Policies Towards Foreign Direct Investment

In 1995 the Nigerian Investment Promotion Commission Act dismantled years of controls and limits on foreign direct investment (FDI), opening nearly all sectors to foreign investment, allowing for 100 percent foreign ownership in all sectors (with the exception of the petroleum sector, where FDI is limited to joint ventures or production sharing contracts), and creating the Nigerian Investment Promotion Commission (NIPC) with a mandate to encourage and assist investment in Nigeria.  The NIPC features a One-Stop Investment Center (OSIC) that nominally includes participation of 27 governmental and parastatal agencies (not all of which are physically present at the OSIC, however) in order to consolidate and streamline administrative procedures for new businesses and investments. Foreign investors receive largely the same treatment as domestic investors in Nigeria, including tax incentives. However, without strong political and policy support, and because of the unresolved challenges to investment and business in Nigeria, the ability of the NIPC to attract new investment has been limited.

The Nigerian government has continued to promote import substitution policies such as trade restrictions and local content requirements in a bid to attract investment that would develop domestic capacity to produce products and services that would otherwise be imported.  The import bans and high tariffs used to advance Nigeria’s import substitution goals have been undermined by smuggling of targeted products (most notably rice and poultry) through the country’s porous borders, and by corruption in the import quota systems developed by the government to incentivize domestic investment.  Despite the government’s stated goal to attract investment, investors generally find Nigeria a difficult place to do business.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are currently no limits on foreign control of investments in Nigeria.  However, in some instances regulatory bodies may insist on Nigerian equity as a prerequisite to doing business.  The NIPC Act of 1995 liberalized the ownership structure of business in Nigeria, so that foreign investors can now own and control 100 percent of the shares in any company (as opposed to the earlier arrangement of 60 percent – 40 percent in favor of Nigerians).

The lack of restrictions applies to all industries, except in the oil and gas sector where investment is limited to joint ventures or production-sharing agreements.  Additional laws restrict industries to domestic investors if they are considered crucial to national security, such as firearms, ammunition, and military and paramilitary apparel.  Foreign investors must register with the NIPC after incorporation under the Companies and Allied Matters Decree of 1990. The Act prohibits the nationalization or expropriation of foreign enterprises except in cases of national interest.

Other Investment Policy Reviews

The OECD completed an investment policy review of Nigeria in May 2015. (http://www.oecd.org/countries/nigeria/oecd-investment-policy-reviews-nigeria-2015-9789264208407-en.htm   ).  The WTO published a trade policy review of Nigeria in 2017 which also includes a brief overview and assessment of Nigeria’s investment climate.  That review is available at: https://www.wto.org/english/tratop_e/tpr_e/tp456_e.htm   .

The United Nations Council on Trade and Development (UNCTAD) published an investment policy review of Nigeria and a Blue Book on Best Practice in Investment Promotion and Facilitation in 2009 (available at unctad.org).  The recommendations from its reports continue to be valid: Nigeria needs to diversify FDI away from the oil and gas sector by improving the regulatory framework, investing in physical and human capital, taking advantage of regional integration and reviewing external tariffs, fostering linkages and local industrial capacity, and strengthening institutions dealing with investment and related issues.  NIPC and the Federal Inland Revenue Service (FIRS) developed a compendium of investment incentives which is available online at: https://nipc.gov.ng/compendium 

Business Facilitation

Although the NIPC offers the One-Stop Investment Centre, Nigeria does not have an online single window business registration website, as noted by Global Enterprise Registration (www.GER.co).  The Nigerian Corporate Affairs Commission (CAC) maintains an information portal, and in 2018 the Trade Ministry launched an online portal for investors called ‘iGuide Nigeria’ (https://theiguides.org/public-docs/guides/nigeria).  While many steps for business registration can be completed online, the final step requires submitting original documents to a CAC office in exchange for final registration.  On average, it takes eight procedures and 10 days to establish a foreign-owned limited liability company (LLC) in Nigeria (Lagos), significantly faster than the regional average for Sub-Saharan Africa at 23 days.  Time required is likely to vary in different parts of the country. Only a local legal practitioner accredited by the Corporate Affairs Commission can incorporate companies in Nigeria. According to the Nigerian Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, foreign capital invested in an LLC must be imported through an authorized dealer, which will issue a Certificate of Capital Importation.  This certificate entitles the foreign investor to open a bank account in foreign currency. Finally, a company engaging in international trade must get an import-export license from the Nigerian Customs Service.

Although not online, the One-Stop Investment Center co-locates relevant government agencies in one place in order to provide more efficient and transparent services to investors.  Investors may pick up documents and approvals that are statutorily required to establish an investment project in Nigeria. The Center assists with visas for investors, company incorporation, business permits and registration, tax registration, immigration, and customs issues.  The Nigerian government has not established uniform definitions for micro, small, and medium enterprises (MSMEs) with different agencies using different definitions, so the process may vary from one company to another.

Outward Investment

The Nigerian Export Promotion Council administered an Export Expansion Grant (EEG) scheme to improve non-oil export performance, but the government suspended the program in 2014 due to concerns about corruption on the part of companies who collected the grants but did not actually export.  After a period of re-evaluation and revision, the program was relaunched in 2018. The federal government set aside 5.12 billion naira (roughly USD 14.2 million) in the 2019 budget for the EEG scheme. The Nigerian Export-Import (NEXIM) Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms of three to five years (or longer) for the importation of machinery and raw materials used for generating exports.

Agencies created to promote industrial exports remain burdened by uneven management, vaguely-defined policy guidelines, and corruption.  Nigeria’s inadequate power supply and lack of infrastructure coupled with the associated high production costs leave Nigerian exporters at a significant disadvantage.  Many Nigerian businesses fail to export because they find meeting international packaging and safety standards is too difficult or expensive. Similarly, firms often are unable to meet consumer demand for a consistent supply of high-quality goods in quantities sufficient to support exports as well as the domestic market.  Therefore, the vast majority of Nigeria’s manufacturers remain unable or uninterested in competing in the international market, especially given the size of Nigeria’s domestic market.

The Nigerian government signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2000.  U.S. and Nigerian officials held their latest round of TIFA talks in April 2016. In 2017, Nigeria and the United States signed a Memorandum of Understanding to formally establish the U.S. – Nigeria Commercial and Investment Dialogue (CID), a new bilateral policy instrument focused on improving trade and investment between the two nations.  The aim of the CID is to promote increased, diverse, and sustained trade and investment with an initial focus on infrastructure, agriculture, digital economy, investment, and regulatory reform.

Nigeria has bilateral investment agreements with Algeria, Austria, Bulgaria, Canada, China, Egypt, Ethiopia, France, Finland, Germany, Italy, Jamaica, the Republic of Korea, Kuwait, Morocco, the Netherlands, Romania, Russia, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda, and the United Kingdom.  Fifteen of these treaties (those with China, France, Finland, Germany, Italy, the Republic of Korea, The Netherlands, Romania, Serbia, South Africa, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom) have been ratified by both parties. Nigerian government officials blame treaty partners for the lack of ratification, but the ratification process within Nigeria has not proven proactive or well-organized.

Nigeria is a party to double taxation agreements with the following 23 countries: Belgium, Canada, China, Czech Republic, France, Ghana, Italy, Kenya, the Republic of Korea, Mauritius, the Netherlands, Pakistan, the Philippines, Poland, Qatar, Romania, Singapore, Slovakia, South Africa, Spain, Sweden, United Arab Emirates, and the United Kingdom.  The most recent agreement was signed with Ghana in July 2018; however, it and a number of the other agreements remain to be ratified. Nigeria does not have such an agreement with the United States.

Real Property

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

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

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

Intellectual Property Rights

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

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

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

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

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

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

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

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

Capital Markets and Portfolio Investment

The NIPC Act of 1995 liberalized Nigeria’s foreign investment regime, which has facilitated access to credit from domestic financial institutions.  Foreign investors who have incorporated their companies in Nigeria have equal access to all financial instruments. Some investors consider the capital market, specifically the Nigerian Stock Exchange (NSE), a financing option, given commercial banks’ high interest rates and the short maturities of local debt instruments.

After a strong performance in 2017, the NSE experienced significant contractions and decline in 2018, losing nearly 20 percent on its all-share index year-on-year.  The stark reverse in performance was mostly attributed to government regulatory uncertainty and the 2019 presidential elections. As of December 2018, the NSE had 169 listed companies and a total market capitalization of USD 32.5 billion, a 13.9 percent decrease from 2017.  The Nigerian government has considered requiring companies in certain sectors such as telecoms, oil and gas or over a certain size to list on the NSE, as a means to encourage greater corporate participation and sectoral balance in the NSE, but those proposals have not been enacted to date.

The government employs debt instruments, issuing bonds of various maturities ranging from two to 20 years.  Nigeria has issued bonds to restructure the government’s domestic debt portfolio from short-term to medium- and long-term instruments.  Some state governments have issued bonds to finance development projects, while some domestic banks have used the bond market to raise additional capital.  The Nigerian Securities and Exchange Commission (NSEC) has issued stringent guidelines for states wishing to raise funds on capital markets, such as requiring credit assessments conducted by recognized credit rating agencies.

Money and Banking System

The Central Bank of Nigeria (CBN) currently licenses 21 deposit-taking commercial banks in Nigeria.  Following a 2009 banking crisis, CBN officials intervened in eight of 24 commercial banks (roughly one-third of the system by assets) due to insolvency or serious undercapitalization and established the government-owned Asset Management Company of Nigeria (AMCON) to address bank balance sheet disequilibria via discounted purchases of non-performing loans.  The Nigerian banking sector emerged stronger from the crisis thanks to AMCON and a number of other reforms undertaken by the CBN, including the adoption of uniform year-end IFRS financial reporting to increase transparency, a stronger emphasis on risk management and corporate governance, and the nationalization of three distressed banks. In 2013 the CBN introduced a stricter supervision framework for the country’s top eight banks, identified as “Systemically Important Banks” (SIBs) as they account for more than 70 percent of the industry’s total assets, loans and deposits, and their failure or collapse could disrupt the entire financial system and the country’s real economy.  These eight banks are: First Bank of Nigeria, United Bank for Africa, Zenith Bank, Access Bank, Ecobank Nigeria, Guaranty Trust Bank, Skye Bank, and Diamond Bank. Under the new supervision framework, the operations of SIBs are closely monitored with regulatory authorities conducting stress tests on the SIBs’ capital and liquidity adequacy. Moreover, SIBs are required to maintain a higher minimum capital adequacy ratio of 15 percent. In September 2018, the CBN revoked the operating license of Skye Bank Plc, due to the deterioration of its share capital and its board’s failure to recapitalize the bank. The CBN reported that total non-performing loans (NPLs) grew by 14.8 per cent in 2017 while they dropped to 14.2 percent of outstanding loans at the end of 2018.  Nigerian government and private sector analysts assess that the volume of non-performing loans may be higher than these figures, owing in part to banks not reporting non-performing insider loans made to banks’ owners and directors.

The CBN supports non-interest banking.  Several banks have established Islamic banking operations in Nigeria including Jaiz Bank International Plc, Nigeria’s first full-fledged Non-Interest Bank which commenced operations in 2012.  There are five licensed merchant banks – Altitude Microfinance Bank Limited, Coronation Merchant Bank Limited, FBN Merchant Bank, FSDH Merchant Bank Ltd and Rand Merchant Bank Nigeria Limited.

The CBN has issued regulations for foreign banks regarding mergers with or acquisitions of existing local banks in the country.  Foreign institutions’ aggregate investment must not be more than 10 percent of the latter’s total capital.

Foreign Exchange and Remittances

Foreign Exchange Policies

Foreign currency for most transactions is procured through local banks in the inter-bank market.  Low value foreign exchange may also be procured at a premium from foreign exchange bureaus, called Bureaus De Change.  Nigerian, American, and other foreign businesses have frequently expressed strong concern about the CBN’s foreign exchange restrictions, which they report prevent them from importing needed equipment and goods and from repatriating naira earnings.  Foreign exchange demand remains high because of the dependence on foreign inputs for manufacturing and refined petroleum products.

In 2015 the CBN published a list of 41 product categories which could no longer be imported using official foreign exchange channels; the number of categories has since been increased to 43.  Affected businesses (American and Nigerian) have complained publicly and privately that the policy in effect bans the import of some 700 individual items and severely hampers their ability to source inputs and raw materials.  While the CBN has often referred to the list as temporary, the restriction remains in place, with an additional item added in 2018, bringing the number to 43. In February 2019, the Governor of the Central Bank commented that the Bank is currently considering adding more items to the list and bringing the number as high as 50 items.

https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf 

In 2017, the CBN began providing more foreign exchange to the interbank market via wholesale and retail forward contract auctions, in order to meet some of the demand that had been forced to the parallel market.  These actions satisfied some of the pent-up demand for dollars in the economy and resulted in a strengthening of the naira at the parallel market from a low of 520 naira to the dollar in January 2017 to around 390 naira to the dollar in April 2017.  The CBN also established an “investors and exporters” window in 2017 which allows trades through that window to occur at around 360 naira to the dollar. This, combined with increased oil revenue, has boosted CBN reserves and helped stabilize the foreign exchange market.  Most trade happens at the investors and exporters window, which provides the value of the naira quoted by financial markets globally, while the CBN continues to peg the official interbank rate at 305 naira to the dollar for government transactions. The CBN also maintains separate window for “invisibles” such as education and medical expenses abroad, and a retail window which subsidizes imports of petroleum products, raw materials, agricultural equipment and the aviation sector.

Remittance Policies

The NIPC guarantees investors unrestricted transfer of dividends abroad (net a 10 percent withholding tax).  Companies must provide evidence of income earned and taxes paid before repatriating dividends from Nigeria. Money transfers usually take no more than 48 hours.  In 2015, the CBN implemented restrictions on foreign exchange remittances. All such transfers must occur through banks. Such remittances may take several weeks depending on the size of the transfer and the availability of foreign exchange at the remitting bank.  Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7  ).

Sovereign Wealth Funds

The Nigeria Sovereign Investment Authority (NSIA) is the manager of Nigeria’s sovereign wealth fund.  It was created by the Nigeria Sovereign Investment Authority Act in 2011 and began operation the following year with seed capital of USD 1 billion.  Its most recent annual report (calendar year 2017) reported total assets of nearly USD 533.88 million, an almost 27 percent increase over 2016. It was created to receive, manage, and grow a diversified portfolio that will eventually replace government revenue currently drawn from non-renewable resources, primarily hydrocarbons.

The NSIA is a public agency that subscribes to the Santiago Principles which are a set of 24 guidelines that assign “best practices” for the operations of Sovereign Wealth Funds globally. The NSIA invests through three funds:  the Future Generations Fund for diversified portfolio of long term growth, the Nigeria Infrastructure Fund for domestic infrastructure development, and the Stabilization Fund to act as a buffer against short-term economic instability.  NSIA does not take an active role in management of companies. The Embassy has not received any report or indication that the activities of the NSIA limit private competition.

The Nigerian government does not have an established practice that is consistent with the OECD guidelines on Corporate Governance for State-Owned Enterprises (SOEs), but SOEs do have enabling legislation that governs their ownership.  To legalize the existence of SOEs, provisions have been made in the Nigerian constitution under socio-economic development in section 16 (1) of the 1979 and 1999 constitutions respectively. The government has privatized many former SOEs to encourage more efficient operations, such as the state-owned telecommunications company, Nigerian Telecommunications (NITEL) and its mobile subsidiary Mobile Telecommunications, (MTEL) in 2014.

Nigeria does not operate a centralized ownership system for its SOEs.  The enabling legislation for each SOE stipulates its ownership and governance structure.  The Boards of Directors are usually appointed by the President on the recommendation of the relevant Minister.  The Boards operate and are appointed in line with the enabling legislation which usually stipulates the criteria for appointing Board members.  Directors are appointed by the Board within the relevant sector. In a few cases, however, some Board appointments have been viewed as a reward to political affiliates.

In the case of Nigeria’s most prominent SOE, the Nigerian National Petroleum Corporation (NNPC), Board appointments are made by the presidency but the day-to-day running of business is overseen by the Group Managing Director (GMD).  The GMD reports to the Minister of Petroleum and although in the current administration the President has retained that ministerial role for himself, the appointed Minister of State for Petroleum acts as the de facto Minister of Petroleum in the President’s stead.  Nigeria’s National Assembly passed a Petroleum Industry Governance Bill in March 2018 but the President sent it back to the National Assembly, requesting amendments to the bill. The bill would clarify regulatory, policy, and operational roles in the petroleum sector and pave the way for partial privatization of NNPC.

Responsible for exploration, refining, petrochemicals, products transportation, and marketing, the NNPC is Nigeria’s biggest and arguably most important state-owned enterprise.  It owns and operates Nigeria’s four refineries (one each in Warri and Kaduna and two in Port Harcourt), all of which operate far below their original installed capacity. Nigeria’s tax agency receives taxes on petroleum profits and other hydrocarbon-related levies, while the Department of Petroleum Resources collects rents, royalties, license fees, bonuses, and other payments.  In an effort to provide greater transparency in the collection of revenues that accrue to the government, the Buhari administration requires these revenues, including some from the NNPC, to be deposited in the Treasury Single Account.

Another key SOE is the Transmission Company of Nigeria (TCN), responsible for the operation of Nigeria’s national electrical grid.  Private power generation and distribution companies have accused the TCN grid of significant inefficiency and inadequate technology which greatly hinder the nation’s electricity output and supply.  The TCN emerged from the defunct National Electric Power Authority (NEPA) as an incorporated entity in November 2005. It was the only major component of Nigeria’s electric power sector not to have been privatized in 2013.

Privatization Program

The Privatization and Commercialization Act of 1999 established the National Council on Privatization, the policy-making body overseeing the privatization of state-owned enterprises (SOEs), and the Bureau of Public Enterprises (BPE), the implementing agency for designated privatizations.  The BPE has focused on the privatization of key sectors, including telecommunications and power, and calls for core investors to acquire controlling shares in formerly state-owned enterprises.

Since 1999, the BPE has privatized and concessioned more than 140 enterprises, including an aluminum complex, a steel complex, cement manufacturing firms, hotels, a petrochemical plant, aviation cargo handling companies, vehicle assembly plants, and electricity generation and distribution companies.  The electricity transmission company remains state-owned. Foreign investors can and do participate in BPE’s privatization process. The BPE also retains partial ownership in some of the privatized companies. (It holds a 40 percent stake in the power distribution companies, for instance.)

The National Assembly has questioned the propriety of some of these privatizations, with one ongoing case related to an aluminum complex privatization the subject of a Supreme Court ruling on ownership.  In addition, the failure of the 2013 power sector privatization to restore financial viability to the sector has raised criticism of the privatized power generation and distribution companies. Nevertheless, the government’s long-delayed sale in December 2014 of the state-owned NITEL and MTEL shows a continued commitment to the privatization model.

There is no specific Responsible Business Conduct (RBC) law in Nigeria.  Several legislative acts incorporate within their provisions certain expectations that directly or indirectly regulate the observance or practice of Corporate Social Responsibility.  In order to reinforce responsible behavior, various laws have been put in place for the protection of the environment. These laws stipulate criminal sanctions for non-compliance. There are also regulating agencies which exist to protect the rights of consumers.  While the Nigerian government has no specific action plan regarding OECD RBC guidelines, most government procurements are done transparently and in line with the Public Procurement Act which stipulates advertisement and a transparent bidding process.

Nigeria participates in the Extractive Industries Transparency Initiative (EITI) and is an EITI compliant country.  Specifically, in February 2019 the EITI Board determined that Nigeria had made satisfactory progress overall with implementing the EITI Standard after having fully addressed the corrective actions from the country’s first Validation in 2017.  The next EITI Validation study of Nigeria will occur in 2022.

The Department of Petroleum Resources (DPR), an arm of the Ministry of Petroleum Resources, also ensures comprehensive standards and guidelines to direct the execution of projects with proper consideration for the environment.  The DPR Environmental Guidelines and Standards (EGAS) of 1991 for the petroleum industry is a comprehensive working document with serious consideration for the preservation and protection of the Niger Delta.

The Nigerian government provides oversight of competition, consumer rights, and environmental protection issues.  The Federal Competition and Consumer Protection Commission (FCCPC), the National Agency for Food and Drug Administration and Control, the Standards Organization of Nigeria, and other entities have the authority to impose fines and ensure the destruction of harmful substances which otherwise may have sold to the general public.  The main regulators and enforcers of corporate governance are the Securities and Exchange Commission (SEC) and the Corporate Affairs Commission (which register all incorporated companies). Nigeria has adopted multiple reforms on corporate governance. Environmental pollution by multinational oil companies has resulted in fines being imposed locally while some cases have been pursued in foreign jurisdictions resulting in judgments being granted in favor of the oil producing communities.

The Companies Allied Matter Act 1990 (CAMA) and the Investment Securities Act provide basic guidelines on company listing.  More detailed regulations are covered in the Nigeria Stock Exchange Listing rules. Publicly listed companies are expected to disclose indicate their level of compliance with the Code of Corporate Governance in their Annual Financial Reports.

Government Procurement

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

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

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

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

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

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

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

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

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

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

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

Resources to Report Corruption

Economic and Financial Crimes Commission

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

Hotline: +234 9 9044752 or +234 9 9044753

Independent Corrupt Practices and Other Related Offences Commission:

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

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

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

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

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

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

Nigeria’s skilled labor pool has declined over the past decade due to inadequate educational systems, limited employment opportunities, and the migration of educated Nigerians to other countries, including the United Kingdom, the United States, and South Africa.  The low employment capacity of Nigeria’s formal sector means that almost three-quarters of all Nigerians work in the informal and agricultural sectors or are unemployed. Companies involved in formal sector businesses such as banking and insurance possess an adequately skilled workforce.  Manufacturing and construction sector workers often require on-the-job training. The result is that while individual wages are low, individual productivity is also low which means overall labor costs can be high. The Buhari Administration is pushing reforms in the education sector to improve the supply of skilled workers, but this and other efforts run by state governors are in their initial stages.

Labor organizations in Nigeria remain politically active and are prone to call for strikes on a regular basis against the national and state governments.  While most labor actions are peaceful, difficult economic conditions fuel the risk that these actions could become violent.

The Right of Association

Nigeria’s constitution guarantees the rights of free assembly and association, and protects workers’ rights to form or belong to trade unions.  Several statutory laws, nonetheless, restrict the rights of workers to associate or disassociate with labor organizations. Nigerian unions belong to one of three trade union federations:  the Nigeria Labor Congress (NLC), which tends to represent junior (i.e., blue collar) workers; the United Labor Congress of Nigeria (ULC), which represents a group of unions that separated from the NLC in 2015; and the Trade Union Congress of Nigeria (TUC) representing the “senior” (i.e., white collar) workers.  According to figures provided by the Ministry of Labor and Employment, total union membership stands at roughly 7 million. A majority of these union members work in the public sector, although unions exist across the private sector. The Trade Union Amendment Act of 2005 allowed non-management senior staff to join unions.

Collective Bargaining

Collective bargaining occurred throughout the public sector and the organized private sector in 2018.  However, public sector employees have become increasingly concerned about the Nigerian governments’ and state governments’ failure to honor previous agreements from the collective bargaining process.

Collective bargaining in the oil and gas industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend to be resolved quickly through negotiations.

Workers under collective bargaining agreements cannot participate in strikes unless their unions comply with the requirements of the law, which includes provisions for mandatory mediation and referral of disputes to the Nigerian government.  Despite these restrictions on staging strikes, unions occasionally conduct strikes in the private and public sectors without warning. Localized strikes occurred in the education, government, energy, power, and healthcare sectors in 2018. The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.  Major negotiations between the main labor unions and the federal government occurred in 2018 regarding the minimum wage and the unions’ demands for it to be raised from 18,000 naira (USD 50) per month to 30,000 naira (USD 83) per month. The National Assembly passed the 2019 Appropriations bill which included the newly agreed upon minimum wage in January 2019, though it has yet to be fully implemented. The minimum wage bill awaits the president’s assent although several state governments already announced their inability to pay.

The Nigerian Minister of Labor and Employment may refer unresolved disputes to the Industrial Arbitration Panel (IAP) and the National Industrial Court (NIC).  In 2015, the National Industrial Court launched an Alternative Dispute Resolution Center. Union officials question the effectiveness and independence of the NIC, believing it unable to resolve disputes stemming from Nigerian government failure to fulfill contract provisions for public sector employees.  Union leaders criticize the arbitration system’s dependence on the Minister of Labor and Employment’s referrals to the IAP.

Child Labor

Nigeria’s laws regarding minimum age for child labor and hazardous work are inconsistent. Article 59 of the Labor Act of 1974 sets the minimum age of employment at 12, and it is in force in all 36 states of Nigeria.  The Act also permits children of any age to do light work alongside a family member in agriculture, horticulture, or domestic service.

The Federal 2003 Child Rights Act (CRA) codifies the rights of children in Nigeria and must be ratified by each state to become law in its territory.  To date, 24 states and the Federal Capital Territory have ratified the CRA, with all 12 of the remaining states located in northern Nigeria.

The CRA states that the provisions related to young people in the Labor Act apply to children under the CRA, but also that the CRA supersedes any other legislation related to children.  The CRA restricts children under the age of 18 from any work aside from light work for family members; however, Article 59 of the Labor Act applies these restrictions only to children under the age of 12.  This language makes it unclear what minimum ages apply for certain types of work in the country.

While the Labor Act forbids the employment of youth under age 18 in work that is dangerous to their health, safety, or morals, it allows children to participate in certain types of work that may be dangerous by setting different age thresholds for various activities.  For example, the Labor Act allows children age 16 and older to work at night in gold mining and the manufacturing of iron, steel, paper, raw sugar, and glass. Furthermore, the Labor Act does not extend to children employed in domestic service. Thus, children are vulnerable to dangerous work in industrial undertakings, underground, with machines, and in domestic service.  In addition, the prohibitions established by the Labor Act and CRA are not comprehensive or specific enough to facilitate enforcement. In 2013, the National Steering Committee for the Elimination of the Worst Forms of Child Labor in Nigeria (NSC) validated the Report on the Identification of Hazardous Child Labor in Nigeria. The report has languished with the Ministry of Labor and Employment and still awaits the promulgation of guidelines for operationalizing the report.

The Nigerian government adopted the Trafficking in Persons (Prohibition), Enforcement, and Administration Act of 2015 on March 26, 2015.  While not specifically directed against child labor, many sections of the new law support anti-child labor efforts.   The Violence against Persons Prohibition Act was signed into law in on May 25, 2015 and again while not specifically focused on child labor, it covers related elements such as “depriving a person of his/her liberty,” “forced financial dependence/economic abuse,” and “forced isolation/separation from family and friends” and is applicable to minors.

Acceptable Conditions of Work

Nigeria’s Labor Act provides for a 40-hour work week, two to four weeks of annual leave, and overtime and holiday pay for all workers except agricultural and domestic workers.  No law prohibits compulsory overtime. The Act establishes general health and safety provisions, some of which specifically apply to young or female workers, and requires the Ministry of Labor and Employment to inspect factories for compliance with health and safety standards.  Under-funding and limited resources undermine the Ministry’s oversight capacity, and construction sites and other non-factory work sites are often ignored. Nigeria’s labor law requires employers to compensate injured workers and dependent survivors of workers killed in industrial accidents.

Draft legislation, such as a new Labor Standards Act which includes provisions on child labor, and an Occupational Safety and Health Act that would regulate hazardous work, have remained under consideration in the National Assembly since 2006.

Foreign Workers

Admission of foreign workers is overseen by the Federal Ministry of the Interior.  Employers must seek the consent of the Ministry in order to employ foreign workers by applying for an “expatriate quota.”  The quota allows a company to employ foreign nationals in specifically approved job designations as well as specifying the validity period of the designations provided on the quota.

There are two types of visas which may be granted, depending on the length of stay.  For short-term assignments, an employer must apply for and receive a temporary work permit, allowing the employee to carry out some specific tasks.  The temporary work permit is a single-entry visa, and expires after three months. There are no numerical limitations on short-term visas, and foreign nationals who meet the conditions for grant of a visa may apply for as many short-term visas as required.

For long-term assignments, the employer should apply for a “subject-to-regularization” visa (STR). To apply for an STR, an employer must apply for and obtain an expatriate quota.  The expatriate quota lists positions in the company that will be occupied by expatriate staff. Upon arrival in Nigeria, the employee will need to validate his or her visa by applying for a work and residence permit.

Trade and Investment Officer
Plot 1075 Diplomatic Drive
Abuja, Nigeria
Telephone: +234 9 461 4000
Email: EconNigeria@state.gov

Policies Towards Foreign Direct Investment

Ugandan authorities vocally welcome FDI, and Uganda’s legal regime generally facilitates FDI.  A new Investment Code Act (new ICA) came into force in February 2019. The new ICA defines investment more broadly, to include both FDI and portfolio investment.  It also includes international development agencies and companies incorporated in Uganda but with foreign ownership or control in the “foreign investor” category. The new ICA abolishes restrictions on technology transfer and on repatriation of funds by foreign investors.  It establishes new incentives for investment, and grandfathers in old incentives.

Uganda’s laws do not discriminate against foreign investors per se.  Some provisions of the new ICA may discourage FDI, however. Investors must obtain a license from the Uganda Investment Authority (UIA) before investing.  The new ICA establishes a minimum threshold value of USD 250,000 for FDI and a yet-to-be-specified minimum threshold value for portfolio investment. The Ugandan authorities can alter these minimums at any time, thereby creating potential uncertainty for investors.  Additionally, investment licenses may carry specific performance conditions, such as requiring investors to permit the UIA to monitor operations, or to employ or train Ugandan citizens or use Ugandan goods and services to the greatest extent possible. Further, the Ugandan government may revoke investment licenses of entities that “tarnish the good repute of Uganda as an attractive base for investment.”  The government has yet to revoke any investor license on this ground.

Sending a possibly chilling signal to would-be foreign investors, in early 2019, the government accused South African telecoms giant MTN of conspiring with foreigners to commit treason, deported several of its top foreign executives, and reportedly pressured it to list on the Ugandan stock exchange and sell at least 20 percent of its equity to Ugandans.  In a seemingly arbitrary manner, the government also raised the fee for renewal of MTN’s license from USD 100 million to USD 118 million.

The UIA facilitates investment by granting licenses to foreign investors, as well as promoting, facilitating, and supervising investments in Uganda.  It provides a “one stop” shop online where investors can apply for a license, pay fees, register businesses, apply for land titles, and apply for tax identification numbers.  In practice, investors may also need to liaise with other authorities to complete legal requirements. The UIA also triages complaints from foreign investors. The UIA’s website (www.ugandainvest.go.ug  ) and the Business in Development Network Guide to Uganda (www.bidnetwork.org  ) provide information on the laws and reporting requirements for foreign investors.

In practice, investors often bypass the UIA after facing delays, poorly enforced regulations, and corruption.  For larger investments, companies have reported that political support from a high-ranking Ugandan official is a prerequisite.

President Museveni hosts an annual investors’ round table to consult a select group of both foreign and local investors on increasing investment in Uganda, occasionally including U.S. investors.  Every Ugandan embassy has a trade and investment desk charged with advertising investment opportunities in the country. In January 2019, the government conducted a workshop to train its diplomats on investment promotion.

Limits on Foreign Control and Right to Private Ownership and Establishment

With the exception of land, foreigners have the right to own property, establish businesses, and make investments.  The new ICA eliminates all obligations and restrictions regarding technology transfer, intellectual property, and repatriation of funds.  Ugandan law permits foreign investors to acquire domestic enterprises and to establish green field investments. The Companies Act of 2010 permits the registration of companies incorporated outside of Uganda.

As detailed above, all investors must secure a license from the UIA.  The Ugandan authorities evaluate investment proposals based on a number of criteria, including potential for generation of new earnings; savings of foreign exchange; the utilization of local materials, supplies and services; the creation of employment opportunities in Uganda; the introduction of advanced technology or upgrading of indigenous technology; and the contribution to locally or regionally balanced socioeconomic development.

Foreigners wishing to invest in the oil and gas sector must apply for registration in through the Petroleum Authority of Uganda (PAU) National Supplier Database.  More information is available at the Embassy’s website on this process (select – Registering a U.S. Firm on the National Supplier Database): https://ug.usembassy.gov/business/commercial-opportunities/

Uganda’s petroleum laws already impel foreign oil companies to preference local goods and labor where available, with the Minister of Energy authorized to determine the extent of required local content.

Other Investment Policy Reviews

• The United Nations Commission on Trade and Development (UNCTAD) issued its World Investment Report, 2018, available at: https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2130  
• The International Monetary Fund issued an Article IV Consultation and Review in 2019, and its concluding statement is available at: www.imf.org/en/News/Articles/2019/02/14/mcs021419-uganda-staff-concluding-statement-of-the-2019-article-iv-mission  

Business Facilitation

The UIA one-stop shop website assists in registering businesses and investments.  In practice, investors and business may need to liaise with multiple authorities to set up shop, and the UIA lacks the capacity to play a robust and proactive business facilitation role.  According to the 2018 World Bank Doing Business report, business registration takes an average of 24 days.

Prospective investors can also register online and apply for an investment license at https://www.ebiz.go.ug/  .  The UIA also assists with the establishment of local subsidiaries of foreign firms by assisting in registration with the Uganda Registration Services Bureau (URSB) (http://ursb.go.ug/  ).  New businesses are required to obtain a Tax Identification Number from the Uganda Revenue Authority (URA), which they can do online (https://www.ura.go.ug/myTin.do  ) or through the UIA.  Businesses must also secure a trade license from the municipality or local government in the area in which they intend to operate.  Investors in specialized sectors such as finance, telecoms, and petroleum often need an extra permit from the relevant ministry in coordination with the UIA.

Under the Uganda Free Zones Act of 2014, the government continues to establish free trade zones for foreign investors with an export orientation.  Such investors receive a range of benefits including tax rebates on imported inputs and exported products. An investor seeking a free zone license may lodge an application with the Uganda Free Zones Authority (https://freezones.go.ug/  ).

Outward Investment

The GOU does not promote or incentivize outward investment, nor restrict domestic investors from investing abroad.

Uganda has bilateral investment protection treaties with the following countries:  BLEU (Belgium-Luxembourg Economic Union), China, Cuba, Denmark, Egypt, Eritrea, France, Germany, Italy, Netherlands, Nigeria, South Africa, Switzerland, United Kingdom, and Zimbabwe.

Although the countries of the East African Community (EAC) agreed on a text for an Economic Partnership Agreement (EPA) with the European Union (EU) in October 2014, the parties have yet to ratify the agreement.

Uganda does not have a bilateral investment protection treaty, nor a free trade agreement, with the United States.

The United States has Trade and Investment Framework Agreements (TIFAs) with the EAC and the Common Market for Eastern and Southern Africa (COMESA), both organizations to which Uganda belongs.  In 2015, the United States and the EAC also signed a Cooperation Agreement to increase trade-related capacity in the region and deepen economic ties. Within the EAC, the slow pace of regulatory reform, lack of harmonization, non-tariff barriers, and bureaucratic inefficiencies still hamper the free movement of goods, capital, and people among member states.

In March 2018, Uganda signed the Treaty Establishing the African Continental Free Trade Area (AfCFTA).

Uganda does not have a tax treaty with the U.S., but has bilateral taxation treaties with the following countries:  Denmark, India, Mauritius, Netherlands, Norway, South Africa, United Kingdom, and Italy.

In 2018, the government introduced new taxes on social media and mobile money transactions, largely seen as regressive by analysts and widely criticized by the telecom industry.  Early analysis suggests that the taxes are having a deleterious effect on both financial inclusion and technological innovation.

Uganda imposes a 15 percent withholding tax on “every person or company who derives any dividend, interest, royalty, rent, natural resource payment, or management charge from sources in Uganda.”  The URA also charges an 18 percent value-added tax (VAT) on business transactions conducted with a foreign firm.  URA does not allow companies to offset this foreign service tax against their withholding tax, effectively charging a 33 percent tax on all foreign services.  This tax disproportionately impacts U.S. businesses offering software and cloud services.

Real Property

Land rights are complicated in Uganda, and present a significant barrier to investment.  Uganda enforces property rights through the courts. The Mortgage Act and regulations make provisions for mortgages, sub-mortgages, trusts, and other forms of lien.  However, due to widespread corruption and administrative red tape, investors frequently struggle with the integrity of land transactions and recording systems.

Foreigners cannot own land directly and may only acquire leases.  Such leases cannot exceed 99 years. However, foreign investors can create a Ugandan-based firm to purchase and own real estate.

The Land Act provides for four forms of land tenure:  freehold, customary, “Mailo” (a form of freehold) and leasehold.  Freehold, leasehold, and Mailo tenure owners hold registered titles, while customary or indigenous communal landowners – who account for up to 80 percent of all landowners – do not.  Ugandan law provides for the acquisition of prescriptive rights by individuals who settle onto land (squatters) and whose settlement on such land is unchallenged by the owner for at least twelve years.

Intellectual Property Rights

Ugandan law provides for the protection of intellectual property rights (IPR), but the enforcement mechanisms are weak.  The country particularly lacks the capacity to prevent piracy and counterfeit distribution. As a result, theft and infringement of IPR is common and widespread.  Uganda does not track seizures of counterfeit goods or prosecutions of IPR violations. Agriculture experts estimate some 20 percent of agriculture products under copyright in Uganda are counterfeit.

In November 2018, Parliament passed the Genetic Engineering Regulatory Bill of 2018, which currently awaits presidential assent before coming into force.  While the new law provides for the registration of IPR in biotechnology, it makes the proprietor or an individual developer of genetically engineered material strictly liable for any damage, harm, inconvenience or loss caused to the environment, community livelihood, indigenous knowledge systems or technologies.  While the law is a positive development for IPR, the strict liability clauses are likely to discourage innovation.

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

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

Capital Markets and Portfolio Investment

The government generally welcomes foreign portfolio investment and has put in place a legal and institutional framework to manage such investments.  The Capital Markets Authority (CMA) licenses brokers and dealers and oversees the Uganda Securities Exchange (USE), which is now trading the stock of 18 companies.  Liquidity remains constrained to enter and exit sizeable positions on the USE. Capital markets are open to foreign investors and there are no restrictions for foreign investors to open a bank account in Uganda.  The government imposes a 15 percent withholding tax on interest and dividends. Foreign-owned companies may trade on the stock exchange, subject to some share issuance requirements. The government IMF Article VIII and refrains from restricting payments and transfers for current international transactions.  Credit is allocated on market terms and foreign investors are able to access credit. However, the private sector remains crowded out of domestic debt markets due to extensive domestic government borrowing.

Money and Banking System

Formal banking participation remains low, with twenty percent of Ugandans having access to deposits in bank accounts.  While only some five million Ugandans hold bank accounts, some 22 million use mobile money transfers to accomplish basic financial transactions.  In 2018, the government imposed new taxes on the use of mobile money, resulting in a drop in mobile money transactions. Uganda’s banking and financial sector is generally healthy, though non-performing loans remain a problem.  According to the Bank of Uganda’s latest Financial Stability Report 2018, Uganda’s non-performing loan rate stood at 4.4 percent at the end of June 2018, while total bank assets grew to USD 7.3 billion from USD 6.8 billion year over year.  Competitiveness and innovation are steadily increasing in Uganda’s banking sector, but lending to the private sector is still relatively low, largely because of perceived high risk (limited collateral) among potential borrowers, and the government crowding out the private sector in the bond market.  The Bank of Uganda regulates the banking sector. Foreign banks may establish branches in Uganda. Uganda does not have restrictions on a foreigner’s ability to establish a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Uganda keeps open capital accounts, and there are no restrictions on capital transfers in and out of Uganda.  If, however, an investor benefited from tax incentives on the original investment, he or she will need to seek a “certificate of approval to “externalize” the funds.  Investors may convert funds associated with any form of investment into any world currency. The Ugandan shilling (UGX) trades on a market-based floating exchange rate.

Remittance Policies

There are no restrictions for foreign investors on remittances to and from Uganda.  The Financial Intelligence Authority and Bank of Uganda may delay remittances if investigating money laundering concerns or terrorist finance.

Sovereign Wealth Funds

In 2015, the government established the Uganda Petroleum Fund to receive and manage all government revenues from the oil and gas sector.  By law, the government must spend a portion of proceeds from the fund on oil-related infrastructure, with parliament appropriating the remainder of revenues through the normal budget procedure.  In early 2019, the Auditor General found that the government had already made significant withdrawals from the fund without parliamentary approval as required by law.

Uganda has thirty State Owned Enterprises (SOEs).  There is no formally published list of SOEs and detailed information on the ownership of SOEs, their total assets, total net income, or number of people employed is not accessible to the public.  SOEs do not get special financing terms and are subject to hard budget constraints. According to the Ugandan Revenue Authority Act, they have the same tax burden as the private sector. According to the Land Act, private enterprises have the same access to land as SOEs.  One notable exception is the Uganda National Oil company (UNOC), which receives proprietary exploration data on new oil discoveries in Uganda. UNOC can then sell this information to the highest bidder in the private sector to generate income for its operations.

Privatization Program

The government privatized many SOEs in the 1990s.  Uganda does not currently have any privatization program.

Awareness of responsible business conduct varies greatly among corporate actors in Uganda.  No organizations formally monitor respect for Corporate Social Responsibility (CSR). CSR is not a requirement for an investor to obtain an investment license and CSR programs are voluntary.  While government officials make statements encouraging CSR, there is no formal government program to monitor, require, or encourage CSR. In practice, endemic corruption means that well-connected companies can enjoy impunity for harmful practices.  Regulations on human and labor rights, and consumer and environmental protection are inconsistently enforced. Several nongovernmental organizations attempt to name-and-shame companies engaged in nefarious practices, with differing degrees of success.

Uganda’s capacity and political will to regulate mineral trade across its borders remains weak.  Credible organizations allege Uganda’s mineral trade relies on conflict minerals from neighboring countries, especially from the eastern Democratic Republic of Congo.  In 2018, gold surpassed coffee as Uganda’s main export, although Uganda has no significant domestic gold deposits. Non-governmental sources allege that a single well-connected gold refinery that sources gold from conflict areas in neighboring countries accounts for the jump in Uganda’s gold exports.

Uganda announced in 2019 that it would join the Extractive Industry Transparency Initiative, but has not yet finalized its membership.  Uganda has also not formally adopted the Voluntary Principles on Security and Human Rights.

Uganda has generally adequate laws to combat corruption, and an interlocking web of anti-corruption institutions.  However, endemic corruption remains a very serious problem and a major obstacle to investment. Transparency International ranked Uganda 149 out of 180 countries in its 2018 Corruption Perception Index.  While anti-corruption laws extend to family members of officials and political parties in most cases, in practice many well-connected individuals enjoy de facto impunity for corrupt acts. The government does not require companies to adopt specific internal procedures to detect and prevent bribery of government officials.  While Uganda has signed and ratified the UN Anticorruption Convention, it is not yet party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Uganda does not provide protection for non–governmental organizations investigating corruption, and some organizations in fact allege government harassment.  U.S. firms consistently identify corruption a major hurdle to business and investment. Corruption in procurement processes remains a particular problem.

Resources to Report Corruption

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

Justice Irene Mulyagonja
Inspector General of Government
Inspectorate of Government
Jubilee Insurance Centre, Plot 14, Parliament Avenue, Kampala
Telephone:  +256-414-344-219
Website:  www.igg.go.ug  

Contact at “watchdog” organization:

Anti-Corruption Coalition Uganda
Cissy Kagaba
Telephone:  +256-414-535-659
Email:  kagabac@accu.or.ug
Website:  http://accu.or.ug  

Public Procurement and Disposal of Public Assets Authority (PPDA)
UEDCL Towers Plot 39 Nakasero Road
P.O. Box 3925, Kampala Uganda
Telephone:  +256-414-311100
Email:  info@ppda.go.ug
Website: https://www.ppda.go.ug/  

Uganda has experienced periodic political violence associated with elections and other political activities.  Security services routinely use force to halt protests and demonstrations. There are no prominent examples in the past ten years of such violence leading to significant damage of projects or installations.  There has been an uptick in crime over the past several years. In addition, political tensions are likely to increase in the run up to 2021 general elections.

Over seventy percent of Ugandans derive their livelihoods from agriculture.  Formal employment remains low, as do skill and education levels. With figures ranging from five to 80 percent, youth unemployment statistics in Uganda can vary significantly depending on the source and definition of employment.  However, there is consensus that Uganda’s young population faces major unemployment, underemployment, and overwhelming informal employment.

Statistics on the number of foreign/migrant workers are not publicly available.  There are acute shortages of skilled and specialized laborers, especially in the trades.

While there are no explicit provisions requiring the hiring of nationals, there are broad standards requiring investors to contribute to the creation of local employment.  The Petroleum Exploration, Development, and Production Act of 2013 and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act of 2013 both require investors to contribute to the development of a skilled local workforce.  Foreign nationals must obtain a work permit from the Ministry of Internal Affairs.

Ugandan labor laws specify procedures for termination of employment and for termination payments.  Depending on the employee’s duration of employment, employers are required to notify an employee two weeks to three months prior to the termination date.  Employees terminated without notice are entitled to severance wages. Ugandan law only differentiates between termination with notice (or payment in lieu of notice) and summary dismissal (termination without notice).  Summary dismissal applies when the employee fundamentally violates his/her terms of employment. Uganda does not provide unemployment insurance or any other social safety net programs for terminated workers.

Current law requires employers to contribute ten percent of an employee’s gross salary to the National Social Security Fund (NSSF).  The Uganda Retirement Benefits Regulatory Authority Act of 2011, which provides a framework for the establishment and management of retirement benefits schemes for both the public and private sectors, has created an enabling environment for liberalization of the pension sector.

The Employment Act of 2006 does not allow waivers of labor laws for foreign investors.

Ugandan law allows workers, except members of the armed forces, to form and join independent unions, bargain collectively, and conduct legal strikes.  The National Organization of Trade Unions (NOTU) has 20 member unions. Its rival, the Central Organization of Free Trade Unions (COFTU), also has 20 union members.  Union officials estimate that nearly half of employees in the formal sector belong to unions. In 2014, the Government of Uganda created the Industrial Court (IC) to arbitrate labor disputes.

Uganda ratified all eight ILO fundamental conventions enshrining labor and other economic rights and partially adopted these conventions into the 1995 Constitution, which stipulates and protects a wide range of economic rights.

Despite these legal protections, many Ugandans work in unsafe environments due to poor enforcement and the limited scope of the labor laws.  Labor laws do not protect domestic, agricultural, and informal sector workers.

Seth Miller
Economic and Commercial Officer
U.S. Embassy Kampala, Ggaba Road, Kampala
Telephone: +256 (0) 414-306-240 (office)
Email: MillerSA@state.gov

Policies Towards Foreign Direct Investment

The government has a clear desire to attract greater FDI in order to improve the country’s competitiveness.  The government encourages public-private partnerships in order to enhance technological development, while also emphasizing the need to improve the investment climate by restoring the rule of law and sanctity of contracts.  Implementation has been limited.

Zimbabwe’s Indigenization and Economic Empowerment law limits the amount of shares owned by foreigners in the diamonds and platinum sectors to 49 percent with specific indigenous organizations owning the remaining 51 percent.  The government has signaled it intends to remove these restrictions. There are also smaller sectors “reserved” for Zimbabweans.

The Zimbabwe Investment Authority (ZIA) promotes and facilitates both foreign direct investment and local investment.  ZIA facilitates and processes investment applications for approval.  ZIA’s website is http://www.investzim.com/  .  The country encourages companies to register with ZIA and the process currently takes approximately 90 days.  The government has announced plans for a more powerful, streamlined entity (a “one-stop shop”) – the Zimbabwe Investment Development Authority (ZIDA).

While the new government of President Emerson Mnangagwa commits to prioritizing investment retention, there are as of yet no mechanisms and formal structures through which this is done.

Limits on Foreign Control and Right to Private Ownership and Establishment

While there is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity, foreign ownership of businesses in the diamonds and platinum sectors is limited to 49 percent (or less in certain reserved sectors), as outlined above.

In 2007, the government passed the Indigenization and Economic Empowerment Act, which required that “indigenous Zimbabweans” (i.e. black Zimbabweans) own at least 51 percent of all enterprises valued over USD 500,000.  A March 2018 amendment to the law limits these restrictions to the diamond and platinum sectors.

Foreign investors are free to invest in the non-resource sectors without any restrictions as the government aims to achieve technology transfer, create employment, and achieve value addition.  The government further reserves certain sectors such as passenger busses, taxis and car hire services, employment agencies, grain milling, bakeries, advertising, dairy processing and estate agencies for Zimbabweans.

The country screens FDI through the Zimbabwe Investment Authority (ZIA) in liaison with relevant line ministries to confirm compliance with the country’s investment regulations.  Once an investor meets the criteria, ZIA issues the company or entity with an investment certificate.

According to the country’s laws, U.S. investors are not especially disadvantaged or singled out by any of the ownership or control mechanisms relative to other foreign investors.  In its investment guidelines, the government states its commitment to non-discrimination between foreign and domestic investors and among foreign investors.

Other Investment Policy Reviews

In the past three years, the government has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) or the United Nations Conference on Trade and Development (UNCTAD).

Business Facilitation

The government expressed its desire to reduce the time it takes to start up a business.  It has also committed itself to improving the transparency and predictability of its policies and to dealing decisively with corruption.

Zimbabwe does not have a fully online registration process.  One is able to begin the process and conduct a name search online via the ZimConnect web portal.  The Zimbabwe Investment Authority (ZIA) is the country’s investment promotion body set up to facilitate both foreign direct investment and local investment.  ZIA’s website is http://www.investzim.com/  .  According to the World Bank, it takes on average 32 days to start a business and requires nine distinct processes, with costs greater than an individual’s average annual income.

Outward Investment

Zimbabwe does not promote or incentivize outward investment because of the tight foreign exchange constraint.  Any outward investment requires approval by exchange control authorities.

Zimbabwe has investment treaties with 35 countries but ratified only ten of these treaties, including those with the Netherlands, Denmark, Yugoslavia, China, Germany, Russia, South Africa, and Switzerland.  Two other investment agreements with India and Iran are awaiting ratification before they go into effect. In spite of these agreements, the government has failed to protect investments undertaken by nationals from these countries, particularly with regard to land.  In 2009, for example, an army officer seized a farm belonging to a German national but the government did not intervene, despite its assurance that Zimbabwe would honor all obligations and commitments to international investors. Some claimants protected by investment treaties have pursued arbitration through the International Centre for Settlement of Investment Disputes.  The German Pezold family won a landmark USD 196 million judgment, but has received only partial payment.

The United States does have a Trade and Investment Framework Agreement (TIFA) with the Common Market for Eastern and Southern Africa (COMESA), of which Zimbabwe is a member.  This TIFA provides a mechanism to talk about disputes, although the protection offered by the TIFA is much more limited than protection typically provided by a bilateral investment treaty.

The United States does not have a bilateral taxation and/or investment treaty with Zimbabwe.

Real Property

The government enforces interests in residential and commercial properties in cities although this is not the case with agricultural land.  Mortgages and liens do exist for urban properties although liquidity constraints have led to a fall in the number of mortgage loans. According to the World Bank’s 2019 Doing Business Report, Zimbabwe is ranked 109 out of 190 countries in terms of registering property.  The recording of mortgages is generally reliable. With regard to agricultural land, the government provides and protects the usage rights of indigenous people, and it is currently in the process of developing new 99-year leases that will guarantee use, with the government retaining ownership of all agricultural land.  Current 99-year leases have not been strong enough for banks to accept them as collateral.

Intellectual Property Rights

Zimbabwe follows international patent and trademark conventions, and it is a member of the World Intellectual Property Organization (WIPO).  Generally, the government seeks to honor intellectual property ownership and rights, although a lack of expertise and manpower as well as corruption limit its ability to enforce these obligations.  Pirating of videos, music, and computer software is common.

It does not appear that the government enacted new IP related laws or regulations over the past year.  The country does not publish information on the seizures of counterfeit goods.

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

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

Capital Markets and Portfolio Investment

Zimbabwe’s stock market currently has 56 publicly-listed companies, but just 12 of them account for about 75 percent of total market capitalization, which stood at USD 5.7 billion on March 25, 2019.  In September 1996, the government opened the stock and money markets to limited foreign portfolio investment. Since then, a maximum of 49 percent of any locally-listed company can be foreign-owned in line with the indigenization policy framework, with any single investor allowed to acquire up to 15 percent of the outstanding shares.

There is a 1.48 percent withholding tax on the sale of marketable securities, while the tax on purchasing stands at 1.73 percent.  Totaling 3.21 percent, the rates are comparable with the average of 3.5 percent for the region. As a way of raising funds for the state, the government mandated that insurance companies and pension funds invest between 25 and 35 percent of their portfolios in prescribed government bonds.  Zimbabwe’s hyperinflation, which ended with the 2009 dollarization, wiped out the value of domestic debt instruments. However, the government has been borrowing from the local market by issuing Treasury Bills (TBs) to financial institutions to finance government expenditure. Official statistics show that by the end of 2017, the government had issued in excess of USD 2 billion worth of TBs to financial institutions.

Money and Banking System

Three major international commercial banks and a number of regional and domestic banks operate in Zimbabwe, with a total of over 200 branches.  The central bank (Reserve Bank of Zimbabwe (RBZ)) believes that the banking sector is generally stable in spite of a harsh operating environment characterized by high credit risk and liquidity constraints.  As most international banks reduce risk (de-risking) in the face of high penalties for non-compliance with prudential guidelines in developed countries, most Zimbabwean correspondent banking relationships are in jeopardy.  As of December 31, 2018, the sector had 19 operating institutions, comprising 13 commercial banks, five building societies and one savings bank. According to the RBZ, as of December 2018, all operating banking institutions complied with the prescribed minimum core capital requirements.  The level of non-performing loans increased somewhat from 7.08 percent in December 2017 to 8.25 percent by December 2018 largely reflecting a decline in credit quality due to the poor operating environment. The RBZ still believes the NPLs of financial institutions will fall due to banks adopting credit risk management tools in line with the internationally accepted accounting standards.

According to the central bank, the total deposits (including interbank deposits), rose from USD 8.48 billion in December 2017 to USD 10.32 billion by December 2018.  The RBZ reports that as of December 31, 2018, total nostro foreign currency deposits amounted to USD 673.81 million, mostly dominated by corporates (97.17 percent).

Foreign Exchange and Remittances

Foreign Exchange

In 2009, the government lifted exchange controls and demonetized the Zimbabwe dollar.  The RBZ permitted bank accounts and transactions in the following currencies: Euro, Botswana pula, South African rand, British pound, U.S. dollar, Chinese yuan, Australian dollar, Indian rupee, and Japanese yen, with most business conducted in U.S. dollars.  Zimbabwe’s export performance rose but at a slower pace than imports. Weak investment inflows and Zimbabwe’s fiscal and current account deficits gradually resulted in a shortage of foreign exchange. In response to a binding cash crisis, the government introduced a surrogate currency, the bond note, in 2016 which traded on a 1:1 basis with the U.S. dollar, but the shortage of dollars meant RBZ would only allocate U.S. dollars to priority payments, to others payments after a delay, or – when the situation reached a crisis in late 2018 and early 2019 – not at all.  Businesses have resorted to a black market for foreign exchange in order to make external payments. On February 20, 2019, the RBZ introduced the real time gross settlement (RTGS) dollar (incorporating the RTGS balances, bond notes and coins) whose value against the U.S. dollar should be market-determined (via a new interbank foreign exchange market emerged), but RBZ has not allowed the official rate to fall in line with market pressures. The black market persists. Since October 2018, banks have set up distinct foreign currency accounts denominated in U.S. dollars.  The government’s arrears on over USD 7 billion in external debt block the country’s access to multilateral financing. These conditions severely constrain external financing for the economy, which has resulted in rising external payments arrears for necessary imports.

Remittance Policies

In line with recommendations from the Southern African Development Community (SADC) and the IMF, the government revised the Foreign Exchange Control Act, which regulated currency conversions and transfers before the withdrawal of the Zimbabwe dollar.  With these changes and the liberalization of most current account transactions, exporters retained 100 percent of their foreign currency receipts for their own use until 2016. From 2016 to February 2019, the RBZ retained 50 percent of the foreign exchange generated by export proceeds (distributing the equivalent amount to the exporter in local currency), shared among competing foreign payments needs based on a priority list.  In February 2019, the government raised the amount most exporters can retain for their own use to 80 percent, 55 percent for gold producers, 50 percent for all other minerals, and 30 percent for tobacco and cotton farmers. Moreover, foreigners can remit capital appreciation, dividend income and after tax profits provided the foreign exchange is available.

Sovereign Wealth Funds

Zimbabwe does not have a sovereign wealth fund (SWF). The government set aside USUSD 1 million toward administrative costs related to the setting up of the Sovereign Wealth Fund in its 2016 Budget.  Although the government proposed to capitalize the SWF through a charge of up to 25 percent on royalty collections on mineral sales, as well as on special dividend on the sale of diamond, gas, granite and other minerals, the concept has not progressed any further.

Zimbabwe has 107 state-owned enterprises (SOEs), defined as companies wholly-owned by the state.  A list of the SOEs appears here  . Many SOEs support vital infrastructure, including energy, mining, and agribusiness, for example.  As a result, competition within the sectors where SOEs operate tends to be limited. However, the government of Zimbabwe (GOZ) invites private investors to participate in infrastructure projects through public-private partnerships (PPPs).  Most SOEs have public function mandates, although in more recent years, they perform hybrid activities of satisfying their public functions while making profits. SOEs should have independent boards, but in some instances such as the recent case of the Zimbabwe Mining Development Corporation (ZMDC), the government allows the entities to function without boards.

Zimbabwe does not appear to subscribe to the Organization for Economic Cooperation and Development (OECD) guidelines on corporate governance of SOEs.  SOEs operate under the same taxes and same value added tax rebate policies as private sector companies. The SOEs face a number of challenges that include persistent power outages, mismanagement, lack of maintenance, inadequate investment, a lack of liquidity and access to credit, and debt overhangs.  As a result, SOEs have performed poorly in recent years. Few SOEs produce publicly available financial data and even fewer provide audited financial data. This has imposed significant costs on the rest of the economy.

Privatization Program

Although the government committed itself to privatize most SOEs across the economic sectors since the start of the privatization program in the 1990s, it only successfully privatized two parastatals.  In 2018, the government agreed to privatize 48 SOEs but currently, it has targeted five SOEs in the telecommunications sector, postal services, and financial sector for immediate reform. It encourages foreign investors to take advantage of the privatization program to invest in the country, although inter-SOE debts of nearly USD 1 billion pose challenges for privatization plans because they further weaken the entities’ balance sheets.  According to the recently published investment guidelines, the government is still working out the modalities for disposing part of its shareholding to the private sector.

Following dollarization in 2009, there has been increased awareness of standards for responsible business conduct (RBC), driven by the private sector through the Standards Association of Zimbabwe.  The private sector developed the National Corporate Governance Code of Zimbabwe (ZimCode), which is a framework designed to guide Zimbabwean companies on RBC. An industrial advocacy group, the Confederation of Zimbabwe Industries, has a standing committee on business ethics and standards that drives ethical conduct within the Zimbabwean private sector.  The organization has developed its own charter according to OECD guidelines, highlighting good corporate governance and ethical behavior. The Zimbabwean government has not taken any measures to encourage RBC and it does not take RBC policies or practices into its procurement decisions.

Firms that demonstrate corporate social responsibility do not automatically garner favorable treatment from consumers, employees, and government.  With regard to indigenization, foreign companies receive formal indigenization credits of up to 31 percent for conducting CSR determined by the extent to which the activity achieves the government’s socio-economic objectives.

Although the Zimbabwean government has considered implementing the World Bank’s Extractive Industries Transparency Initiative (EITI) principles in order to strengthen accountability, good governance, and transparency in the mining sector, it has yet to launch an EITI program.  However, the government has stated its intention to adopt a domestic initiative called the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI), though it has made little progress in implementing the initiative.

In 2005, the government enacted an Anti-Corruption Act that established a government-appointed Zimbabwe Anti-Corruption Commission (ZACC) to investigate corruption.  The 2009 – 13 government of national unity (GNU) enhanced the institutional capacity of the ZACC with members appointed from civil society and the private sector. However, when the ZACC’s term of office expired, the new ZACC did not include civil society and private sector representatives.  The government has a track record of prosecuting individuals selectively, focusing on those who have fallen out of favor with the ruling party and ignoring transgressions by members of the favored elite. Accusations of corruption seldom result in formal charges and convictions. Many corruption charges stem from opaque procurement processes.

While the laws to combat corruption exist, enforcement of the laws is weak as law enforcement agencies lack political will and resources.  As a result, Transparency International ranked Zimbabwe 160 out of 175 countries and territories surveyed in 2018. The Mnangagwa government has committed itself to eradicate corruption.  Since December 2017, ZACC has arrested and brought before the courts a number of high-ranking officials, mostly aligned to the Mugabe faction from the previous government. In spite of this, the courts have not sent many of the accused persons to prison.

Existing rules on the Zimbabwe Stock Exchange compel listed companies to disclose, through annual reports, minimum disclosure requirements.

The government also created a policy to improve accountability in the use of state resources through the introduction of the Public Finance Management Act in March 2010.  Nevertheless, corruption remains endemic, especially within the diamond sector where production and export figures are largely unreliable. The government has introduced a diamond policy that focuses on ensuring the 100 percent government ownership of all alluvial diamonds in the ground and the involvement of the Zimbabwe Revenue Authority (ZIMRA) in the entire value chain of diamond production.

While Zimbabwe signed the United Nations Convention against Corruption on February 20, 2004 and ratified the treaty on February 20, 2007, it is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Transparency International Zimbabwe
96 Central Avenue
P O Box CY 434, Causeway
Harare
+263 4 793 246/7
Email: info@tizim.org

Political parties, labor organizations, and civil-society groups sometimes encounter state-sponsored intimidation and repression from government security forces and Zimbabwe African National Union – Patriotic Front (ZANU–PF)-linked activists.  Disagreements between and within political parties occasionally resulted in violence targeting political party members.

Political tensions and civil unrest persist under the government of President Emmerson Mnangagwa who came into power following the military intervention of November 2017 that resulted in the departure of longstanding dictator Robert Mugabe.  On August 1, 2018, the army used live ammunition to disperse people demonstrating against the delay in announcing official presidential election results, leaving six people dead. Following demonstrations against a 140 percent increase in fuel prices on January 14, 2019, security forces responded with excessive violence and human rights abuses, including the use of live ammunition, arbitrary beatings and arrests, resulting in 17 deaths and hundreds injured over the course of weeks.  The crackdown targeted members of the opposition political party, civil society groups, and labor leaders. Political uncertainty remains high.

Violent crime, such as assault, carjacking, and home invasion, is common. Local police lack the resources to respond effectively to serious criminal incidents.

Decades of political and economic crises have led to the emigration of many of Zimbabwe’s skilled and well-educated citizens.  Formal sector employment has fallen significantly. Anecdotal evidence shows widespread youth unemployment as the country continues to produce graduates without a matching growth in employment opportunities.  As a result, most end up joining the informal sector estimated at over 90 percent of the workforce.

The government encourages foreign investors to make maximum use of Zimbabwean management and technical personnel.

The country’s labor laws make it very difficult for employers to adjust employment in response to an economic downturn except in the Special Economic Zones (SEZs) where labor laws do not apply.  Outside the SEZs, the employer must engage the employees and their representatives and agree to adopt measures to avoid retrenchment. If the measures fail, the employer can retrench and pay an all-inclusive package of one month salary for each two years of service or the pro rata share thereof.

The labor laws differentiate between layoffs and severance with the former falling under retrenchment where the retrenchment law must apply.  The law does not accept unfair dismissal or layoffs of employees. The 2015 amendments to the act only permit terminations of contracts to be in terms of a registered code of conduct, expiry of a contract of fixed term duration, or mutual agreement.  There is no unemployment insurance or other safety net programs for workers laid off for economic reasons.

Employers in all sectors rely heavily on temporary or contract workers because there is no need to follow termination procedures.  The employee will only wait for the expiry of the agreed period of employment.  The Labor Amendment Act of 2015, however, now requires employment councils to put a limit on the number of times employers can renew short-term contracts.

The government does not waive labor laws in order to attract or retain investment, except in the case of SEZs.

Labor unions affiliated to the Zimbabwe Congress of Trade Unions (ZCTU) are independent of the government and those affiliated to the Zimbabwe Federation of Trade Unions (ZFTU) and the Zimbabwe Industrial Revolution Workers Federation support the government.

Collective bargaining takes place through a National Employment Council (NEC) in each industry, comprising representatives from labor, business, and government.  The agreements apply to the entire sector regardless of whether or not all employees are members to the council or not, except for managerial employees.

The country has a labor dispute resolution process that starts at company level through disciplinary committees or grievance committees.  If the issue is not resolved at this level, the aggrieved party can appeal to either the employment council or the Labor Court depending on the industrial agreement.  Other redress is through the Ministry of Public Service Labor and Social Welfare in which labor officers settle disputes for industries without employment councils. From the Labor Court, an aggrieved party can appeal to the Supreme Court.

Labor inspection is minimal due to a lack of inspectors, and there is discrimination in practice.  The government continues to harass labor unions and their leaders. Labor leaders were among the targets of the January 2019 violent government crackdown.

The government is a member of the International Labor Organization (ILO) and has ratified conventions protecting worker rights.  The country has been subject to ILO supervisory mechanisms for practices that limit workers’ rights to freely associate, organize, and hold labor union meetings.

Joseph Muzulu
Economic Specialist
U.S. Embassy Harare, 2 Lorraine Drive, Bluffhill, Harare
+263 8677011514
Email: muzuluj@state.gov