment of applicable duties. Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program, resulting in the establishment of the Lekki FTZ (owned by Lagos state), and the Olokola FTZ (which straddles Ogun and Ondo states and is owned by those two states, the federal government, and private oil companies).  Workers in FTZs may unionize, but may not strike for an initial ten-year period.

Nigeria ratified the WTO Trade Facilitation Agreement (TFA) in 2016 and the Agreement entered into force in February 2017.  Nigeria already implements items in Category A under the TFA and has identified, but not yet implemented, its Category B and C commitments.  In August 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments.  (See https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm   )

Performance and Data Localization Requirements

Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the Corporate Affairs Commission, procure appropriate business permits, and register with the Securities and Exchange Commission (when applicable) to conduct business in Nigeria.  Manufacturing companies sometimes must meet local content requirements. Long-term expatriate personnel do not require work permits, but they remain subject to needs quotas requiring them to obtain residence permits that allow salary remittances abroad. Expatriates looking to work in Nigeria on a short-term basis can either request a temporary work permit, which is usually granted for a two-month time period but can be extended up to six months, or a business visa, if only traveling to Nigeria for the purpose of meetings, conferences, seminars, trainings, or other brief business activities.  Authorities permit larger quotas for professions deemed in short supply, such as deep-water oil-field divers. U.S. companies often report problems in obtaining quota permits. The Nigerian government’s Immigration Regulations 2017 introduced additional means by which foreigners can obtain residence in Nigeria. Foreign nationals who have imported an annual minimum threshold of capital over a certain period of time may be issued a permanent residence permit, as long as the investment is not withdrawn. The Nigerian Oil and Gas Content Development Act, 2010 (NOGCDA) restricts the number of expatriate managers to 5 percent of the total number of personnel for companies in the oil and gas sector.

Technology Transfer Requirements

The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP).  NOTAP’s main objective is to regulate the international acquisition of technology while creating an environment conducive to local technology.  To this end, NOTAP recommends local technical partners to Nigerian users in a bid to reduce the level of imported technology, which currently accounts for over 90 percent of technology in use in Nigeria.  One of NOTAP’s major activities is the review of Technology Transfer Agreements (TTAs), a requirement for importing technology into Nigeria and for companies operating in Nigeria to access foreign currency.  NOTAP reviews three major aspects prior to approval of TTAs and subsequent issuance of a certificate:

• Legal – ensuring that the clauses in the agreement are in accordance with Nigerian laws and legal frameworks within which NOTAP operates;
• Economic – ensuring prices are fair for the technology offered; and
• Technical – ensuring transfer of technical knowledge.

One of the chief complaints among American firms concerning the TTA is the length of the approval process which can take up to three months.  NOTAP took steps to automate the TTA approval process in order reduce the approval process to one month or less. However, total number of days for processing TTAs by NOTAP from the date of filing the application to the issuance of confirmation of reasonableness is still 60 business days. See https://notap.gov.ng/sites/default/files/stages_involved.pdf  .

The NOGCDA has technology-transfer requirements that may violate a company’s intellectual property rights.

Data Storage

The Guidelines for Nigerian Content Development in the ICT sector issued by the National Information Technology Development Agency (NITDA) on December 3, 2013, require ICT companies to host all consumer and subscriber data locally to ensure the security of government data and promote development of the ICT by mandating all government ministries, departments and agencies to source and procure software from only local and indigenous software development companies.  Enforcement of the guidelines is largely absent as the Nigerian government lacks capacity and resources to monitor digital data flows. Federal government data is hosted locally in data centers that meet international standards. In 2019 NITDA updated the 2013 Guidelines for Data Protection (https://nitda.gov.ng/wp-content/uploads/2019/01/Nigeria percent20Data percent20Protection percent20Regulation.pdf) and rolled out the regulatory framework for providers of public internet access services such that only registered, verified and vetted providers can provide public internet access service in Nigeria.

Customs

The Nigerian Customs Service (NCS) and the Nigerian Ports Authority (NPA) exercise exclusive jurisdiction over customs services and port operations.  Nigerian law allows importers to clear goods on their own, but most importers employ clearing and forwarding agents to minimize tariffs and lower landed costs.  Others ship their goods to ports in neighboring countries, primarily Benin, after which they transport overland and smuggle into the country. The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin.  In December 2013, the NCS regained the authority to conduct destination inspections, which had previously been contracted to private companies. NCS also introduced the Nigeria Integrated Customs Information System (NICIS) platform and an online system for filing customs documentation via a Pre-Arrival Assessment Report (PAAR) process but the NCS still carries out 100 percent cargo examinations and shipments take more than 20 days to clear through the process.

Shippers report that efforts to modernize and professionalize the NCS and the NPA have largely been unsuccessful – port congestion persists and clearance times are long.  The 2017 presidential directive for the Apapa Port, which handles over 40 percent of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance is not effective.  The port is congested, inefficient and the proliferation of customs units incentivizes corruption from official and unofficial middle men who complicate and elongate the clearance process.  Freight forwarders usually resort to bribery of customs agents and port officials to avoid extended delays clearing imported goods through the NPA and NCS.  Other ports are not viable or efficient and are virtually idle. Smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Visa Requirements

Investors sometimes encounter difficulties acquiring entry visas and residency permits. Foreigners must obtain entry visas from Nigerian embassies or consulates abroad, seek expatriate position authorization from the NIPC, and request residency permits from the Nigerian Immigration Service.  In 2018, Nigeria instituted a visa-on-arrival system, which generally works relatively well, but still requires lengthy processing at an embassy or consulate abroad before an authorization is issued. Some U.S. businesses have reported being solicited for bribes in the visa-on-arrival program.  Visa on arrival is not valid for employment or residence. Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost from USD 1,000 to USD 3,000 in facilitation fees. The Nigerian government announced a new visa rule in August 2011 to encourage foreign investment, under which legitimate investors can obtain multiple entry-visas at points of entry into Nigeria.  Obtaining a visa prior to traveling to Nigeria is strongly encouraged.

Real Property

The Nigerian government recognizes secured interests in property, such as mortgages.  The recording of security instruments and their enforcement remain subject to the same inefficiencies as those in the judicial system.  In the World Bank Doing Business 2019 Report, Nigeria ranked 184 out of the 190 countries surveyed for registering property, a decline of five points over its 2018 ranking.  In Lagos, property registration required an average of 12 procedures over 105 days at a cost of 11.1 percent of the property value while in Kano registering property averages 11 procedures over 47 days at a cost of 11.8 percent of the property value.

Fee simple property rights remain rare.  Owners transfer most property through long-term leases, with certificates of occupancy acting as title deeds.  Property transfers are complex and must usually go through state governors’ offices, as state governments have jurisdiction over land ownership.  Authorities have often compelled owners to demolish buildings, including government buildings, commercial buildings, residences, and churches, even in the face of court injunctions. Therefore, acquiring and maintaining rights to real property can be problematic.

Clarity of title and registration of land ownership remain significant challenges throughout rural Nigeria, where many smallholder farmers have only ancestral or traditional use claims to their land.  Nigeria’s land reforms have attempted to address this barrier to development but with limited success.

Intellectual Property Rights

Nigeria’s legal and institutional infrastructure for protecting intellectual property rights (IPR) is in need of further development and funding.  Even though there are laws for enforcing most IPR, the legislation is deficient with respect to online piracy, geographical indications, and plant and animal breeders’ rights.  A bill to establish the Industrial Property Commission to oversee the registration of trade marks, patents, designs, plant varieties, animal breeders and farmers’ rights, as well as supervise the new registries created under the Industrial Property Act, has been in the works since 2016.  No new IPR legislation has been enacted.

Copyright protection in Nigeria is governed by the Copyright Act of 1988, as amended in 1992 and 1999, which provides an adequate basis for enforcing copyright and combating piracy.  The Act is administered by the Nigerian Copyright Commission (NCC), a division of the Ministry of Justice. The International Anti-Counterfeiting Coalition (IACC) has long noted that the Copyright Act should be amended to provide stiffer penalties for violators.  Nigeria is a member of the World Intellectual Property Organization (WIPO) and in 2017 passed legislation to ratify the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, both of which it signed in 1997. These treaties have becoming increasingly relevant since they address important digital communication and broadcast issues.  The 2016 Draft Copyright Bill was revised to bring it into compliance with these two treaties and was sent to the National Assembly in December 2017.

Local content guidelines issued by the Ministry of Communication Technology (MCT) in 2013 and titled the Guidelines for Nigerian Content Development in Information and Communications Technology have raised IPR concerns about the future ability of the Nigerian government to protect data and trade secrets since the localization processes require the disclosure of source code and other sensitive design elements as a condition of doing business.  The IT industry in Nigeria has pushed back strongly against several of the measures in those guidelines, which remain in effect but have not been fully enforced. While the National Information Technology Development Agency (NITDA) does not currently require in-country product manufacturing due to the difficult business environment in Nigeria, it has noted that it would continue to press for local information and communications technology (ICT) capacity building programs.

Violations of Nigerian IPR laws continue to be widespread due in large part to a culture of inadequate enforcement.  That culture stems from several factors, including insufficient resources among enforcement agencies, lack of political will and focus on IPR, porous borders, entrenched trafficking systems that make enforcement difficult (and sometimes dangerous), and corruption.  The NCC, which has primary responsibility for copyright enforcement, is widely viewed as understaffed and underfunded relative to the magnitude of the IPR challenge in Nigeria. Nevertheless, the NCC continues to carry out enforcement actions on a regular basis. According to its report for 2018, the NCC conducted five anti-piracy operations and seized 288 copyrighted works, including DVDs, books, MP3s, and software.  Anti-piracy operations in 2018 led to seven arrests.

The Nigeria Customs Service (NCS) has general authority to seize and destroy contraband.  Under current law, copyrighted works require a notice issued by the rights owner to Customs to treat such works as infringing, but implementing procedures have not been developed and this procedure is handled on a case-by-case basis between the NCS and the NCC.  Once seizures are made, the NCS invites the NCC to inspect and subsequently take control of the fake goods for further investigation since the NCC has the statutory responsibility to investigate and prosecute copyright violations. The NCC is responsible for the cost of moving and storing infringing goods.  If, after investigations, any persons are identified as associated with the infringing materials, a decision may be taken to prosecute. When no person is identified, the NCC may obtain an order of court to destroy such works. The NCC works in cooperation with rights owners’ associations and stakeholders in the copyright industries on such matters.

Many U.S. government agencies, including the Department of Justice, the U.S. Patent and Trademark Office, the U.S. Copyright Office, the Department of Homeland Security, the Internal Revenue Service, and others have recently led or participated in IPR capacity building efforts that have included participants from Nigeria’s Economic and Financial Crimes Commission, the Nigerian Customs Service, the Nigerian Police, the Nigerian Copyright Commission, the Nigerian Trademarks, Patents, and Designs Registry, the Standards Organization of Nigeria, and the National Agency For Food and Drug Administration and Control.

Nigeria was not included in the United States Trade Representative (USTR) 2019 Special 301 Report or the 2018 Notorious Markets List.

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

Government Procurement

Foreign companies, whether incorporated in Nigeria or not, may bid on government projects and generally receive national treatment in government procurement, but may also be subject to a local content vehicle (e.g., partnership with a local partner firm or the inclusion of one in a consortium) or other prerequisites which are likely to vary from tender to tender.  Corruption and lack of transparency in tender processes has been a far greater concern to U.S. companies than discriminatory policies based on foreign status. Government tenders are published in local newspapers, a “tenders” journal sold at local newspaper outlets, and on occasion in foreign journals and magazines. The Nigerian government has made modest progress on its pledge to conduct open and competitive bidding processes for government procurement with the introduction of the Nigeria Open Contracting Portal (NOCOPO) in 2017 under the Bureau of Public Procurement (BPP).

The Public Procurement Law of 2007 established the BPP as the successor agency to the Budget Monitoring and Price Intelligence Unit.  The BPP acts as a clearinghouse for government contracts and procurement and monitors the implementation of projects to ensure compliance with contract terms and budgetary restrictions.  Procurements above 100 million naira (about USD 277,550) reportedly undergo full “due process,” but government agencies routinely flaunt public procurement requirements. Some of the 36 states of the federation have also passed public procurement legislation.

The reforms have also improved transparency in procurement by the state-owned Nigerian National Petroleum Company (NNPC).  Although U.S. companies have won contracts in a number of sectors, difficulties in receiving payment are not uncommon and can deter firms from bidding.  Supplier or foreign government subsidized financing arrangements appear in some cases to be a crucial factor in the award of government procurements. Nigeria is not a signatory to the WTO Agreement on Government Procurement.

In July 2016, Nigeria announced its participation in the Open Government Partnership (OGP), a potentially significant step forward on public financial management and fiscal transparency.  In December 2016, the Ministry of Justice presented Nigeria’s National Action Plan (NAP) for the OGP.  Implementation of its 14 commitments has been slow, but some progress has been made, particularly on the issues such as tax transparency, ease of doing business, and asset recovery. The NAP, which runs through 2019, covers five major themes: ensuring citizens’ participation in the budget cycle, implementation of open contracting and the adoption of open contracting data standards, increasing transparency in the extractive sectors, adopting common reporting standards like the Addis Tax initiative, and improving the ease of doing business.  Full implementation of the NAP would be a significant step forward for Nigeria’s fiscal transparency, although Nigeria has not fully completed any commitment to date.

Businesses report that bribery of customs and port officials remains common, and often necessary to avoid extended delays in the port clearance process, and that smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction.  Nigeria scored 27 out of 100 in Transparency International’s 2018 Corruption Perception Index (CPI), placing it in the 144th position out of the 180 countries ranked, a one-point decline from its 2016 score of 28 and a stagnant score from 2017.  The Economic and Financial Crimes Commission (EFCC) Establishment Act of 2004 established the EFCC to prosecute individuals involved in financial crimes and other acts of economic “sabotage.” Traditionally, the EFCC has encountered the most success in prosecuting low-level internet scam operators.  A relative few high-profile convictions have taken place, such as a former governor of Adamawa state, a former governor of Bayelsa State, a former Inspector General of Police, and a former Chair of the Board of the Nigerian Port Authority. However, in the case of the convicted governor of Bayelsa State, the President of Nigeria pardoned him in March 2013.  The case of the former governor of Adamawa, who was convicted in 2017, is under appeal and he is currently free on bail.

Since taking office in 2015, President Buhari has focused on implementing a campaign pledge to address corruption, though his critics contend his anti-corruption efforts often target political rivals.  Since then, the EFCC arrested a former National Security Advisor (NSA), a former Minister of State for Finance, a former NSA Director of Finance and Administration and others on charges related to diversion of funds intended for government arms procurement.

The Corrupt Practices and Other Related Offences Act of 2001 established an Independent Corrupt Practices and Other Related Offences Commission (ICPC) to prosecute individuals, government officials, and businesses for corruption.  The Act punishes over 19 offenses, including accepting or giving bribes, fraudulent acquisition of property, and concealment of fraud. Nigerian law stipulates that giving and receiving bribes constitute criminal offences and, as such, are not tax deductible.  Since its inauguration, the ICPC has secured convictions in 71 cases (through 2015, latest data available) with nearly 300 cases still open and pending as of July 2018. In April 2014, a presidential committee set up to review Nigeria’s ministries, departments, and agencies (MDAs) recommended that the EFCC, the ICPC, and the Code of Conduct Bureau (CCB) be merged into one organization.  The federal government, however, rejected this proposal to consolidate the work of these three anti-graft agencies.

Nigeria gained admittance into the Egmont Group of Financial Intelligence Units (FIUs) in May 2007.  In September 2018, the Egmont Group lifted its suspension of Nigeria’s membership, put in place in July 2017 due to concerns about the Nigeria FIU’s operational autonomy and ability to protect classified information.  The suspension was lifted due to the Nigerian government’s efforts to address the concerns, through the passage of the Nigerian Financial Intelligence Agency Act in July 2018.

The Paris-based Financial Action Task Force (FATF) removed Nigeria from its list of Non-Cooperative Countries and Territories in June 2006.  In October 2013, the FATF decided that Nigeria had substantially addressed the technical requirements of its FATF Action Plan and agreed to remove Nigeria from its monitoring process conducted by FATF’s International Cooperation Review Group (ICRG).  Nigeria, as a member of the Inter-governmental Action Group Against Money Laundering in West Africa (GIABA), is an associated member of FATF.

The Nigeria Extractive Industries Transparency Initiative (NEITI) Act of 2007 provided for the establishment of the NEITI organization, charged with developing a framework for transparency and accountability in the reporting and disclosure by all extractive industry companies of revenue due to or paid to the Nigerian government.  NEITI serves as a member of the international Extractive Industries Transparency Initiative (EITI), which provides a global standard for revenue transparency for extractive industries like oil and gas and mining. Nigeria is party to the United Nations Convention Against Corruption. Nigeria is not a member of the OECD and not party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

Economic and Financial Crimes Commission

Headquarters:  No. 5, Fomella Street, Off Adetokunbo Ademola Crescent, Wuse II, Abuja, Nigeria. Branch offices in Ikoyi, Lagos State; Port Harcourt, Rivers State; Independence Layout, Enugu State; Kano, Kano State; Gombe, Gombe State.

Hotline: +234 9 9044752 or +234 9 9044753

Independent Corrupt Practices and Other Related Offences Commission:

Abuja Office – Headquarters
Plot 802 Constitution Avenue, Central District, PMB 535, Garki Abuja
Phone/Fax: 234 9 523 8810
Email: info@icpc.gov.ng

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

President Buhari has focused on matters of insecurity in Nigeria and in neighboring countries.   While the two insurgencies maintain the ability to stage forces in rural areas and launch attacks against civilian and military targets across the Northeast, Nigeria is also facing increased rural violence in the Middle Belt.

Due to challenging security dynamics in the North, the U.S. Diplomatic Mission to Nigeria has significantly limited official travel north of Abuja.  Such trips occur only with security measures designed to mitigate the threats of car-bomb attacks and abductions.

Decades of neglect, persistent poverty, and environmental damage caused by oil spills have left Nigeria’s oil rich Niger Delta region vulnerable to renewed violence.  Though each oil-producing state receives a 13 percent derivation of the oil revenue produced within its borders, and several government agencies, including the Niger Delta Development Corporation (NDDC) and the Ministry of Niger Delta Affairs, are tasked with implementing development projects, bureaucratic mismanagement and corruption have prevented these investments from yielding meaningful economic and social development in the region.  Niger Delta militants have demonstrated their ability to attack and severely damage oil instillations at will as seen when they cut Nigeria’s production by more than half in 2016.  Attacks on oil installations have since decreased due to a revamped amnesty program and continuous high-level engagement with the region.

Other security challenges facing Nigeria include increasing rural violence caused by criminal actors and by conflicts between migratory pastoralists and farmers, and thousands of refugees fleeing to Nigeria from Cameroon’s English-speaking region due to tensions there.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* https://www.nigerianstat.gov.ng/   

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Data not available.

Transparency of the Regulatory System

South African laws and regulations are generally published in draft form for stakeholders to comment, and legal, regulatory, and accounting systems are generally transparent and consistent with international norms.

The dti is responsible for business-related regulations. It develops and reviews regulatory systems in the areas of competition, standards, consumer protection, company and intellectual property registration and protections, as well as other subjects in the public interest.  It also oversees the work of national and provincial regulatory agencies mandated to assist the dti in creating and managing competitive and socially responsible business and consumer regulations. The dti publishes a list of Bills and Acts that govern the dti’s work at http://www.dti.gov.za/business_regulation/legislation.jsp  .

The 2015 Medicines and Related Substances Amendment Act authorized the creation of the South African Healthcare Products Regulatory Authority (SAHPRA), meant in part to address the backlog of more than 7000 drugs waiting for approval to be used in South Africa.  Established in 2018, and unlike its predecessor, the Medicines Control Council (MCC), SAHPRA is a stand-alone public entity governed by a board that is appointed by and accountable to the South African Ministry of Health. SAHPRA is responsible for the monitoring, evaluation, regulation, investigation, inspection, registration, and control of medicines, scheduled substances, clinical trials and medical devices, in vitro diagnostic devices (IVDs), complementary medicines, and blood and blood-based products.  SAHPRA intends to do this through 207 full-time in-house technical evaluators, though this structure has not been fully staffed. Unlike with the MCC, SAHPRA’s funding is provided by the retention of registration fees. Despite its launch in 2018, the full staffing and implementation of SAPHRA is anticipated to take up to five years, and clearing the backlog of drug registration dossiers will also take significant time.

South Africa’s Consumer Protection Act (2008) went into effect in 2011. The legislation reinforces various consumer rights, including right of product choice, right to fair contract terms, and right of product quality. Impact of the legislation varies by industry, and businesses have adjusted their operations accordingly. A brochure summarizing the Consumer Protection Act can be found at:  http://www.dti.gov.za/business_regulation/acts/CP_Brochure.pdf . Similarly, the National Credit Act of 2005 aims to promote a fair and non-discriminatory marketplace for access to consumer credit and for that purpose to provide the general regulation of consumer credit and improves standards of consumer information. A brochure summarizing the National Credit Act can be found at: http://www.dti.gov.za/business_regulation/acts/NCA_Brochure.pdf 

International Regulatory Considerations

South Africa is a member of the Southern African Customs Union (SACU), the oldest existing customs union in the world.  SACU functions mainly on the basis of the 2002 SACU Agreement which aims to: (a) facilitate the cross-border trade in goods among SACU members; (b) create effective, transparent and democratic institutions; (c) promote fair competition in the common customs area; (d) increase investment opportunities in the common customs area; (e) enhance the economic development, diversification, industrialization and competitiveness of member States; (f) promote the integration of its members into the global economy through enhanced trade and investment; (g) facilitate the equitable sharing of revenue arising from customs and duties levied by members; and (h) facilitate the development of common policies and strategies.

The 2002 SACU Agreement requires member States to develop common policies and strategies with respect to industrial development; cooperate in the development of agricultural policies; cooperate in the enforcement of competition laws and regulations; develop policies and instruments to address unfair trade practices between members; and calls for harmonization of product standards and technical regulations.

SACU member States are working to develop the regional industrial development policy to harmonize competition policy and unfair trade practices.  Progress is limited in general to customs related areas, mainly tariff and trade remedies. SACU has not harmonized non-tariff measures. Also, the 2002 SACU Agreement is limited to the liberalization of trade in goods and does not cover trade in services.  In 2008, the SACU Council of Ministers agreed that new generation issues such as services, investment, and Intellectual Property Rights should be incorporated into the SACU Agenda. Work is ongoing. South Africa is generally restricted from negotiating trade agreements by itself, since SACU is the competent authority.

In general, South Africa models its standards according to European standards or UK standards where those differ.

South Africa is a member of the WTO and attempts to notify all draft technical regulations to the Committee on Technical Barriers to Trade (TBT), though often after the regulations have been implemented.

In November 2017, South Africa ratified the WTO’s Trade Facilitation Agreement. According to the government, it has implemented over 90 percent of the commitments as of February 2018. The outstanding measures were notified under Category B, to be implemented by the indicative date of 2022 without capacity building support and include Article 3 and Article 10 commitments on Advance Rulings and Single Window.

The South African Government is not party to the WTO’s Government Procurement Agreement (GPO).

Legal System and Judicial Independence

South Africa has a mixed legal system composed of civil law inherited from the Dutch, common law inherited from the British, and African customary law, of which there are many variations.  As a general rule, South Africa follows English law in criminal and civil procedure, company law, constitutional law, and the law of evidence, but follows Roman-Dutch common law in contract law, law of delict (torts), law of persons, and family law.  South African company law regulates corporations, including external companies, non-profit, and for-profit companies (including state-owned enterprises). Funded by the national Department of Justice and Constitutional Development, South Africa has district and magistrates courts across 350 districts and high courts for each of the provinces (except Limpopo and Mpumalanga, which are heard in Gauteng).  Often described as “the court of last resort,” the Supreme Court of Appeals hears appeals, and its jurisprudence may only be overruled by the apex court, the Constitutional Court. Moreover, South Africa has multiple specialized courts, including the Competition Appeal Court, Electoral Court, Land Claims Court, the Labour and Labour Appeal Courts, and Tax Courts to handle disputes between taxpayers and the South African Revenue Service.  These courts exist parallel to the court hierarchy, and their decisions are subject to the same process of appeal and review as the normal courts. Analysts routinely praise the competence and reliability of judicial processes, and the courts’ independence has been repeatedly proven with high-profile rulings against controversial legislation, as well as against former presidents and corrupt individuals in the executive and legislative branches.

Laws and Regulations on Foreign Direct Investment

The February 2019 ratification of the Competition Amendment Bill introduced, among other revisions, section 18A that mandates the President create a committee – comprised of 28 Ministers and officials chosen by the President – to evaluate and intervene in a merger or acquisition by a foreign acquiring firm on the basis of protecting national security interests.  According to the bill, any decisions taken by this committee are required to be published in the Gazette and must be presented, in appropriate detail, to the National Assembly. The new section states that the President must identify and publish in the Gazette – the South African equivalent of the U.S. Federal Register – a list of national security interests including the markets, industries, goods or services, sectors or regions in which a merger involving a foreign acquiring firm must be notified to the South African government.  The law also outlines what factors the President should take into consideration when determining what constitutes a threat to national security interest, including the merger’s impact on the use or transfer of sensitive technology or know-how; the security of critical infrastructure, including systems, facilities, and networks; the supply of critical goods or services to citizens and/or to the government; and the potential to enable foreign surveillance or espionage or hinder intelligence or law enforcement operations. It also suggests the President consider transactions that enable or facilitate terrorism, terrorist organizations, or organized crime; and to consider a merger’s impact on the economic and social stability of South Africa.  The law further recommends the committee take into consideration whether the foreign acquiring firm is a firm controlled by a foreign government.

Competition and Anti-Trust Laws

The Competition Commission is empowered to investigate, control and evaluate restrictive business practices, abuse of dominant positions, and mergers in order to achieve equity and efficiency.  Their public website is www.compcom.co.za  

The Competition Tribunal has jurisdiction throughout South Africa and adjudicates competition matters in accordance with the Competition Act.  While the Commission is the investigation and enforcement agency, the Tribunal is the adjudicative body, very much like a court.

In addition to the points made in the previous section, the amendments, presented by the Ministry for Economic Development that revise the Competition Act of 1998 and entered effect in February 2019 extend the mandate of the competition authorities and the executive to tackle high levels of economic concentration, address the limited transformation in the economy, and curb the abuse of market power by dominant firms.  The changes introduced through the Competition Amendment Act are meant to curb anti-competitive practices and break down monopolies that hinder “transformation” – the increased participation of black and HDSA in the South African economy. The amendments aim to deter the abuse of market dominance by large firms that use practices such as margin squeeze, exclusionary practices, price discrimination, and predatory pricing.  By increasing the penalties for these prohibited business practices – for repeat offences the penalties could amount to between 10 percent to 25 percent of a firm’s annual turnover – and allowing the parent or holding company to be held liable for the actions of its subsidiaries that contravene competition law, the Competition Commission hopes to break down these anticompetitive practices and open up new opportunities for SMEs.

Expropriation and Compensation

Racially discriminatory property laws and land allocations during the colonial and apartheid periods resulted in highly distorted patterns of land ownership and property distribution in South Africa.  Given the slow and mixed success of land reform to date, the National Assembly (Parliament) passed a motion in February 2018 to investigate a proposal to amend the constitution (specifically Section 25, the “property clause”) to allow for land expropriation without compensation (EWC). The constitutional Bill of Rights, where Section 25 resides, has never been amended.  Some politicians, think-tanks, and academics argue that Section 25, as written, allows for EWC in certain cases, while others insist that in order to implement EWC more broadly, amending the constitution is required. Academics foresee a few test cases for EWC over the next year, primarily targeted at abandoned buildings in urban areas, informal settlements in peri-urban areas, and involving labor tenants in rural areas.

Parliament tasked an ad hoc Constitutional Review Committee – made up of parliamentarians from various political parties – to report back on whether to amend the constitution to allow EWC, and if so, how it should be done.  In December 2018, the National Assembly adopted the committee’s report recommending a constitutional amendment, but Parliament ran out of time to draft the amendment before its final session before the May 8, 2019 elections.  The next Parliament will need to compose a new ad hoc committee to draft the constitutional amendment bill.

South African law requires that Parliament engage in a rigorous public participation process.  Parliament must publish a proposed bill to amend the Constitution in the Government Gazette at least 30 days prior to its introduction to allow for public comment.  Any change to the constitution would need a two-thirds parliamentary majority (267 votes) to pass, as well as the support of six out of the nine provinces in the National Council of Provinces.  Currently, no single political party has such a majority.

In September 2018, President Ramaphosa appointed an advisory panel on land reform, which supports the Inter-Ministerial Committee on Land Reform chaired by Deputy President David Mabuza.  Comprised of ten members from academia, social entrepreneurship, and activist organizations, the panel will submit a formal report in 2019 on issues related to land restitution, redistribution, tenure security, and agricultural support.  Analysts have praised the panel for representing the executive branch’s interest and dedication to engaging with diverse sectors to handle the sensitive, multi-faceted issues related to land reform.

Existing expropriation law, including The Expropriation Act of 1975 (Act) and the Expropriation Act Amendment of 1992, entitles the government to expropriate private property for reasons of public necessity or utility.  The decision is an administrative one. Compensation should be the fair market value of the property as agreed between the buyer and seller, or determined by the court, as per Section 25 of the Constitution. In several restitution cases in which the government initiated proceedings to expropriate white-owned farms after courts ruled the land had been seized from blacks during apartheid, the owners rejected the court-approved purchase prices.  In most of these cases, the government and owners reached agreement on compensation prior to any final expropriation actions. The government has twice exercised its expropriation power, taking possession of farms in Northern Cape and Limpopo provinces in 2007 after negotiations with owners collapsed. The government paid the owners the fair market value for the land in both cases. A new draft expropriation law, intended to replace the Expropriation Act of 1975, was passed and is awaiting Presidential signature.  Some analysts have raised concerns about aspects of the new legislation, including new clauses that would allow the government to expropriate property without first obtaining a court order.

In 2018, the government operationalized the 2014 Property Valuation Act that creates the office of Valuer-General charged with the valuation of property that has been identified for land reform or acquisition or disposal by a department.  Among other things, the Act gives the government the option to expropriate property based on a formulation in the Constitution termed “just and equitable compensation.” This considers the market value of the property and applies discounts based on the current use of the property, the history of the acquisition, and the extent of direct state investment and subsidy in the acquisition and capital improvements to the property.  Critics fear that this could lead to the government expropriating property at a price lower than fair market value. The Act also allows the government to expropriate property under a broad range of policy goals, including economic transformation and correcting historical grievances.

The Mineral and Petroleum Resources Development Act 28 of 2002 (MPRDA), enacted in 2004, gave the state ownership of all of South Africa’s mineral and petroleum resources.  It replaced private ownership with a system of licenses controlled by the government of South Africa, and issued by the Department of Mineral Resources.  Under the MPRDA, investors who held pre-existing rights were granted the opportunity to apply for licenses, provided they met the licensing criteria, including the achievement of certain B-BBEE objectives.  Amendments to the MPRDA passed by Parliament in 2014, but were not signed by the President.  In August 2018, the Minister for the Department of Mineral Resources, Gwede Mantashe, called for the recall of the amendments so that oil and gas could be separated out into a new bill.  The Minister also announced the B-BBEE provisions in the new Mining Charter would not apply during exploration, but would start once commodities were found and mining commenced.  The Amendments are now with the Department of Mineral Resources to draft a new bill to be submitted to Parliament.

Dispute Settlement

ICSID Convention and New York Convention

South Africa is a member of the New York Convention of 1958 on the recognition and enforcement of foreign arbitration awards, but is not a member of the World Bank’s International Center for the Settlement of Investment Disputes.

Investor-State Dispute Settlement

The 2015 Promotion of Investment Act removes the option for investor state dispute settlement through international courts typically afforded through bilateral investment treaties (BITs).  Instead, investors disputing an action taken by the South African government must request the Department of Trade and Industry to facilitate the resolution by appointing a mediator. A foreign investor may also approach any competent court, independent tribunal, or statutory body within South Africa for the resolution of the dispute.

Dispute resolution can be a time-intensive process in South Africa.  If the matter is urgent, and the presiding judge agrees, an interim decision can be taken within days while the appeal process can take months or years.  If the matter is a dispute of law and is not urgent, it may proceed by application or motion to be solved within months. Where there is a dispute of fact, the matter is referred to trial, which can take several years.  The Alternative Dispute Resolution involves negotiation, mediation or arbitration, and may resolve the matter within a couple of months.

International Commercial Arbitration and Foreign Courts

Arbitration in South Africa follows the Arbitration Act of 1965, which does not distinguish between domestic and international arbitration and is not based on UNCITRAL model law.  South African courts retain discretion to hear a dispute over a contract entered into under U.S. law and under U.S. jurisdiction; however, the South African court will interpret the contract with the law of the country or jurisdiction provided for in the contract.

South Africa recognizes the International Chamber of Commerce, which supervises the resolution of transnational commercial disputes.  South Africa applies its commercial and bankruptcy laws with consistency and has an independent, objective court system for enforcing property and contractual rights.

Alternative Dispute Resolution is increasingly popular in South Africa for many reasons, including the confidentiality which can be imposed on the evidence, case documents, and the judgment.  South Africa’s new Companies Act also provides a mechanism for Alternative Dispute Resolution.

Bankruptcy Regulations

South Africa has a strong bankruptcy law, which grants many rights to debtors, including rejection of overly burdensome contracts, avoiding preferential transactions, and the ability to obtain credit during insolvency proceedings.  South Africa ranks 66 out of 190 countries for resolving insolvency according to the 2019 World Bank Doing Business report, an increase from its 2018 rank of 55 despite receiving the same overall score, indicating that the increase is only due to other countries falling below South Africa in 2019.

Investment Incentives

South Africa offers various investment incentives targeted at specific sectors or types of business activities. The dti has a number of incentive programs ranging from tax allowances to support in the automotive sector and helping innovation and technology companies to film and television production.

12I Tax Allowance: is designed to support new industrial projects that utilize only new and unused manufacturing assets and expansions or upgrades of existing industrial projects. The incentive offers support for both capital investment and training. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=45&subthemeid=26  

Agro-Processing Support Scheme (APSS): aims to stimulate investment by South African agro-processing/beneficiation (agri-business) enterprises. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=69&subthemeid=25  

Aquaculture Development and Enhancement Programme (ADEP): is available to South African registered entities engaged in primary, secondary, and ancillary aquaculture activities in both marine and freshwater classified under SIC 132 (fish hatcheries and fish farms) and SIC 301 and 3012 (production, processing and preserving of aquaculture fish). https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=56&subthemeid=26  

Automotive Investment Scheme (AIS): designed to grow and develop the automotive sector through investment in new and/ or replacement models and components that will increase plant production volumes, sustain employment and/ or strengthen the automotive value chain. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=37&subthemeid=26  

Medium and Heavy Commercial Vehicles Automotive Investment Scheme (MHCV-AIS): is designed to grow and develop the automotive sector through investment in new and/or replacement models and components that will increase plant production volumes, sustain employment and/or strengthen the automotive value chain. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=60&subthemeid=26  

People-carrier Automotive Investment Scheme (P-AIS): provides a non-taxable cash grant of between 20 percent and 35 percent of the value of qualifying investment in productive assets approved by the dti. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=55&subthemeid=26  

Business Process Services (BPS): aims to attract investment and create employment opportunities in South Africa through offshoring activities. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=6&subthemeid=25  

Capital Projects Feasibility Programme (CPFP): is a cost-sharing grant that contributes to the cost of feasibility studies likely to lead to projects that will increase local exports and stimulate the market for South African capital goods and services. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=4&subthemeid=26  

Cluster Development Programme (CDP): aims to promote industrialization, sustainable economic growth and job creation needs of South Africa through cluster development and industrial parks. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=66&subthemeid=28  

Critical Infrastructure Programme (CIP): aims to leverage investment by supporting infrastructure that is deemed to be critical, thus lowering the cost of doing business.  https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=3&subthemeid=26  

Clothing and Textile Competitiveness Improvement Programme (CTCIP): aims to build capacity among manufacturers and in other areas of the apparel value chain in South Africa, to enable them to effectively supply their customers and compete on a global scale. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=35&subthemeid=25  

Export Marketing and Investment Assistance (EMIA): develops export markets for South African products and services and recruits new foreign direct investment into the country. The purpose of the scheme is to partially compensate exporters for costs incurred with respect to activities aimed at developing an export market for South African product and services and to recruit new foreign direct investment into South Africa. https://www.thedti.gov.za/trade_investment/emia.jsp  

Foreign Film and Television Production and Post-Production Incentive: to attract foreign-based film productions to shoot on location in South Africa and conduct post-production activities. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=63&subthemeid=26  

Innovation and Technology Funding instruments: click on the link to see a graphic of the various funding instruments the government has made available. https://www.thedti.gov.za/financial_assistance/Innovation_value_Chain.jsp  

Manufacturing Competitiveness Enhancement Programme (MCEP): aims to encourage manufacturers to upgrade their production facilities in a manner that sustains employment and maximizes value-addition in the short to medium term.  Participants can also apply for incentives for energy efficiency and green economy incentives. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=53&subthemeid=25  

Production Incentive (PI): forms part of the Clothing and Textile Competitiveness Program, and forms part of the customized sector program for the clothing, textiles, footwear, leather and leather goods industries. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=36&subthemeid=25  

Sector-Specific Assistance Scheme (SSAS): is a reimbursable cost-sharing incentive scheme which grants financial support to organizations that support the development of industry sectors and those that contribute to the growth of South African exports. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=8&subthemeid=26  

Shared Economic Infrastructure Facility (SEIF) – contact the Department of Small Business Development on +27 861 843 384 (select option 2) or E-Mail: sbdinfo@dsbd.gov.za for more information. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=61&subthemeid=1  

Support Programme for Industrial Innovation (SPII): is designed to promote technology development in South Africa’s industry, through the provision of financial assistance for the development of innovative products and/or processes. SPII is focused on the development phase, which begins when basic research concludes and ends at the point when a pre-production prototype has been produced. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=48&subthemeid=8  

Strategic Partnership Programme (SPP) – The SPP aims to develop and enhance the capacity of small and medium-sized enterprises to provide manufacturing and service support to large private sector enterprises. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=67&subthemeid=1  

Workplace Challenge Programme (WPC): managed by Productivity South Africa, WPC aims to encourage and support negotiated workplace change towards enhancing productivity and world-class competitiveness, best operating practices, continuous improvement, lean manufacturing, while resulting in job creation. https://www.thedti.gov.za/financial_assistance/financial_incentive.jsp?id=68&subthemeid=25  

Foreign Trade Zones/Free Ports/Trade Facilitation

South Africa designated its first Industrial Development Zone (IDZ) in 2001. IDZs offer duty-free import of production-related materials and zero VAT on materials sourced from South Africa, along with the right to sell in South Africa upon payment of normal import duties on finished goods.  Expedited services and other logistical arrangements may be provided for small to medium-sized enterprises or for new foreign direct investment. Co-funding for infrastructure development is available from the dti. There are no exemptions from other laws or regulations, such as environmental and labor laws.  The Manufacturing Development Board licenses IDZ enterprises in collaboration with the South African Revenue Service (SARS), which handles IDZ customs matters. IDZ operators may be public, private, or a combination of both. There are currently five IDZs in South Africa: Coega IDZ, Richards Bay IDZ, Dube Trade Port, East London IDZ, and Saldanha Bay IDZ.  For more detailed information on IDZs in South Africa please see: http://www.thedti.gov.za/industrial_development/sez.jsp  

In February 2014, the dti introduced a new Special Economic Zones (SEZs) Bill focused on industrial development. The SEZs encompass the IDZs but also provide scope for economic activity beyond export-driven industry to include innovation centers and regional development.  There are five SEZ in South Africa: Atlantis SEZ, Nkomazi SEZ, Maliti-A-Phofung SEZ, Musina/Makhado SEZ, and OR Tambo SEZ. The broader SEZ incentives strategy allows for 15 percent Corporate Tax as opposed to the current 28 percent, Building Tax Allowance, Employment Tax Incentive, Customs Controlled Area (VAT exemption and duty free), and Accelerated 12i Tax Allowance.

Performance and Data Localization Requirements

Employment and Investor Requirements

Foreign investors who establish a business or who invest in existing businesses in South Africa must show within twelve months of establishing the business that at least 60 percent of the total permanent staff are South African citizens or permanent residents.

The Broad-Based Black Economic Empowerment (B-BBEE) program measures employment equity, management control, and ownership by historically disadvantaged South Africans for companies which do business with the government or bid on government tenders.  Companies may consider the B-BBEE scores of their sub-contractors and suppliers, as their scores can sometimes contribute to or detract from the contracting company’s B-BBEE score.

A business visa is required for foreign investors who will establish a business or who will invest in an existing business in South Africa.  They are required to invest a prescribed financial capital contribution equivalent to R2.5million (USD 178 thousand) and have at least R5 million (USD 356 thousand) in cash and capital available.  These capital requirements may be reduced or waived if the investment qualifies under one of the following types of industries/businesses: information and communication technology; clothing and textile manufacturing; chemicals and bio-technology; agro-processing; metals and minerals refinement; automotive manufacturing; tourism; and crafts.

The documentation required for obtaining a business visa is onerous and includes, among other requirements, a letter of recommendation from the Department of Trade and Industry regarding the feasibility of the business and its contribution to the national interest, and various certificates issued by a chartered or professional South African accountant.

U.S. citizens have complained that the processes to apply for and renew visas and work permits are lengthy, confusing, and difficult.  Requirements frequently change mid-process, and there is little to no feedback about why an application might be considered incomplete or denied.  Many U.S. citizens use facilitation services to help navigate these processes.

Goods, Technology, and Data Treatment

The government does not require the use of domestic content in goods or technology.  The transfer of personal information about a subject to a third party who is in a foreign country is prohibited unless certain conditions are met.  These conditions are outlined in the Protection of Personal Information (PoPI) Act, which the government enacted in 2013 to regulate how personal information may be processed.  The conditions relate to: accountability, processing limitations, purpose specification, information quality, openness, security safeguards, and data subject participation. PoPI also created an Information Regulator (IR) to draft regulations and enforce them; the five member body that comprises the IR was established in 2018.  The IR released regulations on personal information processing in December 2018, but government was not clear if the one year grace period to begin implementation started from the date the regulations were published or from the date the IR is fully operational.

Investment Performance Requirements

There are no performance requirements on investments.

Real Property

The South African legal system protects and facilitates the acquisition and disposition of all property rights (e.g., land, buildings, and mortgages).  Deeds must be registered at the Deeds Office. Banks usually register mortgages as security when providing finance for the purchase of property.

South Africa ranks 106th of 190 countries in registering property according to the 2019 World Bank Doing Business report.

Intellectual Property Rights

South Africa has a strong legal structure and enforcement of intellectual property rights through civil and criminal procedures.  Criminal procedures are generally lengthy, so the customary route is through civil enforcement.  There are concerns about counterfeit consumer goods, illegal commercial photocopying, and software piracy.

Owners of patents and trademarks may license them locally, but when a patent license entails the payment of royalties to a non-resident licensor, the Department of Trade and Industry (the dti) must approve the royalty agreement.  Patents are granted for twenty years – usually with no option to renew. Trademarks are valid for an initial period of ten years, renewable for ten-year periods. The holder of a patent or trademark must pay an annual fee to preserve ownership rights.  All agreements relating to payment for the right to use know-how, patents, trademarks, copyrights, or other similar property are subject to approval by exchange control authorities in the SARB. A royalty of up to four percent is the standard approval for consumer goods, and up to six percent for intermediate and finished capital goods.

Literary, musical, and artistic works, as well as cinematographic films and sound recordings are eligible for copyright under the Copyright Act of 1978.  New designs may be registered under the Designs Act of 1967, which grants copyrights for five years. The Counterfeit Goods Act of 1997 provides additional protection to owners of trademarks, copyrights, and certain marks under the Merchandise Marks Act of 1941.  The Intellectual Property Laws Amendment Act of 1997 amended the Merchandise Marks Act of 1941, the Performers’ Protection Act of 1967, the Patents Act of 1978, the Copyright Act of 1978, the Trademarks Act of 1993, and the Designs Act of 1993 to bring South African intellectual property legislation fully into line with the WTO’s Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS).  Further Amendments to the Patents Act of 1978 also brought South Africa into line with TRIPS, to which South Africa became a party in 1999, and implemented the Patent Cooperation Treaty. The private sector and law enforcement cooperate extensively to stop the flow of counterfeit goods into the marketplace, and the private sector believes that South Africa has made significant progress in this regard since 2001.   Statistics on seizures are not available.

In an effort to modernize outdated copyright law to incorporate “digital age” advances, the dti introduced the latest draft of the Copyright Amendment Bill in May 2017.  The South African Parliament and the National Council of Provinces approved the Copyright Amendment Bill in March 2019 and sent the bill to the president for signature. As of mid-May 2019, the bill had not been signed.  Among the issues of concern to some private sector stakeholders is the introduction of the U.S. model of “fair use” for copyright exemptions without prescribing industry-specific circumstances where fair use will apply, creating uncertainty about copyrights enforcement.  Other concerns that stakeholders have include a clause which allows the Minister of Trade and Industry to set royalty rates for visual artistic works and impose compulsory contractual terms. The bill also limits the assignment of copyright to 25 years before it reverts back to the author.

The Performers’ Protection Amendment Bill seeks to address issues relating to the payment of royalties to performers; safeguarding the rights of contracting parties; and promotes performers’ moral and economic rights for performances in fixations (recordings).  Similar to the Copyright Amendment Bill, this bill gives the Minister of Trade and Industry authority to determine equitable remuneration for a performer and copyright owner for the direct or indirect use of a work. It also suggests that any agreement between the copyright owner and performer will only last for a period of 25 years and does not determine what happens after 25 years.  The bill also does not stipulate how it will address works with multiple performers, particularly how to resolve potential problems of hold-outs when contracts are renegotiated that could hinder the further exploitation of a work.

The dti released the final Intellectual Property Policy of the Republic of South Africa Phase 1  in June, 2018, that informs the government’s approach to intellectual property and existing laws.  Phase I focuses on the health space, particularly pharmaceuticals. The South African Government, led by the dti, held multiple rounds of public consultations since its introduction and the 2016 release of the IP Consultative Framework.

Among other things, the IP policy framework calls for South Africa to carry out substantive search and examination (SSE) on patent applications and to introduce a pre- and post-grant opposition system.  The dti repeatedly stressed its goal of creating the domestic capacity to understand and review patents, without having to rely on other countries’ examinations. U.S. companies working in South Africa have been generally supportive of the government’s goal; they are concerned, however, that the relatively low number of examiners currently on staff (20) to handle the proposed SSE process and the introduction of a pre-grant opposition system in South Africa could lead to significant delays of products to market.  The South African Government is working with international partners (including USPTO and the European Union) to provide accelerated training of their patent reviewers while also recruiting new staff.

The new IP policy framework also raises concerns around the threat of separate patentability criteria for medicines and a more liberalized compulsory licensing regime.  Stakeholders are calling for more concrete assurances that the use of compulsory licensing provisions will be as a last resort and applied in a manner consistent with WTO rules.  Industry sources report they are not aware of a single case of South Africa issuing a compulsory license.

South Africa is currently in the process of implementing the Madrid Protocol.  CIPC has completed drafting legislative amendments after consultations with stakeholders and the World Intellectual Property Organization (WIPO) on the implementation process in South Africa.  WIPO has conducted a number of missions to South Africa on this matter, the latest of which was in February 2018. South Africa has also engaged with national IP offices with similar trade mark legislation, such as New Zealand.

Resources for Rights Holders

Economic Officer covering IP issues:

Juan Manuel Cammarano
Trade and Investment Officer
+27(0)12 431-4343
CammaranoJM@State.gov

For additional information about South Africa’s treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .  A list of attorneys for various South African districts can be found on the U.S. Mission Citizen Services page: https://za.usembassy.gov/u-s-citizen-services/local-resources/attorneys/

South Africa has a robust anti-corruption framework, but laws are inadequately enforced and accountability in public sectors tends to be low. The law provides for criminal penalties for conviction of official corruption, and the government continued efforts to curb corruption, but officials sometimes engaged in corrupt practices with impunity.

High-level political interference has undermined the ability of the country’s National Prosecuting Authority (NPA) – constitutionally responsible for all prosecutions – to pursue criminal proceedings and enforce accountability.  After an unprecedented consultative process, President Ramaphosa appointed Shamila Batohi as the National Director of Public Prosecutions (NDPP) in December 2018, and he created an Investigative Directorate within her office in March 2019 to focus on the significant number of cases emanating from ongoing corruption investigations.  The Constitutional Court ruled in August 2018 that Zuma’s appointment of Shaun Abrahams as the former NDPP was invalid and ordered President Ramaphosa to replace Abrahams within 90 days. Widely praised by civil society, the court also ordered former NDPP Mxolisi Nxasana to repay a “golden handshake” (an illegal departure bonus) of 10.2 million rand (USD 788,000) he received when Zuma replaced him with Abrahams in 2015.

The Department of Public Service and Administration formally coordinates government initiatives against corruption, and the “Hawks” – South Africa’s Directorate for Priority Crime Investigations – focuses on organized crime, economic crimes, and corruption.  In 2018, the Office of the Public Protector, a constitutionally mandated body designed to investigate government abuse and mismanagement, investigated thousands of cases, some of which involved high-level officials. The public and NGOs considered the Office of the Public Protector independent and effective, despite limited funding.  According to the NPA’s 2017-2018 Annual Report, it recovered 410,000 rand (USD 31,700) from government officials involved in corruption, a 92-percent decrease from the previous year.  Courts convicted 213 government officials of corruption.

The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation.  Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas.  Inconsistently implemented, the PCCA does not include any protectionary measures for whistleblowers.  Complementary acts – such as the Promotion of Access to Information Act and the Public Finance Management Act – calls for increased access to public information and review of government expenditures.

“State capture” – the popular term used to describe systemic corruption of the state’s decision-making processes by private interests – has become synonymous with the administration of former president Jacob Zuma.  In response to widespread calls for accountability, President Cyril Ramaphosa has denounced corruption since assuming office in February 2018. He has vowed to tackle the scourge at all levels of government, including through proposed lifestyle audits of officials to expose bribery, corruption, and public tender irregularities.  He has also launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, National Prosecuting Authority, and writ large across the government. These commissions have revealed pervasive networks of criminality across all levels of the municipal, provincial, and national government.  Numerous former senior officials had already testified before the commission; a number of them directly implicated former president Jacob Zuma in corruption cases.

Corruption charges were reinstated against Zuma in 2018 related to a USD 2.5-billion arms deal in the late 1990s.  The Zuma-linked Gupta family, which owns interests in multiple industries from computer services to mining, has also been placed under investigation and its assets frozen while the state investigates allegations of state capture, bribery, and the siphoning off of public funds meant for small-holder farmers.  These and other ongoing efforts are meant to rebuild the public’s trust in government and to foment transparency and predictability in the business environment in order to woo investors.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

South Africa signed the Anticorruption Convention on 9 Dec 2003 and ratified it on 22 Nov 2004.  South Africa also signed the OECD Convention on Combatting Bribery in 2007, with implementing legislation dating from 2004.

South Africa is also a party to the SADC Protocol Against Corruption, which promotes the development of mechanisms needed to prevent, detect, punish and eradicate corruption in the public and private sector.  The protocol also seeks to facilitate and regulate cooperation in matters of corruption amongst Member States and foster development and harmonization of policies and domestic legislation related to corruption.  The Protocol defines ‘acts of corruption,’ preventative measures, jurisdiction of Member States, as well as extradition. http://www.sadc.int/files/7913/5292/8361/Protocol_Against_Corruption2001.pdf 

Resources to Report Corruption

To report corruption to the government:

Advocate Busisiwe Mkhwebane
Public Protector
Office of the Public Protector, South Africa
175 Lunnon Street, Hillcrest Office Park, Pretoria 0083

Anti-Corruption Hotline: +27 80 011 2040 or +27 12 366 7000
http://www.pprotect.org   or customerservice@pprotect.org

Or for a non-government agency:

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

South Africa has a history of politically-motivated violence and civil disturbance.  Violent protests, often by residents in poor communities against the lack of effective government service delivery, are common.  Killings of, and by, mostly low-level political and organized crime rivals take place on a regular basis.  Still, South Africa enjoys strong, democratic political institutions and the overall political environment is stable and secure.

In May 2018, President Cyril Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings.  The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner.  The task force ordered multiple arrests, including of high profile officials, in what appears to be a crackdown on political killings.

There is suspicion that criminal threats have been used to resolve business disputes. There was one known incident in 2018 when two expat employees of a U.S. company managing an ongoing construction project received threats to leave the country.  The threats escalated to mention the expats’ families as targets, and the company evacuated them from South Africa. Subcontractors accused of using substandard construction materials were suspected. There were no reports of physical damage at the project.

Labor unrest in one part of South Africa has caused damage to property and halted operations to a U.S. company operating in an industrial zone.  In this case, the U.S. company was targeted as a single employer by strikes and labor unrest on what was a national bargaining council issue.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

* Statistics South Africa (STATS SA) www.statssa.gov.za

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment