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Cameroon

Executive Summary

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

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

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

Key Sectors

% of GDP

1

Agriculture

19

2

Services and consumer retail

12

3

Manufacturing

8

4

Public Administration

8

5

Transportation

7

6

Banking and Finance

7

7

Real Estate and Infrastructure Construction

6

8

Extractive industry (Oil, Gas, Mining)

5

9

Information & Communication Technology

4

10

Utilities (Electricity, Water)

1

11

Tourism, Media and Leisure

1

12

Other

23

Source: Cameroon Ministry of Finance, IMF, World Bank

Sectors that have historically attracted significant investment are:

Agriculture

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

Transportation

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

Information & Communication Technology

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

Extractive industry (Oil, Gas, Mining)

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

Banking and Finance

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

Table 1: Key Metrics and Rankings

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2018

152 of 175

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

World Bank’s Doing Business Report

2019

166 of 190

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

Global Innovation Index

2018

111 of 126

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

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

2018

$9.0 m (2017)

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

World Bank GNI per capita

2018

$1,370

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

3. Legal Regime

Transparency of the Regulatory System

In general, Cameroon has adequate laws, most of which are consistent with international business and legal norms.  Weak investigating capacity, a lack of understanding of international business practices, and corruption in the judiciary adversely affect the implementation of the laws.  In many circumstances, judicial loopholes lead to arbitrary interpretations of the texts.

Some ministries, though not all, consult with the general public and private sector organizations through targeted outreach to stakeholders, such as business associations or other groups.  There is no formal process for such consultations.  Ministries do not report the results of consultations.  Such processes are not believed to disadvantage U.S. or other foreign investors.

Legal procedures of Cameroon are based on national, regional, and supra-national laws and treaties.  Parliament is the nominal source of all regulatory power, though the Parliament is subsidiary to the President, and the Executive Branch originates 98 percent of all laws passed.  Public involvement is limited and oversight or enforcement mechanisms are weak and do not ensure that governments follow administrative processes.  National regulations, controlled by ministries, control most economic activity and are the most relevant for foreign businesses.

Cameroon does not meet the minimum standards of fiscal transparency.  Many of the state-owned enterprises do not have public accounts.  There are only three publicly listed companies on the Douala Stock Exchange.  All three use the OHADA (Organization for the Harmonization of Corporate Law in Africa) accounting system, which does not conform to IFRS (International Financial Reporting Standards) or GAAP (Generally Accepted Accounting Principles) standards.

Draft bills and regulations are not made available for public comment.

The government is currently working on an online and digitalized database for all legal texts.  Until that project is completed, the Official Journal or “Journal Officiel” (in French), is the main repository for all legal texts.  Currently, the website for the Office of the Prime Minister (www.spm.gov.cm   ) contains PDF versions of all new regulatory actions published in the Cameroon Tribune, the country’s newspaper of record.

Cameroon has administrative courts that specialize in the application and enforcement of public laws.  From a strictly legal perspective, the Supreme Court has oversight on enforcement mechanisms, but a lack of separation of powers prevents the judiciary from carrying out its responsibilities.

Cameroon has made tangible progress in the area of fiscal modernization largely with the support of the International Monetary Fund (IMF) and initiatives such as the Extractive Industry Transparency Initiative.  Cameroon’s budget was widely and easily accessible to the general public, including online on various government websites.  The government published its fiscal year 2019 executive budget proposal in June 2018 and enacted the budget in December 2018.  The end-of-year report for the previous year was published in October 2018.

It is too early to tell the impacts of the reforms.  The IMF continues to stress that the government must strengthen fiscal governance, improve its fiscal consolidation, implement debt sustainability, enhance private sector-led growth, and expand financial access.  Full implementation of these recommendations would have a tremendous impact on the country and economy.

Ministries and regulatory agencies do not develop forward regulatory plans – i.e., a public list of anticipated regulatory changes or proposals intended to be adopted/implemented within a specified period.  Ministries do not have a legal obligation to publish the text of proposed regulations before their enactment.  There is no period of time set by law for the text of proposed regulations to be made publicly available.

There is no specialized government body tasked with reviewing and monitoring regulatory impact assessments conducted by other individual agencies or government bodies.

There are no scientific or data-driven assessments of new regulation.  There are no publicly available scientific studies or quantitative analyses conducted on the impact of regulations.  Affected parties do not have the right to request reconsideration or appeal adopted regulations to the relevant administrative agency.  There is no existing requirement that regulations be periodically reviewed to see whether they are still needed or should be revised.

Information on debt obligations was publicly available and updated quarterly in the form of brochures, and increasingly via the website of the Cameroon Debt Management Office  .  For example, the electronic version of the debt data covering the second and third quarters of 2018 was released and can be obtained upon request, although it was not posted on the website as in previous years.  However, allocations to and earnings from state-owned enterprises were not identified in budget documents and few state-owned enterprises produced financial statements.

The government maintained items in the budget that may qualify as off-budget accounts and contingent liabilities in debt covenants that are not subject to adequate audit or oversight.  There are similar concerns regarding the budget for security operations and what qualifies as “sovereign expenses.”  Moreover, the information in the budget is generally reliable, though the execution of the investment budget deviated often significantly from projections because of the low execution rate.

International Regulatory Considerations

Cameroon is a founding member of the Central African Economic and Monetary Community (CEMAC).  CEMAC treaties supersede national laws.  The economic union has one central bank, one banking ombudsman, and a single regional tariff.

Cameroon is signatory to the OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the MLI).  In 2009, the EU and Cameroon signed an interim Economic Partnership Agreement (EPA).  They are working to bring several Cameroonian products up to EU standards.  Cameroon references many international conventions and multilateral treaties such as the UN treaties in its domestic laws.

Cameroon joined the World Trade Organization (WTO) on December 13, 1995 and was previously a member of the General Agreement on Taxes and Tariffs.  On March 11, 2019, Cameroon was suspended from the WTO for failure to meet its designated contribution to the organization.  The government of Cameroon is expected to notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).

Legal System and Judicial Independence

The Cameroonian legal system is a legacy of French, German (Codified Laws), and English (Common law) colonization.  There is also a patchwork of traditional ethnological legal systems, which varies for each ethnic group.  The government wants to harmonize these different legal traditions to equip Cameroon with laws that are applicable across the country and reduce the need to navigate different legal systems.  This project, however, is meeting with stiff resistance from English-speaking lawyers concentrated in the Northwest and Southwest Regions, who claim that the initiative will dilute their heritage.

In terms of standards, Cameroon’s commercial legal system follows the OHADA rules, which are supposed to be aligned with International Financial Reporting Standards (IFRS).  Enforcement is weak partly because of lack of capacity.  Cameroon does not train enough specialized judges in the commercial and economic fields.  Consequently, poor enforcement of laws and accounting standards tends to create confusion for foreign investors.  Despite efforts to align OHADA standards to international norms, government accounting regulations remain obsolete in the context of rapid developments in international finance and capital markets.

To circumvent the problem, U.S. enterprises and investors often maintain two sets of accounting records, one in accordance with U.S. GAAP or suitable international standards, and another to comply with OHADA standards and government reporting requirements.

The judicial system is subsidiary to the executive branch.  The executive regularly interferes in judiciary matters.  The current judicial process is not procedurally competent, fair, or reliable.  Endemic corruption, lack of funding, and political considerations make the courts unable to function as independent arbiters of disputes.

Arbitration is becoming the solution of choice to solve business disputes in Cameroon.  Arbitration exists in OHADA corporate law.  Since OHADA is supra-national, Cameroon is bound by its decisions which follow international norms.

Regulations and enforcement actions are appealable and they are adjudicated in the national court system.  Due to the court system’s revealed lack of objectivity, few businesses attempt to appeal against unfavorable rulings.

Laws and Regulations on Foreign Direct Investment

The Law No. 2013/004 of April 18, 2013 defines incentives for private investment in

Cameroon and proposes generic and special incentives while affirming the government’s responsibilities to private investors.  The law remains valid for domestic and foreign investors.  Additional laws and regulations are available on the website of the Ministry of Finance  .

The Cameroon Investment Promotion Agency is the primary or “one-stop-shop” website for investment that provides relevant laws, rules, procedures, and reporting requirements for investors (https://investincameroon.net/en/  ).

Competition and Anti-Trust Laws

The National Competition Commission handles anti-competition and anti-trust disputes.  In some cases, the regulator of a specific economic sector can play the anti-trust role.  For example, in July 2018, the courts accused a multinational mobile operator of anti-competitive practices against a domestic money transfer provider when the multinational unilaterally suspended the domestic company’s Unstructured Supplementary Service Data code.  The local company complained to the Telecom Regulatory Agency and to the National Competition Commission, which ordered the mobile operator to reinstate the code.  The mobile operator ignored the initial injunction, forcing the Cameroonian company to take legal action.  The courts ruled against the multinational.

Expropriation and Compensation

Decree N°.85-9 of July 4, 1985 and the subsequent implementation of Decree N°.87-1872 of December 16, 1987 lay down the procedure governing expropriation for public purposes and conditions for compensation.  Some of the provisions of these legal texts were repealed by Instruction n°005/I/Y.25/MINDAF/D220 of December 29, 2005.  Essentially, for the general public’s interest, the State may expropriate privately-owned land.  The laws also lay down the formalities to be observed within the context of the procedure, both at the central and local levels.

In recent years, the government has expropriated property in the context of the construction of large infrastructure projects such as roads and hydroelectric dams.  The government has a compensation process in place to try to meet the losses of those adversely affected by such decisions.

Serious allegations of corruption have plagued compensation procedures over the last decade.  These incidents, often carried out by civil servants, have diluted trust in the process.

Dispute Settlement

ICSID Convention and New York Convention

Cameroon ratified the ICSID Convention on January 3, 1967 and the New York Convention on February 19, 1988.

There is no specific domestic legislation providing for enforcement under the 1958 New York Convention and for the enforcement of awards under the ICSID Convention.

Investor-State Dispute Settlement

The OHADA-signatory nations adopted a uniform act on arbitration (the Uniform Act) on March 11, 1999.  The Uniform Act sets out the basic rules applicable to any arbitration, where the seat of arbitration is located in an OHADA member state.  The Uniform Act is based on the United Nations Commission on International Trade Law (UNCITRAL) model law.  It supersedes the national laws on arbitration of the OHADA states.  Cameroon’s arbitration law is contained in its code of civil and commercial procedure in the third volume, Articles 576 to 601.

Cameroon has a Bilateral Investment Treaty (BIT) with the United States.  There have been no claims against the BIT since it came into force in 1989.

There have been cases of disputes between Cameroonian partners and U.S. companies, but they tend to be solved through arbitration.  General misunderstandings between partners about contractual commitments tend to cause conflicts, but such cases have been infrequent over the past 10 years.

Local courts may recognize foreign arbitral awards issued against the government, but they are not well equipped to enforce such decisions.

In general, foreign investors complain more about administrative harassment or bottlenecks, and less about extrajudicial actions.

International Commercial Arbitration and Foreign Courts

Additional alternative dispute resolution may involve mediation and negotiations, also possibly through third-party binding arbitration.  The OHADA system serves both as domestic and primary reference legislation.

The Groupement Interpatronal du Cameroon, the country’s most powerful business lobbying group, has an arbitration center in Douala.  Douala is Cameroon’s largest city and trade hub, and the arbitration center is modern and well equipped.  In principle, local courts have the power to recognize and enforce foreign arbitral awards issued against the government if found at fault.

As a treaty, the OHADA prevails over domestic laws.  An international arbitration award can prevail especially if operating through the OHADA framework.  The Common Court of Justice and Arbitration enforced under OHADA is both an arbitration institution and a judicial court, with a remit covering all the OHADA states.

Judicial processes are bureaucratic, expensive, time-intensive, and lengthy to pursue.  This is true even for domestic and state-owned companies, which like their foreign competitors, also suffer from the weaknesses of the legal system and are not guaranteed any better treatment in case of dispute.

Bankruptcy Regulations

Cameroon has bankruptcy laws, which recognize the right of creditors, the equity of shareholders, and other types of liabilities.  Bankruptcy is not criminalized, if it is not a deliberate collusion to avoid tax or mislead investors.  Globally, Cameroon stands at 127 in the ranking of 190 economies on the ease of resolving insolvency.  According to data collected by Doing Business 2019, resolving insolvency takes 2.8 years on average and costs 33.5 percent of the debtor’s estate, with the most likely outcome being that the company will be sold in a piecemeal sale.  The average recovery rate is 15.8 cents on the dollar.

6. Financial Sector

Capital Markets and Portfolio Investment

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

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

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

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

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

Money and Banking System

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

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

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

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

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

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

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

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

Foreign Exchange and Remittances

Foreign Exchange

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

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

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

Remittance Policies

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

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

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

Sovereign Wealth Funds

Cameroon does not have a sovereign wealth fund.

9. Corruption

Corruption is punishable under sections 134 and 134 (a) of the Pena1 Code.  Despite these rules, corruption remains endemic in the country.  In 2018, Cameroon ranked 152 (of 180 countries) in Transparency International’s Corruption Perception Index.  Arrests of high-ranking officials for corruption are widely viewed as political.

In a recent case, a former minister of defense, and leading member of the ruling party, was arrested with his wife and two adult children, an indication that the law can extend to family members of officials and to political parties.

If Cameroon has laws or regulations to counter conflict-of-interest in awarding contracts or government procurement, the Embassy is unaware of them.  U.S. firms indicate that corruption is pervasive in government procurement, the award of licenses or concessions, transfers, performance requirements, dispute settlement, regulatory system, customs, and taxation.

The National Anti-Corruption Commission (CONAC) recently began encouraging private companies to establish internal codes of conduct and ethics committees to review practices.  The Embassy is unaware of how many companies have instituted either program.

Bribing of government officials remains common throughout the private sector.  While some companies use internal controls to detect and prevent such bribery, it is difficult to determine how widespread the practice is, in practice.

Cameroon is signatory to the United Nations’ and the African Union’s anti-corruption initiatives, but the international initiatives have limited effects on the enforcement of laws in the country.

Post is unaware of any NGO’s involved in investigating corruption.  The government prefers the state-controlled anti-corruption commission, CONAC, to investigate potential cases.

U.S. firms indicate that corruption is most pervasive in government procurement, the award of licenses or concessions, transfers, performance requirements, dispute settlement, regulatory system, customs, and taxation.  Multiple American companies have told the Embassy they are hesitant to invest in Cameroon due to corruption concerns.

Resources to Report Corruption

Rev. Dieudonne MASSI GAMS
Chairman
National Anti-Corruption Commission
B.P. 33200 Yaounde Cameroon
(+237) 22 20 37 32
www.conac-cameroun.net  infos@conac-cameroun.net

Me Charles NGUINI
Country Representative
Transparency International Cameroon
Nouvelle route Bastos, rue 1.839,  BP : 4562 Yaounde
(+237) 33 15 63 78
transparency@ti-cameroon.org

Chad

Executive Summary

Chad is one of Africa’s largest countries, with a land area of 1,284,000 square kilometers that encompasses three agro-climatic zones.  Chad is a landlocked country bordering Libya to the north, Sudan to the east, Central African Republic (CAR) to the south, and Cameroon, Niger, and Nigeria on the west (with which it shares Lake Chad).  The nearest port, Douala, Cameroon, is 1,700 km from the capital, N’Djamena. Chad is one of six countries that constitute the Central African Economic and Monetary Community (CEMAC), a common market.

Chad’s human development is one of the lowest in the world according to the UN Human Development Index (HDI), and poverty continues to afflict a large proportion of the population.  Since oil production began in 2003, the petroleum sector has dominated economic activity and has been the largest target of foreign investment. However, agriculture and livestock breeding are important economic activities that employ the majority of the population, and the government has prioritized these sectors in an effort to diversify the economy and to maximize non-petroleum tax receipts in the wake of the drop in global oil prices.

The Government of Chad (GOC) has focused on improving internal economic and social conditions, although its efforts have been constrained by regional instability arising from the continued terrorist threat, an influx of refugees along the Chad-Sudan-Central African Republic (CAR) border, and low oil revenues (which account for over 70 percent of government revenue) due to the fall in global oil prices.

According to the IMF, after three consecutive years of contraction, non-oil economic activity has stabilized and pressures on the government fiscal position have eased. Nonetheless, the social, economic, and financial situation remains fragile. While oil production rebounded strongly in 2018, growth in the non-oil sector was estimated at only 0.5 percent. Economic recovery continues to be held back by the domestic debt overhang and underlying structural fragilities. Average inflation picked up to 4 percent in 2018, pulled largely by a 90 percent increase in the administered price of fresh water in May 2018. 

The GOC is favorably disposed to foreign investment, with a particular goal of attracting North American companies.  There are opportunities for foreign investment in Agribusiness; Agricultural, Construction, Building & Heavy Equipment; Architecture & Engineering; Automotive & Ground Transportation; Education; Energy & Mining; Environmental Technologies; Food Processing & Packaging; Health Technologies; Industrial Equipment & Supplies; Information & Communication; and Services.

Chad’s business and investment climate remains challenging.  Private sector development is hindered by poor transport infrastructure, lack of skilled labor, unreliable energy, weak contract enforcement, corruption, and high tax burdens on private enterprises. 

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 165 of 175 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 181 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2018 N/A http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 $640 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

3. Legal Regime

Transparency of the Regulatory System

Chad is currently implementing laws to foster competition and establish clear rules based on Uniform Acts produced by the Organization for the Harmonization of Business Law in Africa (OHADA, Organisation pour l’Harmonisation en Afrique du Droit des Affaires, www.ohada.com  ).  However, until full implementation of new laws is complete, certain Chadian and foreign companies may encounter difficulties from well-established companies with a corner on the market that discourages competition. 

Regulations and financial policies generally do not impede competition in the financial sector.  Legal, regulatory, and accounting systems pertaining to banking are transparent and consistent with international norms.  Chad began using OHADA’s accounting system in 2002, bringing its national standards into harmony with accounting systems throughout the region.  Several international accounting firms have offices in Chad. However, while accounting, legal, and regulatory procedures are consistent with international norms, some local firms do not use generally accepted standards and procedures in their business practices.

There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.  The Government has posted its draft Finance Law on the Ministry of Finance and Budget’s website the past two years; other proposed laws and regulations are not published in draft form for public comment. (Note: the Ministry of Finance and Budget’s website was funded by a USG grant in 2014. End Note.)  The GOC occasionally provides opportunities for local associations, such as the National Council of Employers (CNPT, Conseil National du Patronat Tchadien) or the CCIAMA to comment on proposed laws and regulations pertaining to investment.  All contracts and practices are subject to legal review, which can be weak. In 2018, the Ministry of Public Health closed some pharmacies operating without licenses and initiated a law regulating pharmacies.

The GOC publishes all budget information including on its website. The GOC also established an Observatory on Public Finance (OFiP) in 2018 to implement projects and publish information contributing to transparency in the management of public finances. OTFiP is a dedicated online framework for the dissemination of public finance data and the operationalization of the Code of Transparency and Good Governance. This code is an implementation of one of the six CEMAC Directives on the new harmonized framework for public financial management. 

Chad is still not listed on www.businessfacilitation.org  

International Regulatory Considerations

Chad has been a member of the WTO since 19 October 1996 and a member of GATT since 12 July 1963. Chad is a member of OHADA, and also a member of the Central African Economic and Monetary Community (CEMAC, Communaute Economique et Financiere de l’Afrique Centrale, www.cemac.int  ) and OHADA.  Since 2017, Chad is gradually implementing business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts.  Chad’s banking sector is regulated by COBAC (Commission Bancaire de l’Afrique Centrale), a regional agency. 

Legal System and Judicial Independence

Chad’s legal system and commercial law are based on the French Civil Code.  The constitution recognizes customary and traditional law if it does not interfere with public order or constitutional rights.  Chad’s judicial system rules on commercial disputes in a limited technical capacity. The Chadian President appoints judges without National Assembly confirmation, and thus the judiciary may be subject to executive influence.  Courts normally award monetary judgments in local currency, although it may designate awards in foreign currencies based on the circumstances of the disputed transaction. 

Chad’s commercial laws are based on standards promulgated by CEMAC, OHADA, and the Economic Community of Central African States (CEEAC, Communaute Economique des Etats de l’Afrique Centrale, http://www.ceeac-eccas.org  ).  The Government and National Assembly are currently in the process of adopting legislation to comply fully with all these provisions. 

Specialized commercial tribunal courts were authorized in 1998 and became operational in 2004.  These tribunals exist in five major cities but lack adequate technical capacity to perform their duties.  Firms not satisfied with judgments in these tribunals may appeal to OHADA’s regional court in Abidjan, Ivory Coast that ensures uniformity and consistent legal interpretations across its member countries and several Chadian companies have done so.  OHADA also allows foreign companies to utilize tribunals outside of Chad, generally in Paris, France, to adjudicate business disputes. Finally, CEMAC established a regional court in N’Djamena in 2001 to hear business disputes, but this body is not widely used.

Contracts and investment agreements can stipulate arbitration procedures and jurisdictions for settlement of disputes.  If both parties agree and settlements do not violate Chadian law, Chadian courts will respect the decisions of courts in the nations where particular agreements were signed, including the United States.  This principle also applies to disputes between foreign companies and the Chadian Government. Such disputes can be arbitrated by the International Chamber of Commerce (ICC). Foreign companies frequently choose to include clauses in their contract to mandate ICC arbitration. 

Bilateral judicial cooperation is in effect between Chad and certain nations.  Chad signed the Antananarivo Convention in 1970, covering the discharge of judicial decisions and serving of legal documents, with eleven other former French colonies (Benin, Burkina Faso, Cameroon, CAR, Congo-Brazzaville, Gabon, Cote d’Ivoire, Madagascar, Mauritania, Niger, and Senegal).  Chad has similar arrangements in place with France, Nigeria, and Sudan. 

Laws and Regulations on Foreign Direct Investment

The National Investment Charter encourages foreign direct investment.  Chad is a member of the Central African Economic and Monetary Community (CEMAC, Communaute Economique et Financiere de l’Afrique Centrale, www.cemac.int  ) and the Organization for the Harmonization of Business Law in Africa (OHADA, Organisation pour l’Harmonisation en Afrique du Droit des Affaires, www.ohada.com  ). Since 2017, Chad is gradually implementing business and economic laws and regulations based on CEMAC standards and OHADA Uniform Acts. 

Foreign investors using the court system are not generally subject to executive interference.  In addition, the OHADA Treaty allows foreign companies to utilize tribunals outside of Chad, e.g., the ICC in Paris, France, to adjudicate any disputes.  Companies may also access the OHADA’s court located in Abidjan, Côte d’Ivoire.

Foreign businesses interested in investing in or establishing an office in Chad should contact ANIE, which offers a one-stop shop for filing the legal forms needed to start a business.  The process officially takes 72 hours and is the only legal requirement for investment. ANIE’s website (www.anie-tchad.com  ) provides additional information.

Competition and Anti-Trust Laws

Regulation of competition is covered by the OHADA Uniform Acts that form the basis for Chadian business and economic laws and regulations.  The Office of Competition in Chad’s Ministry of Industrial and Commercial Development & Private Sector Promotion reviews transactions for competition-related concerns. 

Expropriation and Compensation

Chadian law protects businesses from nationalization and expropriation, except in cases where expropriation is in the public interest.  There were no government expropriations of foreign-owned property in 2018. There are no indications that the GOC intends to expropriate foreign property in the near future.

Chad’s Fourth Republic Constitution adopted in May 2018 prohibits seizure of private property except in cases of urgent public need, of which there are no known cases.  A 1967 Land Law prohibits deprivation of ownership without due process, stipulating that the state may not take possession of expropriated properties until 15 days after the payment of compensation.  The government continues to work on reform of the 1967 law. A draft law encourages foreign companies to own property instead of leasing.

Dispute Settlement

ICSID Convention and New York Convention

Chad has been a signatory and contracting state of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”) since 1966. 

Chad is not a contracting state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Arbitration Convention”).

Investor-State Dispute Settlement

Chad is signatory to an investment agreement among the member states of CEMAC, CEEAC, and OHADA.  The OHADA Investment Arrangement, with provisions for securities, arbitration, dispute settlement, bankruptcy, recovery, and other aspects of commercial regulation, has defined the commercial rights of several economic stakeholders, e.g., the Chadian Treasury,   and provides for the enforcement of foreign arbitral awards. Chad has no Bilateral Investment Treaty (BIT) or Free Trade Agreement (FTA) with an investment chapter with the United States.

There is no formal record of the government’s handling of investment disputes.  Some U.S. and other foreign investors have been involved in disputes with the GOC, particularly over issues regarding taxes and duties, though there are no official statistics. Investment disputes involving foreign investors are frequently arbitrated by an independent body.

International Commercial Arbitration and Foreign Courts

In addition to independent courts, such as the ICC, Chad’s constitution recognizes customary and traditional law as long as it does not interfere with public order or constitutional rights.  As most businesses operate in the informal sector, customary and traditional law function as alternative dispute resolution (ADR) mechanisms when parties are from the same tribe or clan and express their desire to settle outside of the formal court.

Specialized commercial tribunal courts were authorized in 1998 and became operational in 2004.  These tribunals exist in five major cities, but lack adequate capacity to perform their duties. The N’Djamena Commercial Tribunal  has heard disputes involving foreign companies.

Foreign investors using the court system are not generally subject to executive interference.  In addition, the OHADA Treaty allows foreign companies to utilize tribunals outside of Chad, e.g., the ICC in Paris, France, to adjudicate any disputes.  Companies may also access the OHADA’s court located in Abidjan, Côte d’Ivoire.

Bankruptcy Regulations

Chad’s bankruptcy laws are based on OHADA Uniform Acts.  According to Section 3, Articles 234 – 239 of OHADA’s Uniform Insolvency Act, creditors and equity shareholders may designate trustees to lodge complaints or claims to the commercial court collectively or individually.  These laws criminalize bankruptcy and the OHADA provisions grant Chad the discretion to apply its own sentences.

The World Bank’s 2018 Doing Business Report ranks Chad’s ease of resolving insolvency at 150 of 190.  This is a decrease of four positions from 2017. The report is available at http://www.doingbusiness.org/data/exploreeconomies/chad/#resolving-insolvency  

6. Financial Sector

Capital Markets and Portfolio Investment

Chad’s financial system is underdeveloped.  There are no capital markets or money markets in Chad.  A limited number of financial instruments are available to the private sector, including letters of credit, short- and medium-term loans, foreign exchange services, and long-term savings instruments.

Commercial banks offer credit on market terms, often at rates of 12 to 25 percent for short-term loans.  Medium-term loans are difficult to obtain, as lending criteria are rigid. Most large businesses maintain accounts with foreign banks and borrow money outside of Chad.  There are ATMs in some major hotels, N’Djamena airport, and in some neighborhoods of N’Djamena.

Chad does not have a stock market and has no effective regulatory system to encourage or facilitate portfolio investments.  A small regional stock exchange, known as the Central African Stock Exchange, in Libreville, Gabon, was established by CEMAC countries in 2006.  Cameroon, a CEMAC member, launched its own market in 2005. Both exchanges are poorly capitalized.

The GOC does not restrict payments and transfers for current international transactions. Access to credit is available, but is prohibitively expensive for most Chadians in the private sector.

Money and Banking System

Chad’s banking sector is small and continues to streamline lending practices and reduce the volume of bad debt. The Chadian banking rate is even lower than the average rate in the CEMAC, sub-region estimated at 12%, due to the lack of means to afford a bank account and the lack of culture aimed at popularizing the banking system. Chad’s four largest banks have been privatized. The former Banque Internationale pour l’Afrique au Tchad (BIAT) became a part of Togo-based Ecobank; the former Banque Tchadienne de Credit et de Depôt was re-organized as the Societe Generale Tchad; the former Financial Bank became part of Togo-based Orabank; and the former Banque de Developpement du Tchad (BDT) was reorganized as Commercial Bank Tchad (CBT), in partnership with Cameroon-based Commercial Bank of Cameroon.  There are two Libyan banks in Chad, BCC (formerly Banque Libyenne) and Banque Sahelo-Saharienne pour l’Investissement et le Commerce (BSCIC), along with one Nigerian bank (UBA, United Bank for Africa). In 2018, the GoC funded a new bank Banque de l’Habitat du Tchad (BHT) with the GoC as majority shareholder with 50 percent of the shares and two public companies, the National Social Insurance Fund (CNPS) and the Chadian Petroleum Company (SHT), each holding 25 percent.

 Chad, as a CEMAC member, shares a central bank with Cameroon, Central African Republic, Republic of Congo, Equatorial Guinea, and Gabon – the Central African Economic Bank (BEAC, Banque des Etats de l’Afrique Centrale), headquartered in Yaounde, Cameroon.   

Foreigners must establish legal residency in order to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The government does not restrict converting funds associated with an investment (including remittances of investment capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency at legal market-clearing rates.  There are no restrictions on repatriating these funds, although there are some limits associated with transferring funds. Individuals transferring funds exceeding USD 1,000 must document the source and purpose of the transfer with the local sending bank.  Companies and individuals transferring more than USD 800,000 out of Chad need BEAC authorization to do so. Authorization may take up to three working days. To request authorization for a transfer, companies and individuals must submit contact information for the sender and recipient, a delivery timetable, and proof of the sender’s identity.  There were no reports of other capital outflow restrictions in 2017. Businesses can obtain advance approval for regular money transfers.

Chad is a member of the African Financial Community (CFA) and uses the Central African CFA Franc (FCFA) as its currency.  The FCFA is pegged to the Euro at a fixed rate of one Euro to 655.957 FCFA exactly (100 FCFA = 0.152449 Euro). In 2018, the CFA/USD exchange rate fluctuated between 565 and 625 FCFA as a function of the performance of the USD against the Euro.  There are no restrictions on obtaining foreign exchange.

Remittance Policies

There are no recent changes to or plans to change investment remittance policies.  There are no time limitations on remittances, dividends, returns on investment, interest, and principal on private foreign debt, lease payments, royalties, or management fees. 

Chad does not engage in currency manipulation.

Chad is a member state of the Action Group against Money Laundering in Central Africa (GABAC), which is in the process of becoming a Financial Action Task Force (FATF)-style regional body.  On the national level, the National Financial Investigation Agency (ANIF) has implemented GABAC recommendations to prevent money laundering and terrorist financing.

Sovereign Wealth Funds

The GOC does not currently maintain a Sovereign Wealth Fund. 

9. Corruption

Foreign investors should also be aware that corruption remains common in Chad.  Corruption in Chad remains a significant deterrent to U.S. investment. Corruption is most pervasive in government procurement, award of licenses or concessions, dispute settlement, regulation enforcement, customs, and taxation.

Chad is not a signatory country of the UN Convention Against Corruption (UNCAC).  Chad is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (“the OECD Anti-Bribery Convention”).

There is an independent Court of Auditors (Cour des Comptes), equivalent to a supreme audit institution (SAI), to enhance independent oversight of government decisions, although its members are nominated by Presidential decree.  Concurrently, the GOC created a General Inspectorate for State Control within the Presidency to oversee government accountability. No reports have been published, however.    In addition to these bodies, the National Assembly’s Finance Committee carries out verifications of the GOC’s annual financial statement. No audits have been made publicly available during the reporting period.

A February 2000 anti-corruption law stipulates penalties for corrupt practices. The law does not single out family members and political parties.  As in other developing countries, low salaries for most civil servants, judicial employees and law enforcement officials, coupled with a weak state system and a culture of rent seeking, have contributed to corruption. 

The Ministry of Finance and Budget set up a toll-free number (700) to fight corruption and embezzlement. According to the Minister of Finance and Budget the toll-free number 700 allows each economic operator or any other individual to alert the Inspectorate General of Finance to denounce any unscrupulous agent who seeks to be corrupted in the context of the issue of administrative paper or the payment of a tax. There are no specific laws to counter conflict of interest. The GOC does not require private companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.

A prominent local NGO, the Center for Studies and Research on Governance, Extractive Industries and Sustainable Development (CERGIED), formerly GRAMP-TC (Groupe Alternatif de Recherche et de Monitoring de Petrole – Tchad), tracks government expenditures of oil revenue.  There are no indications that anti-corruption laws are enforced differently on foreign investors than on Chadian citizens. There is no specific protection for NGOs involved in investigating corruption.

Corruption is an obstacle to FDI.  It is most pervasive in government procurement, award of licenses or concessions, transfers, performance requirements, dispute settlement, regulatory system and customs or taxation.

Resources to Report Corruption

Government agency contact responsible for combating corruption:

Inspection Generale d’Etat
Ministry of Finance and Budget toll free number 700 (inside Chad)
Presidence de la Republique
Ndjamena, Chad
+235 22 51 51 39 / 22 51 44 37

Contact at watchdog organizations:

Gilbert Maoundonodji
Coordinator
CERGIED (formerly GRAMP –TC)
BP 4021, N’Djamena, Chad
+235 6058 2016 / 9317 7678
infos@cergied.org / secretariat@cergied.org / https://cergied.org/  

Congo, Republic of the

Executive Summary

The Republic of Congo (ROC) possesses enormous potential wealth relative to its population of five million.  The IMF projects GDP growth of 3.7 percent in 2019. A sustained economic crisis since a 2014 drop in oil prices, poor governance, and a lack of economic diversification, however, have pushed the government of ROC to near insolvency, reduced its creditworthiness, and caused the central bank to use enormous amounts of its foreign currency reserves.

Oil represents the largest sector of the economy and contributes upwards of 60 percent of the government’s annual declared revenue.  The non-oil sector consists primarily of the logging industry, but significant economic activity also occurs in the telecommunications, banking, construction, and agricultural sectors.  ROC seems poised for economic diversification, with a territory of 30 percent arable land, some of the largest iron ore and potash deposits in the world, a heavily forested land mass, and a deep-water International Ship and Port Facility Security (ISPS) Code-certified port.  ROC has been AGOA eligible since October 2000, providing an additional enticement for export-related investment. ROC participates in the Central African Economic and Monetary Community (CEMAC).

Poverty rates in ROC remain much higher than in other oil-exporting countries, with 46 percent of the population living under the poverty line.  A sizeable middle class with robust education, skills, and material living standards does not exist on a large scale. ROC suffers from poor access to education, low educational standards, and little social mobility.  The majority of the population operates in the informal sector of the economy and does not declare revenues and profits, pay taxes, or pay employee benefits to the state. Women do not participate proportionally, in the formal or informal economies, and women entrepreneurs face additional structural challenges establishing and operating a business and accessing credit.

In addition to economic risks, ROC also faces periodic internal political and security risks  Potential investors should always check www.travel.state.gov for the latest safety and security information before traveling to ROC.

ROC has made significant investments in recent years to develop its infrastructure, including the completion of paved roads linking Brazzaville to the commercial capital of Pointe-Noire and other departments (regions).  Significant challenges remain, in particular ROC’s nascent internet and inconsistent supplies of electricity and water, which present both hurdles to and opportunities for foreign direct investment. Significant sections of the country’s road system remains in need of maintenance or paving. The limited railroad network competes with truck and bus traffic for commercial cargo.  However, major infrastructure projects still reach major cities, and the government reports spending significant amounts on infrastructure improvements.

The petroleum, timber, and mining sectors remain the most significant sectors of the economy in the near term.  Agro business presents a growth opportunity given that the country cultivates less than ten percent of its arable land.  Most agriculture remains at the subsistence level, and the country imports more than 80 percent of its food. The government has also voiced great interest in developing the country’s nascent tourism sector, a sector with potential for investment thanks to ROC’s pristine rainforest reserves.  Limited transportation infrastructure will challenge potential expansions of this sector, however.

The telecommunications and mobile banking sectors stand poised for growth as well.  Mobile phones saturate ROC’s market, though the country lacks supporting infrastructure for telecommunications.  Internet penetration remains at less than 10 percent and connections are extremely expensive, providing significant room for competition and growth in the sector.  While low per capita income prevents most people from owning personal computers and accessing the internet, cyber cafes and satellite broadband projects continue to grow in prevalence, indicating both a desire for internet services as well as a potential market for investors.  The government closely regulates internet and telecommunication networks and reliability of service remains limited.

Investors report that the commercial environment in ROC has not improved substantially in recent years.  The World Bank’s 2019 Ease of Doing Business report ranked ROC at 180 out of 190 countries, and ROC ranked 165 out of 180 countries in Transparency International’s Corruption Perceptions Index 2018.  American businesses operating in ROC and those considering establishing a presence regularly report obstacles linked to corruption, lack of transparency, and host government inefficiency in matters such as registering businesses, obtaining land titles, paying taxes, and negotiating natural resource contracts. 

Table 1: Key Metrics and Rankings

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 165 of 180 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2019 180 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2018 N/A https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, stock positions) 2017 $230 http://www.bea.gov/international/factsheet/ 
World Bank GNI per capita 2017 $1,430 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

3. Legal Regime

Transparency of the Regulatory System

Lack of transparency poses one of the greatest hurdles to FDI, as investors must navigate an opaque regulatory bureaucracy. Companies that have successfully navigated the environment, including with Embassy support, serve as important sources of advice for prospective investors on how to adapt to ROC’s unclear “rules of the game.”  The government does not publish proposed laws and regulations in draft form for public comment. Although Congolese law requires ministries and regulatory agencies to give notice of proposed regulations to the general public, these drafts in fact do not appear publically. Nongovernmental organizations and intra-governmental task forces have sought to improve government transparency with little success. 

There are no known informal regulatory processes managed by nongovernmental organizations or private sector associations.

Various ministries have regulatory authority over the individual industries in their area of responsibility, with overall authority coordinated by the Ministry of Economy.  The government develops new regulations internally and rarely requests input from industry representatives. The government does not usually offer a formal, public comment period.  Departmental (regional) and local authorities may impose additional regulations on a case-by-case basis. Scientific or data-driven assessments do not typically drive the development or review of regulations

ROC uses francophone Africa’s OHADA – the organization for business and customs harmonization, or “Organisation pour l’harmonisation en Afrique du droit des affaires” – system of accounting, legal, and regulatory procedures.

The government does not normally make draft bills or regulations available for public comment.

The Office of the President publishes new laws, regulations, and their summaries in ROC’s Official Journal. The Office of the President no longer publishes the Official Journal online.  

No known oversight or enforcement mechanisms exist for the ROC.

The Office of the President publishes new laws, regulations, and their summaries in ROC’s Official Journal. The Office of the President no longer publishes the Official Journal online.  

The government announced no new regulatory systems or enforcement reforms during the reporting period.

The executive branch, or government, generally proposes laws, which the two houses of the Congolese parliament, the National Assembly and the Senate, must pass. A parliamentarian or a group of parliamentarians in either of the two chambers may propose a law, though this rarely occurs in practice.  A law passed by both houses of the parliament enters into effect from the date the president signs it into law.

No known regulatory enforcement mechanisms exist.

The government does not create or review most regulations based on scientific or data-driven assessments.  No known instances exist where the government made public scientific studies or quantitative analyses on the impact of regulations.

The government does not make transparent its public finances and debt obligations, including explicit and contingent liabilities.  As of the date of this report, the International Monetary Fund (IMF) continues to evaluate ROC’s eligibility for an IMF program. The IMF has cited ROC’s lack of transparency in many of the 17 IMF conditions that ROC must meet before receiving approval for an IMF program.

International Regulatory Considerations

ROC participates as a member in the Economic Community of Central African States (CEEAC), a regional economic cooperation community, and in the Economic and Monetary Community of Central Africa (CEMAC), a monetary union of six Central African states.  These regional economic organizations inspire, legislate, or control much of the national regulatory system.

ROC’s regulatory system for business disputes and regulations governing company registration structure and incorporation frequently incorporate Francophone African regulatory norms, such as those promulgated by OHADA – the organization for business and customs harmonization, or “Organisation pour l’harmonisation en Afrique du droit des affaires.”

ROC participates as a member of the World Trade Organization (WTO).  The government does not provide information as to whether or not it notifies the WTO Committee of all draft regulations relating to Technical Barriers to Trade. ROC has signed on to the WTO Trade Facilitation Agreement but has not begun implementing the agreement.

Legal System and Judicial Independence

The French common law legal system inspires the Congolese legal system.

OHADA – the organization for business and customs harmonization, or “Organisation pour l’harmonisation en Afrique du droit des affaires,” serves as the basis for ROC’s national commercial law, which also incorporates provisions unique to ROC.  A commercial court exists in ROC but has not convened since 2016.

The judicial system remains independent in principle; however, in practice, the executive branch regularly intervenes in the judicial system.  Judges face high pressure to rule in favor of the interests of the executive branch and the ruling party.

Appellate courts exist and receive appeals of enforcement actions.  Public Law 6-2003, which established ROC’s Investment Charter, states that Congolese law will resolve investment disputes. Either party, however, may enact independent settlement or conciliation procedures. These procedures govern appeals:

  • The convention regulating the Community Justice Court;
  • The treaty of October 17, 1993, implementing the Organization for the Harmonization of Business Law in Africa (OHADA); and
  • The International Center for the Settlement of Investment Disputes (ICSID).    

In practice, judgments of foreign courts are difficult to enforce in the ROC. Though the government does not usually deny those judgments outright, it may propose process or procedural delays that prolong the matter indefinitely without resolution.

Laws and Regulations on Foreign Direct Investment

ROC’s Hydrocarbons Law and Mining Code of 2016 contains industry-specific regulations for foreign investments.  No other known laws or regulations apply specifically to foreign investment, aside from the provisions of bilateral investment treaties.  ROC’s Commercial Court has authority over any legal disputes involving foreign investors. Investors may also file legal complaints in the OHADA court – based in Abidjan, Cote d’Ivoire – which has jurisdiction throughout Francophone Africa.

The government has published no major laws, regulations, or judicial decisions related to foreign investment in the past year.

The Congolese “one-stop-shop” – the Congolese Agency for Business Creation, or“Agence Congolaise Pour la Création des Entreprises” (ACPCE) – has an active website: www.acpce.cg  . The website provides information only and does not offer online registration.

Competition and Anti-Trust Laws

No agencies review transactions for competition-related concerns, either domestic or international in nature.  Economic ministries monitor individual industries and review industry-related transactions.

Expropriation and Compensation

The ROC government may legally expropriate property if it finds a public need for a given public facility or infrastructure (e.g. roads, hospitals, etc.).

No recent history of expropriation regarding private companies exists.  Historically, however, the ROC government has expropriated private property from Congolese citizens to build roads and stadiums. Law entitles the claimants to fair market value compensation, which the government makes inconsistently.

Beginning in 2012, the ROC government expropriated the land of Congolese private property owners in the Kintele suburb of Brazzaville to build a state-of-the-art sports complex for the 2015 African Games. The government offered no compensation, and property owners complained of a lack of legal recourse against the government.

Dispute Settlement

ICSID Convention and New York Convention

The ROC is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID). The ROC government has not ratified 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 ROC is a member of the Organization for the Harmonization of Business Law in Africa (OHADA), which includes binding international arbitration of investment disputes.

The ROC has a Bilateral Investment Treaty (BIT) with the United States that includes an investment chapter. There were no recent claims by U.S. investors under the agreement.

There have been two investment disputes involving U.S. entities in the past ten years. 

In one, a company successfully negotiated a settlement with ROC authorities after filing suit in a New York district court. In the second, a company successfully sued ROC in U.S. and French courts over unpaid revenue, however, the ROC government refused to recognize the judgements. Moreover, Congolese courts issued their own judgements in favor of the ROC government. The ROC government no longer engages on the issue.

Local courts have rarely recognized and enforced foreign arbitral awards issued against the government.

There is no known history of extrajudicial action against foreign investors.

International Commercial Arbitration and Foreign Courts

The ROC inconsistently abides by international arbitration for any treaty, international convention, or organization of which it is a member. In practice, arbitral judgments are difficult to enforce.

Commercial courts constitute the domestic arbitration bodies within the country.

Local courts inconsistently recognize and enforce foreign arbitral awards. ROC law allows for the recognitions of foreign judgments when the relevant laws appear sufficiently similar to Congolese law. In practice, Congolese courts have not accepted any foreign arbitral awards in recent years.

The U.S. Embassy is not aware of any investment disputes involving SOEs in recent years.  Given reports that the government routinely exercises significant influence on the judicial system, however, such interference could foreseeably occur in disputes involving SOEs.

Bankruptcy Regulations

The ROC has no specific law that governs bankruptcy.  As a member of OHADA, ROC applies OHADA bankruptcy provisions in the event of corporate or individual insolvency. No laws criminalize bankruptcy. The ROC does not have a credit bureau or other credit monitoring authority serving the country’s market.

6. Financial Sector

Capital Markets and Portfolio Investment

ROC maintains a neutral attitude toward foreign portfolio investment and does not widely practice foreign portfolio investment.

ROC does not have a stock exchange. ROC-based companies may seek regional listing on the Douala Stock Exchange (DAC), which merged with the CEMAC Zone Stock Exchange (BVMAC). The regional central bank, BEAC, determines monetary and credit policies within the CEMAC framework to ensure the stability of the common regional currency.

Existing policies facilitate the free flow of financial resources, though complex products are not widely used.

The government and central bank respect IMF Article VIII and do not impose restrictions on international payments and transfers.

The central bank (BEAC) monitors credits and market terms. Foreign investors can easily obtain credit on the local market.  As an immature financial market, the ROC offers a limited range of credit instruments.

Money and Banking System

ROC’s banking sector lags behind regional peers. The regulatory body of the Central Bank of Central African States (BEAC), the Banking Commission of Central Africa (COBAC), supervises the Congolese banking sector.  Banking penetration likely remains in the five-to-seven percent range, although a government survey conducted in 2015 estimated a rate of 25-30 percent. High intermediation costs and high collateral requirements limit the pool of customers.  The 13 banks that operate in ROC suffer from strained liquidity and generally have deposits that outpace credit. Microfinance banks and electronic banking remain the fastest growth areas in the banking sector.

The current economic crisis and the government’s consecutive years of fiscal deficits have additionally strained the banking sector over the past five years.

Non-performing loans remained steady at approximately five percent in 2018.

Fiscal transparency issues limit any estimate of the total assets controlled by ROC’s largest banks.  The assets of the largest banks have likely decreased significantly in recent years as a result of the economic crisis.

ROC participates in the Central African Economic and Monetary Community (CEMAC) zone and the Central Bank of the Central African States (BEAC) system.

Foreign banks and branches may operate in ROC and constitute the majority of banking operations in ROC. BEAC banking regulations govern foreign and domestic banks in ROC. No banks have left ROC in the past three years.

No known restrictions exist on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

No known legal restrictions or limitations exist against converting, transferring or repatriating funds associated with an investment, including remittances. CEMAC regulations require banks to record and report the identity of customers engaging in transactions valued at over USD 10,000. Financial institutions must maintain records of large transactions for a minimum of five years. The General Director of Monies and Credit (DGMC) within the Ministry of Finance oversees exchange control. Investors may remit on a legal parallel market with approval from the DGMC. The Central Bank (BEAC) recently began monitoring fund transfers larger than USD 100,000.

Foreign investors may hold local bank accounts and report no difficulty obtaining foreign assets (currencies) from any of the major commercial banks, which include French, Chinese, Moroccan, or African banks. No U.S.-based banks operate in ROC, but transfers directly to and from the United States are possible.

ROC and other CEMAC member states use the Central African CFA Franc (FCFA, sometimes abbreviated XAF) as a common currency. The CFA is pegged to the Euro as an intervention monetary unit at a fixed exchange rate of EUR 1: CFA 655.957. This agreement guarantees the availability of foreign exchange and the unlimited convertibility of the CFA Franc. It also provides considerable monetary stability to the ROC and other CEMAC countries. The exchange rate between the CFA Franc and the U.S. dollar fluctuates according to the exchange rate between the Euro and the U.S. dollar.

Remittance Policies

There have been no recent changes or plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.

No known time limitations on remittances exist.

Sovereign Wealth Funds

ROC maintains no formal Sovereign Wealth Fund (SWF), although the Parliament adopted a law enabling the creation of a SWF. The law envisages establishment of the SWF at the BEAC and acquiring mostly risk-free foreign assets.

No official sovereign wealth fund exists.

9. Corruption

ROC has a law against corruption by public officials. The government inconsistently enforces the law.  ROC ranks 165 out of 180 countries in Transparency International’s 2018 Corruption Perceptions Index.

The corruption law applies to elected and appointed officials.  It does not extend to family members of officials or to political parties.

No specific laws or regulations address conflict-of-interest in awarding contracts or government procurement.

ROC does not encourage or require private companies to establish internal codes of conduct that prohibit bribery of public officials.

Some private companies, multinationals in particular, use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

ROC serves as a party to the UN Anticorruption Convention.

ROC does not provide protection to non-governmental organizations (NGOs), to include NGOs investigating corruption.

Corruption remains rampant in ROC. U.S. companies have cited corruption as an impediment to investment, particularly in the petroleum sector, where corruption practices remain prolific.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

Emmanuel Ollita Ondongo
President
Observatoire Anti-Corruption
Centre Ville, Brazzaville
06 944 6165, 05 551 2229
emmallita2007@yahoo.fr

Contact at “watchdog” organization:

Christian Mounzeo
President
Rencontre pour la Paix et les Droits de l’Homme (RPDH)
B.P. 939 Pointe-Noire, République du Congo
+242 05 595 52 46
contact@rpdh-cg.org
www.rpdh-cg.org  

Equatorial Guinea

Executive Summary

The Republic of Equatorial Guinea is endowed with oil and gas resources and hosts billions of dollars in direct U.S. investment that has been instrumental to extracting those resources.  Discovery of oil in the 1990s resulted in rapid economic growth in the early 2000s. However, according to certain businesses, corruption, perceptions of a biased judiciary, and a burdensome, inefficient bureaucracy undermine the general investment climate in the country.  Growth has slowed as operational oil fields have matured and are now in decline. International watchdog organizations give Equatorial Guinea one of the world’s lowest rankings in various global indices, including those for corruption, transparency, and ease of doing business. Companies have reports that these ratings underscore the challenging and opaque environment in which both local and foreign businesses must operate.  The government of the Republic of Equatorial Guinea is seeking investment in several sectors: agribusiness; fishing; energy and mining; petrochemicals, plastics and composites; travel and tourism; and finance. Most of these sectors are undeveloped. The Equatoguinean domestic market is small, with an estimated population of one million, although the country is a member of the Central African Monetary and Economic Union (CEMAC) sub-region, comprising more than 50 million people.  The zone has a central bank and a common currency – the CFA franc, which is pegged to the euro.

The government of the Republic of Equatorial Guinea has worked with international partners, including the World Bank and the International Monetary Fund (IMF) since March 2014 to analyze ways to improve the business climate.  The government implemented some recommendations, launching a one-stop-shop for investors and entrepreneurs on January 14, 2019, and instituting certain tax exemptions and other incentives to attract investment.

Equatorial Guinea has made significant advances on the country’s Horizon 2020 social development plan, specifically in infrastructure construction, electrification, and access to water, healthcare, and education.  Equatorial Guinea expresses pride in having some of the region’s best roads and other essential infrastructure, including development of its ports and pending completion of a new airport terminal. After oil prices started dropping in 2014, the government began extending timelines for completing infrastructure projects, and put many on hold as the country slumped into a recession that continues in 2019.  Investors have reported that past commercial disputes have involved delayed payment, or non-payment, by the government of the Republic of Equatorial Guinea to foreign firms for delivered goods and services and that certain companies exited the country with millions in unpaid bills. Some claim that much work remains, especially on diversifying the economy, and improving healthcare and education.

Equatorial Guinea does not require U.S. citizens to obtain visas.  Visas may be difficult to obtain for third-country nationals. Residency and work permits can be similarly difficult to obtain and or renew.  In March 2018, to ease the conditions of entry and residence in the country, the government reduced the cost of permits by half. Residency and work permits have not been issued regularly since 2017, requiring expatriates to leave the country every 90 days.

Despite the various challenges being reported, U.S. businesses have had success in the hydrocarbons sector, and some U.S. businesses have profited in other sectors, such as technology and computer services.  U.S. businesses will likely continue to invest in the country in light of opportunities in the market.

Table 1

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2018 172 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report “Ease of Doing Business” 2018 177 of 190 https://www.doingbusiness.org/rankings
Global Innovation Index 2018 Not ranked https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, stock positions) 2017 $654 http://www.bea.gov/international/factsheet/
World Bank GNI per capita 2017 $7,050 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

3. Legal Regime

Transparency of the Regulatory System

The Government of the Republic of Equatorial Guinea publishes Equatoguinean labor laws for public consumption; however, officials do not consistently apply laws or regulations.  Officials expect foreign companies to follow every detail of the labor law or face penalties. However, some report that enforcement of compliance with the labor laws by national companies is far less strict. U.S. businesses have complained that bureaucratic procedures are neither streamlined nor transparent, and can be extremely slow for those without the proper political or familial connections.  Many regulations are created within ministries. Some regulations are the result of laws passed by the legislature. Although most regulations are created at the national level, some decisions may be taken at the municipal level (such as decisions about permits for construction).

Proposed laws and regulations are not published in draft form for public comment, but are there have been reports of  informal sharing with representatives of specific industries for comment. Regulations and laws are generally not published online and are available in hardcopy for a fee.

The industry informs that accounting, legal, and regulatory procedures are generally neither transparent nor consistent with international norms.

According to the 2018 Fiscal Transparency Report, Equatorial Guinea does not meet the minimum requirements of fiscal transparency and more information is available at: https://www.state.gov/2018-fiscal-transparency-report/ .

The government recently made some progress on fiscal transparency of its public finances and debt obligations.  Although available to the public several months after the start of the fiscal year, the 2018 budget did include information on debt obligations for the first time in several years.  The 2019 budget also included the public debt obligations. The government is working on fiscal transparency as part of the International Monetary Fund (IMF)’s staff monitored program.

Regulation are generally not reviewed on the basis of scientific or data-driven assessments.

International Regulatory Considerations

Equatorial Guinea is a member of Central African Monetary and Economic Union (CEMAC), which includes a regional central bank, the Bank of Central African States (BEAC), and various regulations.

Equatorial Guinea is not a member of the World Trade Organization (WTO) and is listed as an observer government.  The General Council of the WTO established a Working Party to examine the application of Equatorial Guinea on February 5, 2008.  Efforts to join have faltered, as Equatorial Guinea has not submitted a Memorandum on the Foreign Trade Regime. Equatorial Guinea is not a signatory to the Trade Facilitation Agreement (TFA).

Legal System and Judicial Independence

Equatorial Guinea’s legal system is a mixed system of civil and customary law.  Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts.  Either party can also submit the dispute to international arbitration. Foreign investors are asked to declare their desired international arbitration venue in their initial application to invest in the country.  Arbitration must take place in a neutral location and Spanish will be the official language of the arbitration.

Equatorial Guinea was ranked 101 of 190 in the World Bank’s Doing Business Report 2018 for “enforcing contracts.”

Labor law is meant to protect workers, including a requirement for written contracts and regulation of labor by minors.  Labor courts exist for matters related to employment. Several companies have complained that cases are rarely decided on the merits and penalties are excessive.  Appeals generally proceed to the supreme or constitutional court. The court system and staff are generally considered under-resourced and unprepared, according to companies and public statements by the President of Equatorial Guinea.

The judicial system is not independent of the executive branch.  The President is officially the head of the court system, with the power to appoint or remove judges at will.

Laws and Regulations on Foreign Direct Investment

Law No. 7/1992, Law No. 2/1994, Decree No. 54/1994, and Decree 127/2004 regulate foreign investment.  Certain industries have additional regulations. The enforcement of laws and judicial decisions has not shown a pattern of  reliably or consistency, according to investors. The executive branch heavily influences the judicial branch, as the president is also the chief magistrate of the Republic of Equatorial Guinea.  While the government has made efforts to streamline inward investment procedures and simplify business registration processes, they have not yet implemented all these processes. Decree 72/2018 of April 2018 revised decree 127/2014 of September 14, 2014, and eliminated the mandatory national participation in foreign companies, except for the hydrocarbons sector.  The implementation of the “one-stop-shop” or single window, which launched in January 2019, has simplified the registration process and reduced the timelines (to seven business days according to the government). The centralized administrative procedure clarifies the rates to be paid and the procedures to follow. At least sixteen companies have registered through the single window in the initial months.  The Ministry of Finance and Economy along with the Ministry of Commerce plan to evaluate the system from July-September 2019 to determine its effectiveness. There is a webpage with information (https://www.ventanillaempresarialge.com/en/welcome/  ) but businesses cannot register online.

Competition and Anti-Trust Laws

Equatorial Guinea does not have an agency that actively enforces any competition laws.  Equatorial Guinea became a member of the Organization for the Harmonization of Business Laws in Africa (OHADA) in 1999, and any OHADA competition laws should apply in Equatorial Guinea.

Expropriation and Compensation

Law No. 7/1992 states that the government will not expropriate foreign investments except when acting in the public interest with fair, just, and proper compensation.  The Government of the Republic of Equatorial Guinea does not generally nationalize or expropriate foreign investments, although in 2013 a Spanish investor had his property confiscated.  The Government of the Republic of Equatorial Guinea does have an extensive record of expropriating locally owned property, frequently offering little or no compensation. The government has also withdrawn blocks for hydrocarbons exploration when companies failed to invest within an allotted period, though this generally appears to follow the terms of published tenders.

Dispute Settlement

ICSID Convention and New York Convention

Equatorial Guinea is not a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention — also known as the Washington Convention), although Law No. 7/1992 states that international arbitration may utilize ICSID as the basis of procedure.  Equatorial Guinea is not a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Recent investment disputes have centered on non-payment to investors or contractors by the Government of the Republic of Equatorial Guinea or state-owned enterprises.  Few established local mechanisms compel the Government of the Republic of Equatorial Guinea to pay investors, and the Embassy has limited capacity to intervene. U.S. and foreign enterprises from France, Cote d’Ivoire, Lebanon, Egypt, China, Morocco, and Turkey, operating in the Republic of Equatorial Guinea, have been subject to non-payments or severely delayed payments and have had no recourse in payment disputes.  This, along with the downturn in the economy, has led many foreign-led operations to pull out of the country completely or downsize substantially.

A Spanish businessperson, Francisco Hernando Contreras, signed a joint venture agreement with President Obiang in 2009 to build 36,000 social homes in Equatorial Guinea.  President Obiang allegedly pulled support for the project at the last minute, leaving the Spanish citizen ruined and bankrupted. In March 2012, Mr. Hernando Contreras submitted a claim before the International Centre for Investment Dispute Settlements (ICSID).  After unsuccessful attempts with the ICSID, in August 2017 Madrid’s provincial court ordained a magistrate to revise the claim, acknowledging the Spanish competency to rule the case because of the bilateral investment treaty between the countries. The case was ongoing at the start of 2019.

In at least one case in late 2018, a company that had payment arrears from a state-owned enterprises for over a year was able to make an alternate arrangement to receive payment and ensure timely payment for the future.  This required an amendment to the contract rather than a judicial solution.

International Commercial Arbitration and Foreign Courts

The OHADA (“Organisation pour l’harmonisation en Afrique du droit des affaires”,or Organization for the Harmonization of Corporate Law in Africa) Uniform Act on Arbitration rules would apply where the Court has its seat in Abidjan, but it may sit in any other place on the territory of one of the seventeen Member States of the Organization. It has already held hearings in several member states of the OHADA in recent years. As of March 27, 2019, the Common Court of Justice and Arbitration of the OHADA has included the Equatorial Guinean lawyer, Dr. Sergio Esono Abeso Tomo, on the list of arbitrators of the Arbitration Center of the Common Court of Justice and Arbitration of the OHADA for three and half years term.  He is the first Equatoguinean added to the OHADA list.

Law No. 7/1992 states that disputes that cannot be resolved through direct negotiation by the involved parties shall be referred to Equatoguinean courts.  Either party can also submit the dispute to international arbitration. Foreign investors are asked to declare their desired international arbitration venue in their initial application to invest in the country.  Arbitration must take place in a neutral location and Spanish will be the official language of the arbitration.

Firms have alleged that court actions are sometimes not transparent and discriminatory, and tend to favor local parties rather than foreigners or foreign companies.

Bankruptcy Regulations

The Government of the Republic of Equatorial Guinea has adopted the business laws of the Organization for the Harmonization of Business Laws of Africa (OHADA), including the law pertaining to bankruptcy.

The Republic of Equatorial Guinea currently ranks in last place for processes related to resolving insolvency, according to the World Banks’s Doing Business Report’s ranking of “Resolving Insolvency.”  The Republic of Equatorial Guinea received the World Bank’s ‘no practice mark,’ due to the lack of cases, in the past five years, involving a judicial reorganization, judicial liquidation, or debt enforcement.  This is interpreted to mean that creditors are unlikely to recover their money through a formal legal process.

6. Financial Sector

Capital Markets and Portfolio Investment

The  banking sector is accounted to provide limited financing to businesses.  The government reports that 2 microfinance institutions operate in country and the government has started a microcredit program for SMEs.  The country does not have its own stock market.  According to investors, capital markets are non-existent.

Credit is available but interest rates are  high, ranging from 12 to 18 percent for mortgages, and about 15 percent for personal loans.  Business loans generally require significant collateral, limiting opportunities for entrepreneurs, and may have rates of 20 percent or greater.  It is unclear if foreigners could obtain credit.

Money and Banking System

There is banking coverage throughout the country and it is concentrated in urban centers.  There is little information available about assets and the health of the banking system. The Equatorial Guinea National Bank (BANGE) has 29 branches throughout the country.  According to a November 2017 article, BANGE had over 80,000 clients, approximately 10 percent of the population. CCEI/CCIW Bank de Guinea Ecuatorial has four branches in the largest cities and is a subsidiary of First Bank Afriland (Cameroon).  BGFIBank Guinée Equatoriale operates as a subsidiary of BGFI Holding Corporation (Gabon). Pan-African EcoBank (Togo) and Societal Générale (France) also operate in Equatorial Guinea. According to the United Nations, in 2016 approximately 20 percent of the population had deposits in commercial banks.  If a bank does not have a branch in the location where an individual wants to do business, they would not have access their funds there. ATMs are in limited locations.

The Government of the Republic of Equatorial Guinea is a member of the Economic and Monetary Community of Central African States (CEMAC) and shares a regional Central Bank with other CEMAC members.  Members have ceded regulatory authority over their banks to CEMAC, but also are entitled to national BEAC Branches. Bata and Malabo each have a branch. The government of the Republic of Equatorial Guinea is also a member of the Banking Commission of Central African States within CEMAC.

Foreigners must provide proof of residency to establish a bank account.

The country is an almost entirely cash economy, with credit cards available, but not widely used in the general population.  Primarily visitors or wealthy citizens use credit cards at international hotels, international airlines, and major supermarkets.

The banking sector is affected by = relatively lengthier bureaucratic procedures and a lack of computerized record-keeping. Customers have reported that currency is not always available on demand, and  occasional problems making transfers or exchanging local currency into foreign exchange.

Foreign Exchange and Remittances

Foreign Exchange Policies

Decree No. 54/1994 provides the right to freely transfer convertible currency abroad at the end of each fiscal year. Many businesses have reported that limited financial services create barriers to successfully executing international transfers.  On April 1, 2019 the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a 6-month moratorium until October 1, 2019. Account holders are theoretically able to convert funds to foreign exchange through an administrative process.  It is unclear if this applies to all accounts in the region.

Local currency is not widely available in the Central African Franc zone, but can be relatively easily obtained in the Republic of Equatorial Guinea.

Equatorial Guinea does not engage in currency manipulation as the CFA franc currently has a fixed exchange rate to the euro: 100 CFA francs = 1 former French (nouveau) franc = 0.152449 euro; or 1 euro = 655.957 CFA francs exactly.  Thus, the exchange rate of the currency fluctuates according to the value of the euro.

Remittance Policies

On April 1, 2019 the CEMAC Central Bank published a regulation to enforce an existing requirement to maintain bank accounts in CFA rather than foreign exchange, with a 6-month moratorium until October 1, 2019.  Account holders are theoretically able to convert funds to foreign exchange through an administrative process. It is unclear if this applies to all accounts in the region.

Sovereign Wealth Funds

The Government of the Republic of Equatorial Guinea established a sovereign wealth fund, the Fund for Future Generations, in 2002.  According to investors, the fund has little transparency regarding how the fund it is managed or the value of the fund. A 2017 press report estimated the fund to have USD 413 million, or 1.6% of Equatorial Guinea’s GDP.  The Sovereign Wealth Fund Institute estimates assets under management of USD 165.5 million. There is no publically available information on its allocations.

9. Corruption

Resources to Report Corruption

There is no publicly designated contact at a government agency or agencies responsible for combating corruption.  Various ministries, including the office of the Prime Minister, nominally have responsibility for combatting corruption either within their own ministry or in the government at large.

There are no “watchdog” organizations operating publicly in country.

The Government of the Republic of Equatorial Guinea has laws and regulations against corruption, but many businesses have complained that they are not often enforced, and as a result, corruption is very common.  There are no specific laws about conflict of interest or nepotism. Numerous foreign investigations continued into high-level official corruption. For example, on September 14, 2018, Brazilian authorities seized two suitcases with $1.4 million in cash and another suitcase containing approximately 20 watches valued at $15 million when Vice President Teodoro Obiang Nguema Mbasogo landed in Sao Paulo on an unofficial visit.  The press reported on October 10, 2018 that Brazilian officials launched an investigation because they believed the undeclared cash and luxury watches, along with apartments and cars owned by the vice president in Brazil, might have been part of an effort to launder money embezzled from Equatorial Guinea’s government. Separately, one government official, Hermógenes Nzang Esono (Director General of Post and Mail – GECOTEL, an agency within the Ministry of Transport, Telecommunications, and Mail) was fired and reportedly arrested in April 2019, and is expected to be charged with corruption.

U.S. companies operating in Equatorial Guinea are required to adhere to the rules of the Foreign Corrupt Practices Act.  U.S. firms report that they are concerned about corruption related to government procurement, award of licenses and concessions, customs, and dispute settlement.  Major U.S. firms have internal controls, ethics, and compliance programs to detect and prevent bribery of government officials. It is unclear what controls exist at smaller companies and other foreign and domestic firms.

The country’s greatest concerns in terms of money laundering and terrorism financing are cross-border currency transactions and the illegal international transfer of money by companies or corrupt individuals.  Some report that widespread corruption, at times involving members of the government, is a primary catalyst for money laundering and other financial crimes. Certain businesses have noted that diversion of public funds and corruption are widespread in both commerce and government, particularly as regards the use of proceeds from the extractive industries, including oil, gas, and timber, and infrastructure projects.

Equatorial Guinea became a signatory to the United Nations Convention against Corruption on May 30, 2018.  Equatorial Guinea is a member of the Task Force against Money Laundering in Central Africa, an entity in the process of becoming a Financial Action Task Force-style regional body.  The country is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Gabon

Executive Summary

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

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

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

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

Table 1

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

3. Legal Regime

Transparency of the Regulatory System

Government policies and laws often do not establish clear rules of the game, and foreign firms can have difficulty navigating the bureaucracy.  Despite reform efforts, hurdles and red tape remain, especially at the lower and mid-levels of the ministries. Lack of transparency in administrative processes and lengthy bureaucratic delays occasionally raise questions for companies about fair treatment and the sanctity of contracts.

Rule-making and regulatory authority rests at the ministerial level.  There are no nongovernmental organizations or private sector associations that manage informal regulatory processes.  The government of Gabon has not exhibited any recent tendency to discriminate against U.S. investments, companies, or representatives.

The government does not publish proposed laws and regulations in draft form for public comment.  There are no centralized online locations where key regulatory actions or their summaries are published.  Key regulatory actions are published in the government’s printed Official Journal. It is not uncommon for legislative proposals to be provided “off the record” to the press.

In 2015, Gabon implemented a recommendation from CEMAC to program its budget by objectives.  This was implemented to enhance financial efficiency and transparency.  No new regulatory systems have been announced in the last year, and no new reforms have been implemented in the last year.  Regulations are developed by the relevant ministry concerned, and regulatory enforcement is controlled by individual ministries.  There are no instances of regulations being reviewed on the basis of scientific or data-driven assessments.

International Regulatory Considerations

Gabon is a member of CEMAC, along with Cameroon, the Central African Republic, the Republic of Congo, Equatorial Guinea, and Chad.  Gabon is also member of a larger economic community: the Economic Community of Central African States (ECCAS). Headquartered in Gabon, ECCAS has 11 members: Gabon, Angola, Burundi, Cameroon, Central African Republic, Chad, the Republic of Congo, Democratic Republic of Congo, Equatorial Guinea, Rwanda, and São Tomé and Príncipe.  Both CEMAC and ECCAS work to promote economic cooperation among members.

Legal System and Judicial Independence

Gabon’s legal system is based on French Civil Law.  Regular courts handle commercial disputes in compliance with the Organization for Harmonization of Business Law in Africa (OHADA).  Courts do not apply the law consistently, and delays are frequent in the judicial system.  Lack of transparency in administrative processes and lengthy bureaucratic delays call into question the country’s commitment to fair treatment and the sanctity of contracts.  Judicial capacity is weak, and many government contacts underscore the need for specialized training in technical issues such as money laundering and environmental crimes.  Foreign court and international arbitration decisions are accepted, but enforcement may be difficult.

Gabon has a written code of commercial law.  Gabon is affiliated with OHADA and has been a WTO member since January 1, 1995.

The judicial system is not independent from the executive branch.  Gabon’s judicial bodies are subject to political influence, creating uncertainty concerning fair treatment and the sanctity of contracts.  Regulations or enforcement actions are appealable and are adjudicated in the national court system.

Laws and Regulations on Foreign Direct Investment

Gabon’s 1998 investment code, which gives foreign companies operating in Gabon the same rights as domestic firms, allows foreign investors to choose freely from a wide selection of legal business structures, such as a private limited liability company or public limited liability company.  The distinctions arise primarily from the minimum capital requirements and the conditions under which shares may be re-sold. Foreign investment in Gabon is subject to local law that is in many instances unsettled or unclear, and in certain cases, Gabonese law may require local majority ownership of businesses.  The state reserves the right to invest in the equity capital of ventures established in certain sectors (e.g., petroleum and mining). There are no known systemic practices by private firms to restrict foreign investment, participation, or control.

ANPI-Gabon’s website contains some information on investing in Gabon: http://www.anpigabon.ga/index.php/fr  

Competition and Anti-Trust Laws

Gabonese Law No. 5/89 of July 6, 1989 on Competition covers all aspects of competition and anti-trust (http://www.wipo.int/wipolex/en/details.jsp?id=8814  ).  The relevant ministry for a given dispute reviews transactions for competition-related concerns.

Expropriation and Compensation

Foreign firms established in Gabon operate on an equal legal basis with national companies. Businesses are protected from expropriation or nationalization without appropriate compensation, as determined by an independent third party.  The Gabonese government has not exhibited a tendency to discriminate against U.S. investments, companies, or representatives, nor have there been any indications or reports of incidences of indirect expropriation, such as through confiscatory tax regimes.

Dispute Settlement

ICSID Convention and New York Convention

Gabon is a member state of the International Centre for the Settlement of Investment Disputes (ICSID) and a signatory to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).  The 1965 Code of Civil Procedure provides for various means of enforcement of judgments (both foreign and domestic), depending on the nature of the decree or decision.

Investor-State Dispute Settlement

Gabon does not have a BIT with the United States.  Post is aware of one investment dispute involving a U.S. company.

In 2018, there was one case of a foreign arbitral award issued against the government.  In March 2018, the Société d’Energie et d’Eau du Gabon (SEEG), a subsidiary of the Veolia Group, filed a request for conciliation against Gabon at the International Centre for the Settlement of Investment Disputes (ICSID).  Veolia and the Gabonese government signed an agreement to settle the case in February 2019. Gabon agreed to buy Veolia’s 51 percent stake in SEEG and Veolia agreed to withdraw its arbitrage case once the agreement is finalized. 

International Commercial Arbitration and Foreign Courts

No alternative dispute resolution options exist within Gabon.  Investment disputes are generally negotiated directly with the governmental entity involved.  There is no domestic arbitration body within the country. Local courts recognize foreign arbitral awards, but enforcement may be difficult.

Post is not aware of any cases of state-owned enterprises (SOEs) being involved in investment disputes in the court system.

Bankruptcy Regulations

Gabon has a bankruptcy law, but it is not well developed.  In the World Bank’s Doing Business Report, Gabon ranks 129 out of 190 economies on the ease of resolving insolvency.

Gabon’s bankruptcy law is based on OHADA regulations.  According to Section 3: Art 234-239 of OHADA’s Uniform Insolvency Act, creditors and equity shareholders, collectively or individually, may designate trustees to lodge complaints or claims to the commercial court.  These laws criminalize bankruptcy, and the OHADA regulations grant Gabon the discretion to apply its own remedies.

6. Financial Sector

Capital Markets and Portfolio Investment

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

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

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

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

Money and Banking System

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

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

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

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

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

Foreign Exchange and Remittances

Foreign Exchange Policies

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

9. Corruption

Gabon has established a legal framework to fight corruption, yet enforcement remains limited and official impunity is a problem.  Corruption is rarely, if ever, prosecuted in Gabon.  Transparency International lists Gabon as 124 of 180 countries.  The Gabonese Penal Code criminalizes abuse of office, embezzlement, passive and active bribery, trading in influence, extortion, offering or accepting gifts, and other undue advantages in the public sector.  Private sector corruption is criminalized whenever a given company is related to a public entity. Punishments for public officials found guilty of soliciting or accepting bribes include prison sentences ranging from two to 10 years, and a fine of CFA five million (USD 8,572).

The government established the Commission to Combat Illicit Enrichment (CNLCEI) in 2004.  In summer 2018, the CNLCEI’s five year mandate was not renewed.   The CNLCEI regulations do not extend to family members of civil servants or to political parties.

The Gabonese government launched an anti-corruption campaign in January 2017 called Operation Mamba.  The first conviction occurred in April 2018, but was overturned on appeal in April 2019. Few details of the investigations have been made public.

There are no known laws or regulations to counter conflict of interest in awarding contracts or government procurement.  There is no information about action on the part of the government to encourage or require private companies to establish codes of conduct that prohibit bribery of public officials.  Some private companies use internal controls, ethics, and compliance programs to detect and prevent bribery of government officials.

Gabon is a signatory to the United Nations Convention against Corruption and is a member of The Task Force on Money Laundering in Central Africa (Groupe d’action contre le blanchiment d’argent en Afrique Centrale, or GABAC).

No international or regional watchdog organizations operate in Gabon.  Local civil society lacks the capacity to play a significant role in highlighting cases of corruption.

Companies contend with a high risk of corruption when dealing with the Gabonese extractive industries.  Gabon has vast oil, manganese, and timber resources; however, contracting and licensing processes lack transparency.

Resources to Report Corruption

National Financial Investigations Agency
Tel: +241 0176 1773
Agence Nationale d’Investigation Financière
Immeuble Arambo, Boulevard Triomphal
BP:189
Libreville, Gabon
contact@anif.ga

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