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Cameroon

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.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

 

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

 

Economic Data

Year

Amount

Year

Amount

Host Country Gross Domestic Product (GDP) ($M USD)

2016

$30,400

2017

$34,923

www.worldbank.org/en/country 

Foreign Direct Investment

Host Country Statistical Source

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

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

N/A

N/A

N/A

N/A

BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  

Host country’s FDI in the United States ($M USD, stock positions)

N/A

N/A

N/A

N/A

BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  

Total inbound stock of FDI as % host GDP

N/A

N/A

N/A

N/A

UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx 


Table 3: Sources and Destination of FDI

Cameroon is not included in the IMF’s Coordinated Direct Investment Survey.


Table 4: Sources of Portfolio Investment

Cameroon is not included in the IMF’s Coordinated Portfolio Investment Survey, as the nascent Douala Stock exchange has minimal opportunities for outside portfolio investment.

Egypt

6. Financial Sector

Capital Markets and Portfolio Investment

To date, high returns on GoE debt have crowded out Egyptian investment in productive capacity.  The large foreign inflows Egypt witnessed in 2018 have been mostly portfolio capital, which is highly volatile.  Returns on GoE debt have begun to decrease, which could presage investment by Egyptian capital in the real economy

The Egyptian Stock Exchange (EGX) is Egypt’s registered securities exchange.  There are more than 500,000 investors registered to trade on the exchange. Stock ownership is open to foreign and domestic individuals and entities.  The GoE issues dollar-denominated and Egyptian pound-denominated debt instruments. The GoE has developed a positive outlook toward foreign portfolio investment, recognizing the need to attract foreign capital to help develop the Egyptian economy.

The Capital Market Law 95//1992, along with the Banking Law 88//2003, constitutes the primary regulatory frameworks for the financial sector.  The law grants foreigners full access to capital markets, and authorizes establishment of Egyptian and foreign companies to provide underwriting of subscriptions, brokerage services, securities and mutual funds management, clearance and settlement of security transactions, and venture capital activities.  The law specifies mechanisms for arbitration and legal dispute resolution and prohibits unfair market practices. Law 10//2009 created the Egyptian Financial Supervisory Authority (EFSA) and brought the regulation of all non-banking financial services under its authority. In 2017, EFSA became the Financial Regulatory Authority (FRA).

Settlement of transactions takes one day for treasury bonds and two days for stocks.  Although Egyptian law and regulations allow companies to adopt bylaws limiting or prohibiting foreign ownership of shares, virtually no listed stocks have such restrictions.  While a significant number of the companies listed on the exchange have been family-owned or dominated conglomerates, the exchange has gone through a period of major delisting of many companies that do not have sufficient shares or do not meet the management, fiscal, and transparency standards. Free trading of the remaining shares in many of these ventures is increasing, with a 110 percent increase in trade value and a 53 percent increase in trading volume from 2016 to 2017.  Companies are delisted from the exchange if not traded for six months.

The Higher Investment Council extended the suspension of capital gains tax for three years, until 2020 as part of efforts to draw investors back.   In 2017, the government implemented a stamp duty on all stock transactions with a duty of 0.125 percent on all buyers and sellers. Egypt’s stamp duty on stock exchange transactions includes for the first time a 0.3 percent levy for investors acquiring more than a third of a company’s stocks.

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

The Egyptian credit market, open to foreigners, is vibrant and active. Repatriation of investment profits has become much easier, as there is enough available hard currency to execute FX trades. Since the floatation of the EGP in November 2016, FX trading is considered straightforward, given the reestablishment of the interbank foreign currency trading system.

Money and Banking System

Benefitting from the nation’s increasing economic stability over the past two years, Egypt’s banks have enjoyed both ratings upgrades and continued profitability.  Thanks to economic reforms, a new floating exchange system, and an Investment Law passed in 2017, the project finance pipeline is increasing after a period of lower activity.  Banking competition is improving to serve a largely untapped retail segment and the nation’s challenging, but potentially rewarding, the SME segment. The Central Bank of Egypt (CBE) has mandated that 20 percent of bank loans go to SMEs within the next two years).  Also, with only about a quarter to a third of Egypt’s adult population owning or sharing an account at a formal financial institution (according to press and comments from contacts), the banking sector has potential for growth and higher inclusion, which the government and banks discuss frequently.  A low median income plays a part in modest banking penetration. But the CBE has taken steps to work with banks and technology companies to expand financial inclusion.

Egypt’s banking sector is generally regarded as healthy and well-capitalized due in part to its deposit-based funding structure and ample liquidity—especially since the floatation and restoration of the interbank market.  The CBE estimates that approximately 4.3 percent of the banking sector’s loans are non-performing in 2018. Still, since 2011, a high level of exposure to government debt, accounting for over 40 percent of banking system assets, at the expense of private sector lending, has reduced the diversity of bank balance sheets and crowded out domestic investment.  Given the floatation of the Egyptian Pound and restart of the interbank trading system, Moody’s and S&P have upgraded the outlook of Egypt’s banking system to positive from stable to reflect improving macroeconomic conditions and ongoing commitment to reform.

38 banks operate in Egypt, including several foreign banks. The CBE has not issued a new commercial banking license since 1979.  The only way for a new commercial bank, whether foreign or domestic, to enter the market (except as a representative office) is to purchase an existing bank.  To this end, in 2013, QNB Group acquired National Société Générale Bank Egypt (NSGB). That same year, Emirates NBD, Dubai’s largest bank, bought the Egypt unit of BNP Paribas.  In 2015, Citibank sold its retail banking division to CIB Bank. In 2016 and 2017, Egypt indicated a desire to partially (less than 35 percent) privatize at least one (potentially two) state-owned banks and a total of 23 firms through either expanded or new listings on the Egypt Stock Exchange, though no action has been taken as of early 2018. In March 2019, Egypt began its program to privatize 23 State-Owned Enterprises with a successful minority stake in the Eastern Tobacco Company.

According to the CBE, banks operating in Egypt held EGP 4.216 trillion in total assets at the end of first quarter of 2018, of which approximately 45 percent were held by the largest five banks (the National Bank of Egypt, Banque Misr, the Commercial International Bank, Qatar National Bank Al-Ahli, and the Banque Du Caire). Egypt’s three state-owned banks (Banque Misr, Banque du Caire, and National Bank of Egypt) control nearly 40 percent of banking sector assets.

The chairman of the EGX recently stated that Egypt is allowing, even encouraging, exploration of the use of blockchain technologies across the banking community.  The FRA will review the development and most likely regulate how the banking system adopts the fast-developing blockchain systems into banks’ back-end and customer-facing processing and transactions. Seminars and discussions are beginning around Cairo, including visitors from Silicon Valley, in which leaders and experts are still forming a path forward.  While not outright banning cryptocurrencies, which is distinguished from blockchain technologies, authorities caution against speculation in unknown asset classes.

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

Foreign Exchange and Remittances

Foreign Exchange

There has been significant progress in accessing hard currency since the floatation of the EGP and reestablishment of the interbank currency trading system in November 2016.  While the immediate aftermath saw some lingering difficulty of accessing currency, by 2017 most firms operating in Egypt reported having little difficulty obtaining hard currency for business purposes, such as importing inputs and repatriating profits.  In 2016 the Central Bank lifted dollar deposit limits on households and firms importing priority goods which had been in place since early 2015. With net foreign reserves at an all-time high of over USD 44 billion (March 2019), accessing foreign currency is no longer an issue.

Funds associated with investment can be freely converted into any world currency, depending on the availability of that currency in the local market.  Some firms and individuals report that the process takes time. But the interbank trading system works in general and currency is available as the foreign exchange markets continue to react positively to the government’s commitment to macro and structural reform.

The floating exchange rate operates on the principle of market supply and demand: the exchange rate is dictated by availability of currency and demand by firms and individuals.  While there is some reported informal Central Bank window guidance, the rate generally fluctuates depending on market conditions, without direct market intervention by authorities.  In general, the EGP has stabilized within an acceptable exchange rate range, which has increased the foreign exchange market’s liquidity. Since the early days following the floatation, there has been very low exchange rate volatility.

Remittance Policies

The 1992 U.S.-Egypt Bilateral Investment Treaty provides for free transfer of dividends, royalties, compensation for expropriation, payments arising out of an investment dispute, contract payments, and proceeds from sales.

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

Banking Law 88//2003 regulates the repatriation of profits and capital.  The current system for profit repatriation by foreign firms requires sub-custodian banks to open foreign and local currency accounts for foreign investors (global custodians), which are exclusively maintained for stock exchange transactions.  The two accounts serve as a channel through which foreign investors process their sales, purchases, dividend collections, and profit repatriation transactions using the bank’s posted daily exchange rates. The system is designed to allow for settlement of transactions in fewer than two days, though in practice some firms have reported short delays in repatriating profits, no longer due to availability but more due to processing steps.

Sovereign Wealth Funds

The Cabinet has approved  the establishment of a sovereign wealth fund, which will be charged with investing state funds locally and abroad across asset classes and will be tapped to manage underutilized assets.  The framework of the EGP200 billion sovereign wealth fund was issued in March of 2018. The government is collaborating with regional and European institutions to take part in forming the fund’s sector-specific units.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD ) 2017 $235,370    2018 $242,800 www.worldbank.org/en/country  
Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD , stock positions) 2018 $2,244.4  2017 $9,352.0  BEA data available at https://tradingeconomics.com/egypt/foreign-direct-investment  
Host country’s FDI in the United States (M USD , stock positions) 2017  $2,960.0  2017  $2,950.5 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm  
Total inbound stock of FDI as % host GDP N/A N/A 2017 55.63% UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  

Measurements of FDI in Egypt vary according to the source and the definitions employed to calculate the figure.  The Central Bank of Egypt records figures on quarterly and annual investment flows based on financial records for Egypt’s balance of payments statistics.  They are reported in the table below. The Ministry of Petroleum maintains statistics on investment in the oil and gas sector (which accounts for the bulk of FDI in Egypt), while GAFI has statistics on all other investments – including re-invested earnings and investment-in-kind.  Statistics are not always current. GAFI’s figures are calculated in EGP at the historical value and rate of exchange, with no allowance for depreciation, and are cumulative starting from 1971.

U.S. firms are active in a wide range of manufacturing industries, producing goods for the domestic and export markets.  U.S. investors include American Express, AIG, Ideal Standard, Apache Corporation, Bechtel, Bristol-Myers Squibb, Cargill, Citibank, Coca-Cola, Devon Energy, Dow Chemical, ExxonMobil, Eveready, General Motors, Guardian Industries, H.J.  Heinz, Johnson & Johnson, Kellogg’s, Mars, Mondelez, Microsoft, Proctor and Gamble, Pfizer, PepsiCo, Pioneer, and Xerox. Leading investors from other countries include BG, ENI-AGIP, BP, Vodaphone, and Shell (in the oil/gas sector), Unilever, Al-Futtaim, (UAE), the M.A. Kharafi Group (Kuwait), and the Kingdom Development Company (Saudi Arabia).


Table 3: Sources and Destination of FDI

Data not available.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
Top Five Partners (Millions, US Dollars, 2016)
Total Equity Securities Total Debt Securities
All Countries $1,886 100% All Countries $888 100% All Countries $998 100%
Cayman Islands $416 22% Saudi Arabia $347 39% Cayman Islands $406 41%
Saudi Arabia $392 13% International Organizations $250 28% United States $190 19%
International Organizations $250 12% United Kingdom $45 5% Qatar $103 10%
United States $219 5% Italy $36 4% Germany $48 5%
Qatar $103 5% Switzerland $32 4% Saudi Arabia $46 5%

Ghana

6. Financial Sector

Capital Markets and Portfolio Investment

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

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

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

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

Money and Banking System

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

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

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

Foreign Exchange and Remittances

Foreign Exchange

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

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

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2018 $65,556 2017 $58,997 www.worldbank.org/en/country  
Foreign Direct Investment Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2017 $1,698 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2017 $52 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data  
Total inbound stock of FDI as % host GDP N/A N/A 2017 56% UNCTAD data available at
https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx  


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward Amount 100% Total Outward Amount 100%
Ireland Amount 36% Country #1 Amount X%
France Amount 15% Country #2 Amount X%
Cayman Islands Amount 12% Country #3 Amount X%
Brit Virgin Islands Amount 11% Country #4 Amount X%
Belgium Amount 10% Country #5 Amount X%
“0” reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Data not available.

Lesotho

6. Financial Sector

Capital Markets and Portfolio Investment

The regulatory system is effectively established to encourage and facilitate portfolio investment.   Through the Central Bank of Lesotho (CBL), the GOL promotes the development of financial markets in Lesotho through managing official foreign reserves, implementation of monetary policy through Open Market Operations, and contracting and managing the Government’s domestic debt through issuance and redemption of treasury securities.  Financial markets in Lesotho have been developed in phases.  The first phase focused on money markets development (treasury bills) in 2008 by increasing the frequency of auctions and increasing the number of tenors.  To broadly develop capital markets, this was followed by the introduction of government bonds in 2010, with the last phase being the development of a corporate bonds and equities market.  The stock of portfolio investment liabilities amounted to USD28.5 million at the end of 2010 and comprised mostly bonds. Lesotho’s capital market is relatively underdeveloped, with no secondary market for capital market transactions.  Through publication of the Capital Markets Regulations of 2014, the government established and launched the Maseru Securities Market, the country’s stock market, in January 2016. The Regulations, documented in the Government Gazette No. 76, provide for the operation of a market that is fair, orderly, secure, and transparent.  The Regulations further provide for investor protectios and the licensing of all market players. Although the stock market was formally launched three years ago, it is not functioning; there are neither companies listed nor securities being traded. The registering of companies in the stock market will increase the ability of businesses to raise medium to long-term capital.  The trading of government bonds; corporate bonds and company shares is strictly electronic—there is no physical building. For now, bond trading is operated by the Central Bank of Lesotho, with the hope that the private sector will take over when fully capacitated. For the 2018/19 fiscal year, the government financed a fiscal deficit of approximately USD 85.7 million through domestic borrowing.

The government accepted the obligations of IMF Article VIII in 1997, and continues to refrain from imposing restrictions on the making of payments and transfers for current international transactions.  Foreign participation in government securities is allowed as long as foreign investors can open accounts with local banks through which funds can be collected. Lesotho is part of the Common Monetary Area (CMA) and therefore facilitates free movement of capital.  The current account has been fully liberalized for all inward and outward cross-border transactions. However, some transactions still need approval from the Central Bank. Credit is usually allocated on market terms, although there are structural bottlenecks in the market and perceived distortions.  For example, lending rates are considered to be higher in the country despite excess liquidity in the system.

According to the IMF and the World Bank private sector credit is growing.  A Central Bank of Lesotho report in December 2018 reflected that private sector credit grew by 10.2 percent.  Credit is allocated on market terms, and foreign investors are able to get credit on the local market. However, the banking sector is characterized by conservative lending guidelines, high interest rates, and large collateral requirements.  Foreign investors that meet credit extension criteria are provided with credit from commercial banks. While the local banking system may not be as developed in terms of credit instruments, there are foreign investors who have qualified for loans, bank overdrafts, etc. from commercial banks.  LNDC does not provide credit to foreign investors but can acquire equity in foreign companies investing in strategic economic sectors. The private sector has access to a limited number of credit instruments, such as credit cards, loans, overdrafts, checks, and letters of credit.

In January 2016, Lesotho’s first credit bureau was launched; the latest in a long series of incremental steps by the government to further improve access to finance for the private sector.  The credit bureau, run by Compuscan, a South African credit bureau, facilitates the exchange of consumer credit information among credit providers to enable them to make better assessments of risk and promote responsible borrowing and lending practices.

Money and Banking System

Lesotho has a central bank and four commercial banks—three subsidiaries of South African banks (subject to measures and regulations under the Institutions Act of 2012) and the government-owned Lesotho Post Bank (LPB)— which serve about 435,000 Basotho, approximately 38 percent of the adult population, through 49 branches.  The number of bank branches and automated teller machines (ATMs) are distributed unevenly across the country. In Maseru, there are about 16 branches and ATM locations for every 100,000 people, whereas in Mokhotlong, for example, there are only three branches and ATM locations for every 100,000 people. According to the CBL, the banking system is sound—commercial banks in Lesotho are well-capitalized, liquid, and compliant with international banking standards.  Three South African banks account for almost 92 percent of the country’s banking assets, which totaled over M16.07 billion (USUSD 1.1 billion) by December 2017. The share of bank nonperforming loans to total gross loans was approximately 3.7 percent in December 2018. Foreigners are allowed to establish a bank account and may hold foreign currency accounts in local banks; however, they are required to provide a residence permit as a precondition for opening a bank account to comply with the “know your customer” requirements.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions on converting or transferring funds associated with an investment into a freely usable currency and at a legal market-clearing rate.  Subject to foreign exchange (forex) control rules, Lesotho’s policy is that foreign investors may access forex for day-to-day business purposes and can remit capital and profits overseas.  Investors may hold foreign currency accounts in local banks. Lesotho has acceded to Article VIII of the IMF charter, which provides for foreign exchange convertibility of current account transactions.  For loan repayments, investors must notify the Central Bank of Lesotho (CBL) at the outset of an investment that the capital for that investment is a loan and must disclose the terms of the loan. Lesotho is a member of the Southern African Common Policy on approval of foreign loans.  The Central Bank has fully liberalized inward flows. For outward flows, individuals are allowed to invest up to USD 285,714 per year while legal entities are allowed up to USD 36 million per year. Repatriation of funds abroad by non-residents is not restricted provided there is proof that the declaration of such funds was made when non-residents came to the country.  Loans require approval from the Central Bank.

The CBL has authorized three commercial banks and two private money exchange bureaus in Lesotho to deal in forex. However, the CBL still retains the power to approve forex requirements for all capital account transactions including FDI, capital disinvestment, and contracting and servicing offshore debt.  The procedures for approving dividend remittances are somewhat bureaucratic, similar to other countries that have forex control regimes. Copies of audited company accounts are required for final dividend payments, while interim dividends require only management accounts. Tax clearance certificates are required for both interim and final dividend payments.

Lesotho’s fiscal and monetary policies operate within the context of its membership of the Common Monetary Area (CMA).  The CMA consists of the following SACU countries: Lesotho, Namibia, Swaziland, and South Africa. Under the CMA, the national currency, the loti, is pegged at par to the South African rand, which is also accepted as legal tender in Lesotho.  As a member of the CMA, Lesotho has free convertibility of transactions with Namibia, South Africa, and Swaziland. Under this regime, Lesotho has effectively surrendered its monetary policy to the South African reserve bank, and, therefore, cannot engage in currency manipulation.  To maintain the rand/loti peg, Lesotho maintains reserves in rand and other foreign currencies. Lesotho’s prudent management of its reserves enables it to offer free forex convertibility for all current account transactions.

The country, through its central bank, issued a statement on November 2017, to announce its position on emerging block-chain technologies, in particular cryptocurrencies.  In its statement, the bank highlighted that cryptocurrencies do not fall under the purview of its regulatory scope, and the nature of cryptocurrency transactions violate existing laws, exchange laws, and anti-money laundering/combatting of terrorist financing laws.

Remittance Policies

According to the CBL, there are no plans to change remittance policies in the near future.  The current average delay period for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties, and management fees through normal legal channels is two days, provided the investor has submitted all the necessary documentation related to the remittance.  There has never been a case of blockage of such transfers, and shortages of forex that could lead to blockage are unlikely given that the CBL maintains net international reserves at a target of six months of import cover.

Sovereign Wealth Funds

There is no sovereign wealth fund or asset management bureau in Lesotho. 

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

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

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

Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD) 2016 $2,333 2016 $ 2,291 www.worldbank.org/en/country   
Foreign Direct Investment Host Country Statistical Source USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2016 $ 494 2015 $ 5 BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm   
Host country’s FDI in the United States (M USD, stock positions) 2016 N/A 2016 N/A BEA data available at http://bea.gov/international/direct_investment_multinational_companies_comprehensive_data.htm   
Total inbound stock of FDI as % host GDP 2016 21 2016 0.22 https://www.centralbank.org.ls/  


Table 3: Sources and Destination of FDI

Data on Lesotho not available from the IMF Website


Table 4: Sources of Portfolio Investment

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

Investment Climate Statements
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