Policies Towards Foreign Direct Investment

The government actively encourages Foreign Direct Investment (FDI) and is committed to doubling foreign investment over the next several years.  Foreign companies are free to invest and list on the regional stock exchange Bourse Regionale des Valeurs Mobilieres (BRVM), which is based in Abidjan and covers the eight countries of the West African Economic and Monetary Union (WAEMU).  WAEMU members are part of the Regional Council for Savings and Investment, a regional securities regulatory body.

In most sectors, there are no laws that limit foreign investment.  There are restrictions on foreign investment in the health sector, law and accounting firms, and travel agencies.  Although there are regulations designed to control land speculation in urban areas, foreigners own significant amounts of land.  Freehold land tenure in rural areas is difficult to negotiate and inhibits outside investment. Land tenure disputes exist all over the country owing to the lack of formal private land ownership in most areas.  Most businesses, including agribusinesses and forestry companies, circumvent this by acquiring long-term leases. Companies that wish to purchase

land must have the property surveyed before obtaining title.  Surveying is tightly controlled by a small oligopoly of companies, and can often cost more than the value of the parcel of land.

Cote d’Ivoire’s investment promotion agency, the Centre for the Promotion of Investment in Cote d’Ivoire (CEPICI), facilitates foreign investment, and its services are available to all investors.  CEPICI provides its services through a one-stop shop to facilitate business creation, operation, and expansion; requests incentives in the investment code and for access to industrial land; and promotes and attracts national and foreign investments.  More information is available at http://www.cepici.gouv.ci/  .

Cote d’Ivoire maintains an ongoing dialogue with investors through various business networks and platforms, such as CEPICI, the Ivoirian Chamber of Commerce (CCI-CI), the association of large enterprises (CGECI), and the bankers’ association.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors generally have access to all forms of remunerative activity on terms equal to those enjoyed by Ivoirians.  The government encourages foreign investment, including in the privatization of state-owned and public firms, although in most cases the state reserves an equity stake in the new company.

There are no significant limits on foreign investment, nor are there legal differences in the treatment of foreign and national investors, either in terms of the level of foreign ownership or sector of investment.  There are no laws specifically authorizing private firms to adopt articles of incorporation or association that limit or prohibit foreign investment, participation, or control, and no such practices have been reported.

Banks and insurance companies are subject to licensing requirements, but there are no restrictions designed to limit foreign ownership or to establish subsidiaries of foreign companies in this sector.  Investments in health, law and accounting, and travel agencies are subject to prior approval and require appropriate licenses and association with an Ivoirian partner. The Ivoirian government has, on a case-by-case basis, mandated using local providers, hiring local employees, or arranging for eventual transfer to local control.

The government does not have an official policy to screen investments and its overall economic and industrial strategy does not discriminate against foreign-owned firms.  There are indications in some instances of preferential treatment for firms from countries with longstanding commercial ties to Cote d’Ivoire.

Other Investment Policy Reviews

Cote d’Ivoire has not conducted an investment policy review (IPR) through the OECD.

A Trade Policy Review was last done by the WTO in July 2012 and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp366_e.htm  

UNCTAD does not provide an IPR report for Cote d’Ivoire, though there are statistics on FDI in the country profile at http://unctadstat.unctad.org/Country Profile/GeneralProfile/en-GB/384/index.html  .

The government of Cote d’Ivoire provides information about sector policies and business opportunities in various reports.  More information can be found at: http://www.cepici.gouv.ci/en/   or at: www.gcpnd.gouv.ci/  .

Business Facilitation

The government has engaged in business facilitation efforts through a series of reforms using the World Bank’s Ease of Doing Business Index as a reference to improve the business environment.  These reform efforts include the acceleration of business creation to 24 hours, the issuing of a construction permit in 26 days, the establishment of a one-stop shop for external trade, and the establishment of a single tax declaration form.  In 2018, Cote d’Ivoire improved its Doing Business ranking from 139th to 122nd place.

Cote d’Ivoire’s online information portal containing all documents dedicated to business creation and registration (https://cotedivoire.eregulations.org/  ) is managed by CEPICI.  All the necessary documentation for registration is available online.  The one-stop shop for business registration takes between 24-48 hours and has all the agencies under a single roof, allowing for a more simplified approach to business creation.  Businesses have noted the one-stop shop has been very successful in speeding up registration.

The registration process is generally equitable toward women and underrepresented nationalities, and there have not been any reports of discrimination.

Outward Investment

Cote d’Ivoire does not promote or incentivize outward overseas investment.  The government does not restrict domestic investors from investing abroad.

Investment Incentives

The 2018 Investment Code offers mixed fiscal incentives combining tax exoneration and tax credits focusing on agriculture, agro-business, tourism, health, and education.  These include a full exoneration of customs duties or suspended VAT, and tax exemptions to business operations in some remote areas, with incentives based on the type of investment, phase of operation, local content, and participation.   There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s economic development. The Investment Code, the Petroleum Code, and the Mining Code delineate incentives available to new investors in Cote d’Ivoire.

The government occasionally guarantees loans or jointly finances foreign direct investment projects.  This is not a common practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

Created in 2008, the free trade zone for information technology and biotechnology (VITIB) is located in the city of Grand Bassam.  In 2014, VITIB inaugurated the Mahatma Gandhi Technology Park at Grand Bassam with a loan of USD 20 million from India’s EXIM bank.  Current plans are to develop a technology corridor on VITIB land in Grand Bassam. Bonded warehouses do exist, and bonded zones within factories are allowed.  High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees, but this is not a requirement.

The 2012 Investment Code (Article 14) guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Cote d’Ivoire.  For other nationalities, visa, work, and residence permits are required and the investment agency CEPICI facilitates their acquisition.  The process is not onerous and does not inhibit the mobility of foreign investors and their employees.

There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology.  The Ivoirian government required that Kentucky Fried Chicken franchises, that began operating in April 2018, use locally-sourced chicken. The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Cote d’Ivoire.

There are no performance requirements for investments.

Cellular telephone companies must meet technology and performance requirements to maintain their licenses.  Cote d’Ivoire does not have any known requirements for foreign IT firms to turn over source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business related data.  Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorite de Regulation des Telecommunications (ART-CI).

Cote d’Ivoire’s law on data protection requests prior declaration or authorization by ART-CI for any data processing.  ART-CI is responsible for the oversight of local data storage.

Capital Markets and Portfolio Investment

Government policies generally encourage foreign portfolio investment.

The Regional Stock Exchange (BRVM) is in Abidjan and the BRVM lists companies from the eight countries of the WAEMU.  An effective regulatory system exists to facilitate portfolio investment through the West African Central Bank (BCEAO) and the Regional Council for Savings Investments (CREPMF).  There is sufficient liquidity in the markets to enter and exit sizeable positions.

Government policies allow the free flow of financial resources into the product and factor markets.

The central bank BCEAO respects IMF Article VIII on payment and transfers for current international transactions.

Credit allocation is based on market terms and has increased to support the private sector and economic growth, specifically for large businesses.  Banks lend to the private sector, offering short-term and long-term loans and overdraft facilities. Foreign investors can acquire credit on the local market.

Money and Banking System

The banking sector is composed of 28 commercial banks and two credit institutions.  Banks are expanding their networks, especially in the secondary cities outside Abidjan, as domestic investment has increased upcountry.  The total number of bank branches has more than doubled from 324 in 2010 to 709 branches in 2018.

Cote d’Ivoire’s banking sector is improving with most banks being compliant with the BCEAO’s new minimum capital requirements.  Some public banks have had large numbers of nonperforming loans. The government is restructuring and privatizing the commercial banking sector in order to reinvigorate the banks and remove low performers from government accounts.

The estimated total assets of the five largest banks are around USD 9 billion.

The central bank of the BCEAO is common to the eight member states of the WAEMU and manages regulations.

Foreign banks are allowed to establish operations in Cote d’Ivoire.  They are subject to prudential measures and regulations of the WAEMU Banking Commission.  Cote d’Ivoire did not lose any correspondent banking relationships in the past three years.  No known correspondent banking relationships are in jeopardy.

The U.S. government is not aware of the implementation of block chain technologies in banking transactions.

Alternative financial services available include mobile money and microfinance for payments, transfers, and finances.  Mobile money has become a very popular way to make payments and many Ivoirians prefer mobile money over banking, but mobile money has yet to expand to offering full financial services.

Foreign Exchange and Remittances

Foreign Exchange

There are no restrictions on the transfer or repatriation of capital and income earned, or on investments financed with convertible foreign currency.  Once an investment is established and documented, the government regularly approves the remittances of dividends and/or repatriation of capital. The same holds true for requests for other sorts of transactions (e.g. imports, licenses, and royalty fees).

Funds associated with investments funded with convertible currency are freely convertible into any world currency.

Cote d’Ivoire is a member of the WAEMU, which uses the West African Franc (XOF), also known as the CFA.  The French Treasury holds the international reserves of WAEMU member states and supports the fixed exchange rate of 655.956 CFA to the Euro.

Remittance Policies

There are no recent changes or plans to change investment remittance policies.

There are no time limitations on remittances.  Remittances for Ivoirians were about USD 381 million in 2018 or 0.7 percent of GDP.

Sovereign Wealth Funds

Cote d’Ivoire does not have a sovereign wealth fund.

Policies Towards Foreign Direct Investment

Gabon’s 1998 investment code conforms to Central African Economic and Monetary Community (CEMAC) investment regulations and provides the same rights to foreign companies operating in Gabon as to domestic firms.  Businesses are protected from expropriation or nationalization without appropriate compensation, as determined by an independent third party. Certain sectors, such as mining, forestry, petroleum, agriculture, and tourism have special specific investment codes, which encourage investment through customs and tax incentives.

Gabon established the Investment Promotion Agency (ANPI-Gabon) with the assistance of the World Bank in April 2014.  The ANPI-Gabon’s mission is to promote investments and exports, support small and medium-sized enterprises, manage public-private partnerships, and help companies to get established.  The agency is supposed to act as the gateway for investment into the country and reduce administrative procedures, costs, and waiting periods.

Gabonese authorities have made efforts to prioritize investment.  On March 7, 2017, the High Council for Investment was established to promote investment and boost the economy.  This body provides a platform for dialogue between the public and private sectors, and its main objectives are to improve the economy and create jobs.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign ownership or control, except for discrete activities customarily reserved for the state, including military and paramilitary activities.

Foreign investors are largely treated in the same manner as their Gabonese counterparts with regard to the purchase of real estate, negotiation of licenses, and entering into commercial agreements.  There is no general requirement for local participation in investments (see local labor requirements below). Many businesses find it useful to have a local partner who can help navigate the subjective aspects of the business environment.

Gabon Oil Company, a state-owned enterprise created in 2011, has an automatic right to purchase up to a 15 percent share in any hydrocarbon contract at market price.

The standard practice is for the Gabonese Presidency to review foreign investment contracts after ministerial-level negotiations are completed.  There are instances where the Presidency gets involved to push negotiations stalled at the ministerial level.  The Presidency takes a very active role in meeting with investors.  The lack of a standardized procedure for new entrants to negotiate deals with the government can lead to confusion and time-consuming negotiations.  Moreover, the centralization of decision-making by a few senior officials who are exceedingly busy can delay the process.  As a result, new entrants often find the process of finalizing deals time-consuming and difficult to navigate.

U.S. investors are not disadvantaged by ownership or control mechanisms, sector restrictions, or investment screening mechanisms.  However, French companies continue to dominate major sectors in Gabon. Lack of French language skills can put American or non-Francophone firms at a disadvantage.

Other Investment Policy Reviews

Gabon has been a World Trade Organization (WTO) member since 1995.  In June 2013, Gabon conducted an investment policy review with the WTO.  The government has not conducted any investment policy reviews through the Organization for Economic Co-operation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD) in the past three years.

Business Facilitation

The government encourages investments in some of Gabon’s main industries (oil and gas, mining, and timber) through customs and tax incentives.  For example, oil and mining companies are exempt from customs duties on imported working equipment. The Tourism Investment Code, enacted in 2000, provides tax incentives to foreign tourism investors during the first eight years of operation.  A SEZ located at Nkok offers tax incentives to industrial investors.

ANPI-Gabon houses more than 20 public and private agencies, including the Chamber of Commerce, National Social Security Fund (CNSS), and National Health Insurance and Social Security (CNAMGS).  ANPI-Gabon aims to attract domestic and international investors through improved methods of approving and licensing procedures and support for public-private dialogue. It has a single window registration process that allows domestic and foreign investors to register their business in 48 hours.  There are no special mechanisms for equitable treatment of women and underrepresented minorities in Gabon.

ANPI-Gabon’s website address is:

http://www.anpigabon.ga/index.php/fr/  
https://fr-fr.facebook.com/anpigabon/  

Outward Investment

One of ANPI-Gabon’s primary goals is to promote outward investments and exports.  The Gabonese government does not restrict domestic investors from investing abroad.

Investment Incentives

Some of Gabon’s main industries (oil and gas, mining, and timber) encourage investment through customs and tax incentives.  For example, oil and mining companies are exempt from customs duties on imported working equipment.  The government has attempted to promote tourism by instituting the Tourism Investment Code of 2000, which provides tax exemptions to foreign tourism investors during the first eight years of operation.

President Ali Bongo Ondimba outlawed the export of unprocessed wood in 2009 to boost Gabon’s value-added wood products and increase domestic consumption.  The government and Singaporean-based firm Olam partnered to set up the SEZ at Nkok to process timber, and later expanded the mandate of the SEZ to open it to a broader range of businesses.  The SEZ provides a single-window business service to participants and provides new investors with beneficial fiscal incentives, including tax-free operation for 25 years, no customs duties on imported machinery and parts, and 100 percent repatriation of funds.

Gabon’s agriculture code of 2008 gives tax and customs incentives to agricultural operators, with a particular focus on small and medium-sized enterprises.  Land used for agriculture and farm exploitation is exonerated from fiscal tax.  All imported fertilizers and food for ranch exploitation are additionally exempt from customs duties.

As a member of CEMAC, Gabon’s trade with other member countries (Cameroon, Central African Republic, Chad, Republic of Congo, and Equatorial Guinea) is subject to low or no customs duties.

Foreign Trade Zones/Free Ports/Trade Facilitation

Inaugurated in 2011, the SEZ at Nkok is a public-private partnership between the government of Gabon and Olam, a Singapore-based corporation with interests in Gabonese timber, palm oil, and rubber.  Olam has completed the infrastructure phase for the Nkok SEZ, and multiple companies are actively operating there. Olam has plans to build two more SEZs: one in Port Gentil focused on chemical engineering and another in Franceville for agriculture products.  All SEZs offer tax and customs incentives to attract foreign investors. In 2017, the Gabon Special Economic Zone (GSEZ) inaugurated the New Owendo International Port.  With a surface area of 18 hectares, the terminal has annual capacity of three million tons.

Performance and Data Localization Requirements

Employment and Investor Requirements

Firms are required to obtain authorization from the Ministry of Labor before hiring foreigners.  Foreign workers must obtain permits before working in Gabon, and the availability of a permit for a job depends on the availability of Gabonese nationals to fill the job in question.  The government may set quotas for the number of foreign workers.  When hiring workers, firms must give priority to Gabonese nationals.  If no Gabonese worker with the appropriate qualifications can be found, a firm is expected to hire a Gabonese to work along with the foreigner and, within a reasonable time, the Gabonese worker should replace that foreigner.  In late 2010, the Gabonese government agreed to National Organization of Petroleum Workers demands to limit foreign workers in the oil sector to 10 percent of a company’s workforce and to require that Gabonese occupy all executive posts.  Foreign firms maintain there is a lack of qualified Gabonese workers, requiring companies to often request authorization to hire foreigners.  Non-Gabonese Africans find it increasingly difficult to obtain employment authorization; non-African expatriates have less difficulty.  Chinese industry in Gabon historically imports its labor force and management.  However, these rules do not apply in Gabon’s SEZ at Nkok, a free trade zone, where investors can bring foreign workers.

Goods, Technology, and Data Treatment

There is no known policy requiring foreign investors to use domestic content.  There is no specific performance requirement imposed as a condition for establishing, maintaining, or expanding investment.  There are no performance requirements for investors, nor are there any requirements for foreign IT providers to turn over source code and/or provide access to encryption.  There are no measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory.  No mechanisms exist to enforce rules on local data storage.

Performance Requirements

There is no performance requirement imposed as a condition for establishing, maintaining, or expanding investment.  There is no requirement for investors to buy local products, to export a certain percentage of output, or to invest in a specific geographical area.  There is no blanket requirement that nationals own shares in foreign investments in Gabon or that the share of foreign equity be reduced over time, or that technology be transferred on certain terms.  Nonetheless, many investors find it useful to have a local partner who can help navigate the business environment.

Capital Markets and Portfolio Investment

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

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

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

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

Money and Banking System

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

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

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

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

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

Foreign Exchange and Remittances

Foreign Exchange Policies

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

Policies Towards Foreign Direct Investment

The Government of Ghana has no overall economic or industrial strategy that discriminates against foreign-owned businesses.  The government has made increasing FDI a priority and acknowledged the importance of having an enabling environment for the private sector to thrive.  Officials are implementing some regulatory and other reforms to improve the ease of doing business and make investing in Ghana more attractive.

The 2013 GIPC Act requires the Ghana Investment Promotion Center (GIPC) to register, monitor and keep records of all business enterprises in Ghana.  Sector-specific laws further regulate investments in minerals and mining, oil and gas, industries within Free Zones, banking, non-banking financial institutions, insurance, fishing, securities, telecommunications, energy, and real estate.  Some sector-specific laws, such as in the oil and gas sector and the power sector, include specific local content requirements that could discourage international investment. Foreign investors are required to satisfy the provisions of the GIPC Act as well as the provisions of sector-specific laws.  GIPC leadership has pledged to work in closer collaboration with the private sector to address investor concerns but there have been no significant changes to the laws. More information on investing in Ghana can be obtained from GIPC’s website, www.gipcghana.com  .

Limits on Foreign Control and Right to Private Ownership and Establishment

Ghana is one of the more open economies to foreign equity ownership in Sub-Saharan Africa.  Most of its major sectors are fully open to foreign capital participation.

U.S. investors in Ghana are treated the same as any other foreign investor.  All foreign investment projects must register with the GIPC. Foreign investments are subject to the following minimum capital requirements: USD 200,000 for joint ventures with a Ghanaian partner that should have at least 10 percent of the equity; USD 500,000 for enterprises wholly-owned by a non-Ghanaian; and USD 1 million for trading companies (firms that buy or sell imported goods or services) wholly owned by non-Ghanaian entities.  The minimum capital requirement may be in cash or capital goods relevant to the investment. Trading companies are also required to employ at least 20 skilled Ghanaian nationals.

Ghana’s investment code excludes foreign investors from participating in eight economic sectors: petty trading, the operation of taxi and car rental services with fleets of fewer than 25 vehicles, lotteries (excluding soccer pools), the operation of beauty salons and barber shops, printing of recharge scratch cards for subscribers to telecommunications services, production of exercise books and stationery, retail of finished pharmaceutical products, and the production, supply, and retail of drinking water in sealed pouches.  Sectors where foreign investors are allowed limited market access include: telecommunications, banking, fishing, mining, petroleum, and real estate.

Real Estate

The 1992 Constitution recognized existing private and traditional titles to land.  Freehold acquisition of land is no longer permitted. There is an exception, however, for transfer of freehold title between family members for land held under the traditional system.  Foreigners are allowed to enter into long-term leases of up to 50 years and the lease may be bought, sold, or renewed for consecutive terms. Nationals are allowed to enter into 99-year leases.

Oil and Gas

The oil and gas sector is subject to a variety of state ownership and local content requirements.  The Petroleum (Exploration and Production) Act (2016, Act 919) mandates local participation. All entities seeking petroleum exploration licenses in Ghana must create a consortium in which the state-owned Ghana National Petroleum Corporation (GNPC) holds a minimum 15 percent carried interest.  The Petroleum Commission issues all licenses, but exploration licenses must be approved by Parliament. Further, local content regulations specify in-country sourcing requirements with respect to the full range of goods, services, hiring, and training associated with petroleum operations. The regulations also require mandatory local equity participation for all suppliers and contractors.  The Minister of Energy must approve all contracts, sub-contracts, and purchase orders above USD 100,000. Non-compliance with these regulations may result in a criminal penalty, including imprisonment for up to five years.

The Petroleum Commission applies registration fees and annual renewal fees on foreign oil and gas service providers, which, depending on a company’s annual revenues, range from USD 70,000 to USD 150,000, compared to fees of between USD 5,000 and USD 30,000 for local companies.

Mining

Per the Minerals and Mining Act, 2006 (Act 703), foreign investors are restricted from obtaining a small-scale mining license for mining operations less than or equal to an area of 25 acres (10 hectares).  Non-Ghanaians may only apply for industrial mineral rights if the proposed investment is USD 10 million or above. The Act mandates compulsory local participation, whereby the government acquires 10 percent equity in ventures at no cost.  In order to qualify for a license, a non-Ghanaian company must be registered in Ghana, either as a branch office or a subsidiary that is incorporated under the Ghana Companies Act or Incorporated Private Partnership Act.

The Minerals and Mining Act provides for a stability agreement, which protects the holder of a mining lease for a period of 15 years from future changes in law that may impose a financial burden on the license holder.  When an investment exceeds USD 500 million, lease holders can negotiate a development agreement that contains elements of a stability agreement and more favorable fiscal terms. Parliament passed a new Minerals and Mining (Amendment) Act (Act 900) in December 2015.  One significant provision of the new act requires the mining lease-holder to, “…pay royalty to the Republic at the rate and in the manner that may be prescribed.” The previous Act 703 capped the royalty rate at six percent. The Minerals Commission implements the law.  

Power Sector

In December 2017, Ghana introduced regulations requiring local content and local participation in the power sector. The Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations, 2017 (L.I. 2354) specify minimum initial levels of local participation/ownership and ten year targets:

The regulations also specify minimum and target levels of local content in engineering and procurement, construction works, post construction works, services, management, operations and staff.  All persons engaged in or planning to engage in the supply of electricity are required to register with the ‘Electricity Supply Local Content and Local Participation Committee’ and satisfy the minimum local content and participation requirements within five years. Failure to comply with the requirements could result in a fine or imprisonment.

Insurance

The National Insurance Commission (NIC) imposes nationality requirements with respect to the board and senior management of locally-incorporated insurance and reinsurance companies.  At least two board members must be Ghanaians, and either the Chairman of the board or Chief Executive Officer (CEO) must be Ghanaian. In situations where the CEO is not Ghanaian, the NIC requires that the Chief Financial Officer be Ghanaian. Minimum initial capital investment in the insurance sector is 15 million Ghana cedis (approximately USD 3 million).

Telecommunications

Per the Electronic Communications Act of 2008, the National Communications Authority (NCA) regulates and manages the nation’s telecommunications and broadcast sectors.  For 800 MHz spectrum licenses for mobile telecommunications services, Ghana restricts foreign participation to a joint venture or consortium that includes a minimum of 25 percent Ghanaian ownership.  Applicants have two years to meet the requirement, and can list the 25 percent on the Ghana Stock Exchange. The first option to purchase stock is given to Ghanaians, but there are no restrictions on secondary trading.

There are no significant limits on foreign investment or differences in the treatment of foreign and national investors in other sectors of the economy.

Other Investment Policy Reviews

Ghana has not conducted an investment policy review (IPR) through the OECD recently. UNCTAD last conducted an IPR in 2003.

The WTO last conducted a Trade Policy Review (TPR) in May 2014.  The TPR concluded that the 2013 amendment to the investment law raised the minimum capital that foreigners must invest to levels above those specified in Ghana’s 1994 GATS horizontal commitments, and excluded new activities from foreign competition.  However, it was determined that overall this would have minimum impact on dissuading future foreign investment due to the size of the companies traditionally seeking to do business within the country. An executive summary of the findings can be found at: https://www.wto.org/english/tratop_e/tpr_e/tp398_e.htm  

Business Facilitation

Although registering a business is a relatively easy procedure and can be done online through the Registrar General’s Department (RGD) at https://egovonline.gegov.gov.gh/RGDPortalWeb/portal/RGDHome/eghana.portal   , businesses have noted that the process involved in establishing a business is lengthy and complex, and requires compliance with regulations and procedures of at least four other government agencies, including GIPC, Ghana Revenue Authority (GRA), Ghana Immigration Service, and the Social Security and National Insurance Trust (SSNIT).

According to the World Bank’s Doing Business Report, it takes eight procedures and 14 days to establish a foreign-owned limited liability company (LLC) that wants to engage in international trade in Ghana.  This is longer than the regional average for Sub-Saharan Africa. Foreign investors must obtain a certificate of capital importation, which can take 14 days. The local authorized bank must confirm the import of capital with the Bank of Ghana, which will then confirm the transaction to GIPC for investment registration purposes.

Per the GIPC Act, all foreign companies are required to register with GIPC after incorporation with the RGD.  Registration can be completed online at http://www.gipcghana.com . While the registration process is designed to be completed within five business days, bureaucracy often delays this process.

The Ghanaian business environment is unique and guidance can be extremely helpful.  In some cases, a foreign investment may enjoy certain tax benefits under the law or additional incentives if the project is deemed critical to the country’s development.  Most companies or individuals considering investing in Ghana or trading with Ghanaian counterparts find it useful to consult with a local attorney or business facilitation company.  The Embassy maintains a list of local attorneys which is available through the U.S. Commercial Service in Ghana (www.export.gov/ghana). Specific information about setting up a business is available at the GIPC website: http://www.gipcghana.com/invest-in-ghana/doing-business-in-ghana.html .

Ghana Investment Promotion Centre
Post: P. O. Box M193, Accra-Ghana
Telephone: +233 (0) 302 665125, +233 (0)302 665126, +233 (0) 302 665127, +233 (0) 302 665128/ +233 (0) 302 665129
Telephone: +233 (0) 302 244318254/ 244318252
Email: info@gipcghana.com
Website: www.gipcghana.com  

Note that mining or oil/gas sector companies are required to obtain licensing/approval from the following relevant bodies:

Petroleum Commission Head Office
Plot No. 4A, George Bush Highway, Accra, Ghana
P.O. Box CT 228 Cantonments, Accra, Ghana
Telephone: +233 [0] 302 953392 | +233 [0] 302 953393
Website: http://www.petrocom.gov.gh/  

Minerals Commission
Minerals House, No. 12 Switchback Road, Cantonments, Accra
P.O. Box M 248
Telephone: +233 (0) 302 772 783 /+233 (0) 302 772 786 /+233 (0) 302 773 053
Website: http://www.mincom.gov.gh/  

Outward Investment

Ghana has no specific outward investment policy.  It has entered into bilateral treaties, however, with a number of countries to promote and protect foreign investment on a reciprocal basis.  A few Ghanaian companies have established operations in other West African countries.

Investment Incentives

Investment incentives differ slightly depending upon the law under which an investor operates.  For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not automatically entitled to a tax holiday.  Tax incentives vary depending upon the sector in which the investor is operating.

All investment-specific laws contain some incentives.  The GIPC law allows for import and tax exemptions for plant inputs, machinery and parts that are imported for the purpose of the investment. Chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rate these production items.  The Government of Ghana imposed a five percent import duty on some items that were previously zero-rated, to conform to the ECOWAS common external tariff.

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate. The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner.  Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law. The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law.  The GIPC website (http://www.gipcghana.com) provides a thorough description of available incentive programs. The law also guarantees an investor all the tax incentives provided for under Ghanaian law. For example, rental income from commercial and residential property is exempt from tax for the first five years after construction. Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation.  Rural banks and cattle ranching are exempt from income tax for ten years and pay 8 percent thereafter.

The corporate tax rate is 25 percent and this applies to all sectors except income from non-traditional exports (8 percent tax rate) and oil and gas exploration companies (35 percent tax rate). For some sectors there are temporary tax holidays.  These sectors include Free Zone enterprises and developers (0 percent for the first ten years and 15 percent thereafter); real estate development and rental (0 percent for the first five years and 25 percent thereafter); agro-processing companies (0 percent for the first five years, after which the tax rate ranges from 0 percent to 25 percent depending on the location of the company in Ghana), and waste processing companies (0 percent for seven years and 25 percent thereafter).  Tax rebates are also offered in the form of incentives based on location. A capital allowance in the form of accelerated depreciation is applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum. Under the new Income Tax law of 2015, all businesses can carry forward tax losses for at least three years.

Ghana has no discriminatory or excessively burdensome visa requirements.  A foreign investor who invests under the GIPC law is automatically entitled to a specific number of visas/work permits based on the size of the investment.  When an investment of USD 50,000, but not more than USD 250,000 or its equivalent is made in convertible currency or machinery and equipment, the enterprise can obtain a visa/work permit for one expatriate employee.  An investment of USD 250,000, but not more than USD 500,000, entitles the enterprise to two automatic visas/work permits. An investment of USD 500,000, but not more than USD 700,000, allows the enterprise to bring in three expatriate employees.  An investment of more than USD 700,000 allows an enterprise to bring in four expatriate employees. An enterprise may apply for extra visas or work permits, but the investor must justify why a foreigner must be employed rather than a Ghanaian. There are no restrictions on the issuance of work and residence permits to Free Zone investors and employees.  Overall, the process of issuing work permits is not very transparent.

Ghana has no import price controls.  It is pursuing a liberalized import regime policy within the framework of the World Trade Organization to accelerate industrial growth.  The Government of Ghana joined other ECOWAS countries by fully implementing the ECOWAS Common External Tariff (CET) in February 2016.

In some instances, Ghana has issued guarantees for foreign direct investment projects that it deems critical to the country’s development.  To make the operation of public-private partnerships (PPPs) effective, the government may support such projects with viability gap funding and guarantees.  A new PPP law is under debate in Parliament.

Foreign Trade Zones/Free Ports/Trade Facilitation

Free Trade Zones (called Free Zones in Ghana) were established in May 1996, with one near Tema Steelworks, Ltd., in the Greater Accra Region, and two other sites located at Mpintsin and Ashiem near Takoradi in the Western Region.  The seaports of Tema and Takoradi, as well as the Kotoka International Airport and all the lands related to these areas, are part of the Free Zone. The law also permits the establishment of single factory zones outside or within the areas mentioned above.  Under the law, a company qualifies to be a Free Zone company if it exports more than 70 percent of its products. Among the incentives for Free Zone companies are a ten-year corporate tax holiday and zero import duty.

To make it easier for Free Zone developers to acquire the various licenses and permits to operate, the Ghana Free Zones Authority (www.gfzb.com.gh) provides a “one-stop approval service” to assist in the completion of all formalities.  A lack of resources has limited the effectiveness of the Authority. Foreign employees of Free Zone businesses require work and residence permits.

Performance and Data Localization Requirements

In most sectors, Ghana does not have performance requirements for establishing, maintaining, and expanding a business.  Investors are not currently required to purchase from local sources or employ prescribed levels of local content, except in the upstream petroleum sector and the power sector, which are subject to substantial local content requirements.  Similar legislation is being drafted for the downstream petroleum sector and a National Local Content Policy is being debated by Cabinet that may extend to a broad array of sectors of the economy, but there is no clear timeline for its approval.

Generally, investors are not required to export a specified percentage of their output, except for Free Zone enterprises which, in accordance with the Free Zone Act, must export 70 percent of their products.  Government officials have intimated that local content requirements should be applied to sectors other than petroleum, but currently no local content regulations have been promulgated for other sectors.

As detailed earlier in this report, there are a few areas where the GOG does impose performance requirements including the mining, oil and gas, insurance, and telecommunications sectors.

Data Storage

The Government of Ghana does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology.  In addition, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).

Capital Markets and Portfolio Investment

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

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

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

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

Money and Banking System

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

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

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

Foreign Exchange and Remittances

Foreign Exchange

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

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

Remittance Policies

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

Sovereign Wealth Funds

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

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

Policies Towards Foreign Direct Investment

Kenya has enjoyed a steadily improving environment for foreign direct investment (FDI).  Foreign investors seeking to establish a presence in Kenya generally receive the same treatment as local investors, and multinational companies make up a large percentage of Kenya’s industrial sector.  The government’s export promotion programs do not distinguish between goods produced by local or foreign-owned firms. The major regulations governing FDI are found in the Investment Promotion Act (2004).  Other important documents that provide the legal framework for FDI include the 2010 Constitution of Kenya, the Companies Ordinance, the Private Public Partnership Act (2013), the Foreign Investment Protection Act (1990), and the Companies Act (2015).  GOK membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provides an opportunity to insure FDI against non-commercial risk.

The government does not have a policy to steer investment to specific geographic locations, but encourages investments in sectors that create employment, generate foreign exchange, and create forward and backward linkages with rural areas.  The Central Bank has successfully maintained macroeconomic stability with relatively low inflation and stable exchange rates. The National Treasury is increasingly attentive to ensuring prudent debt management. Kenya puts significant effort into assuring the health and growth of its tourism industry.  To strengthen Kenya’s manufacturing capacity, the government offers incentives for the production of goods for export.

Investment Promotion Agency

KenInvest, the country’s official investment promotion agency, is viewed favorably by international investors (http://www.investmentkenya.com  ).  KenInvest’s mandate is to promote and facilitate investment by assisting investors in obtaining the licenses necessary to invest and by providing other assistance and incentives to facilitate smoother operations.  To help investors navigate local regulations, KenInvest has developed an online database known as eRegulations, designed to provide investors and entrepreneurs with full transparency on Kenya’s investment-related regulations and procedures (http://kenya.eregulations.org/?l=en  ).

The GOK prioritizes investment retention and maintains an ongoing dialogue with investors.  All proposed legislation must pass through a period of public consultation in which investors have an opportunity to offer feedback.  Private sector representatives can serve as board members on Kenya’s state-owned enterprises. Since 2013, the Kenya Private Sector Alliance (KEPSA), the apex private sector business association, has had bi-annual round table meetings with President Kenyatta and his cabinet.  Investors’ concerns are considered by a Cabinet committee on the ease of doing business, chaired by President Kenyatta. The American Chamber of Commerce has also taken an increasingly active role in engaging the GOK on Kenya’s business environment, often providing a forum for dialogue.

Limits on Foreign Control and Right to Private Ownership and Establishment

The government provides the right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.  In an effort to encourage foreign investment, the GOK in 2015 repealed regulations that imposed a 75 percent foreign ownership limitation for firms listed on the Nairobi Securities Exchange, allowing such firms to be 100 percent foreign-owned.  Also in 2015, the government established regulations requiring Kenyans own at least 15 percent of the share capital of derivatives exchanges, through which derivatives such as options and futures can be traded.

Kenya considered imposing “local content” requirements on foreign investments under the Companies Act (2015), which initially contained language requiring all foreign companies to demonstrate at least 30 percent of shareholding by Kenyan citizens by birth.  United States business associations, however, raised concerns over the bill, pointing to its lack of clarity and the possibility such measures could run afoul of Kenya’s commitments under the WTO. After the U.S. government also raised the issue with the Kenyan government, the clause was repealed.

Telecommunications regulator Communications Authority requires 20 percent Kenyan shareholding within three years of receiving a license.  The Mining Act (2016) restricts foreign participation in the mining sector and reserves the acquisition of mineral rights to Kenyan companies, requiring 60 percent Kenyan ownership of mineral dealerships and artisanal mining companies.  The Private Security Regulations Act (2016) restricts foreign participation in the private security sector by requiring that at least 25 percent of shares in private security firms be held by Kenyans. The National Construction Authority Act (2011) imposes local content restrictions on “foreign contractors,” defined as companies incorporated outside Kenya or with more than 50 percent ownership by non-Kenyan citizens.  The act requires foreign contractors to enter into subcontracts or joint ventures assuring that at least 30 percent of the contract work is done by local firms. Regulations implementing these requirements remain in process. The Kenya Insurance Act (2010) restricts foreign capital investment to two-thirds, with no single person controlling more than 25 percent of an insurers’ capital.

Other Investment Policy Reviews

Kenya had no investment policy reviews though multilateral organizations in the last three years.

Business Facilitation

In 2011, the GOK established a state agency called KenTrade to address trading partners’ concerns regarding the complexity of trading regulations and procedures.  KenTrade is mandated to facilitate cross-border trade and to implement the National Electronic Single Window System. In 2017, KenTrade launched InfoTrade Kenya, located at infotrade.gov.ke, which provides a host of investment products and services to prospective investors in Kenya.  The site documents the process of exporting and importing by product, by steps, by paperwork, and by individuals, including contact information for officials’ responsible relevant permits or approvals.

The Movable Property Security Rights Bill (2017) enhanced the ability of individuals to secure financing through movable assets, including using intellectual property rights as collateral.  The Nairobi International Financial Centre Act (2017) seeks to provide a legal framework to facilitate and support the development of an efficient and competitive financial services sector in Kenya.  The act created the Nairobi Financial Centre Authority to establish and maintain an efficient operating framework to attract and retain firms. The Kenya Trade Remedies Act (2017) provides the legal and institutional framework for Kenya’s application of trade remedies consistent with World Trade Organization (WTO) law, which requires a domestic institution to both receive complaints and undertake investigations in line with the WTO Agreements.  To date, however, Kenya has implemented only 7.1 percent of its commitments under the WTO Trade Facilitation Agreement, which it ratified in 2015. The Kenya Trade Remedies Act provides for the establishment of the Kenya Trade Remedies Agency for the investigation and imposition of anti-dumping, countervailing duty, and trade safeguards measures, and enables the GOK to take necessary measures to protect domestic industries from unfair trade practices.

The Companies Amendment Act (2017) amended the prior Companies Act clarifying ambiguities in the act and conforms to global trends and best practices.  The act amends provisions on the extent of directors’ liabilities, on the extent of directors’ disclosures, and on shareholder remedies to better protect investors, including minority investors.  The amended act eliminates the requirement for small enterprises to have lawyers register their firms, the requirement for company secretaries for small businesses, and the need for small businesses to hold annual general meetings, saving regulatory compliance and operational costs.

The Business Registration Services (BRS) Act (2015) established a state corporation known as the Business Registration Service to ensure effective administration of the laws relating to the incorporation, registration, operation and management of companies, partnerships, and firms.  The BRS also devolves to the counties business registration services such as registration of business names and promoting local business ideas/legal entities, thus reducing costs of registration. The Companies Act (2015) covers the registration and management of both public and private corporations.

In 2014, the GOK established a Business Environment Delivery Unit to address challenges facing investors in the country.  The unit focuses on reducing the bureaucratic steps related to setting up and doing business in the country. Separately, the Business Regulatory Reform Unit operates a website (http://www.businesslicense.or.ke/  ) offering online business registration and providing information on how to access detailed information on additional relevant business licenses and permits, including requirements, costs, application forms, and contact details for the relevant regulatory agency.  In 2013, the GOK initiated the Access to Government Procurement Opportunities program, requiring all public procurement entities to set aside a minimum of 30 percent of their annual procurement spending facilitate the participation of youth, women, and persons with disabilities (https://agpo.go.ke/).

An investment guide to Kenya, also referred to as iGuide Kenya, can be found at http://www.theiguides.org/public-docs/guides/kenya/about#  .  iGuides designed by UNCTAD and the International Chamber of Commerce provide investors with up-to-date information on business costs, licensing requirements, opportunities, and conditions in developing countries.  Kenya is a member of UNCTAD’s international network of transparent investment procedures.

Outward Investment

The GOK does not promote or incentivize outward investment.  Despite this, Kenya is evolving into an outward investor in tourism, manufacturing, retail, finance, education, and media.  Currently, the majority of outward investment remains in the EAC, making the most of Kenyan preferential access between EAC member countries.  The GOK also does not restrict domestic investors from investing abroad. Rather, the EAC advocates for free movement of capital across the six member states – Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda.

Investment Incentives

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

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

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

Kenya’s Export Processing Zones (EPZ) and Special Economic Zones (SEZ) offer special incentives for firms operating within their boundaries.  By the end of 2016, Kenya had 65 designated EPZs, with 91 companies and 52,019 workers contributing KSH 63.1 billion (about USD 622 million) to the Kenyan economy.  Companies operating within an EPZ benefit from the following tax benefits: a 10-year corporate-tax holiday and a 25 percent tax thereafter; a 10-year withholding tax holiday; stamp duty exemption; 100 percent tax deduction on initial investment applied over 20 years; and VAT exemption on industrial inputs.

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

While EPZs are focused on encouraging production for export, SEZs are designed to boost local economies by offering benefits for goods that are consumed both internally and externally.  SEZs will allow for a wider range of commercial ventures, including primary activities such as farming, fishing, and forestry. The 2016 Special Economic Zones Regulations state that the Special Economic Zone Authority (SEZA) must maintain an open investment environment to facilitate and encourage business by the establishment of simple, flexible, and transparent procedures for investor registration.  The rules also empower county governments to set aside public land for establishment of industrial zones.

Companies operating in the SEZs will receive the following benefits:  all SEZ supplies of goods and services to companies and developers will be exempted from VAT; the corporate tax rate for enterprises, developers, and operators will be reduced from 30 percent to 10 percent for the first 10 years and 15 percent for the next 10 years; exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004), and stamp duty; and exemption from county-level advertisement and license fees.  There are currently SEZs in Mombasa (2,000 sq. km), Lamu (700 sq. km), and Kisumu (700 sq. km). The Third Medium Term Plan of Kenya’s Vision 2030 economic development agenda calls for a study for an SEZ at Dongo Kundu, and an SEZ was also under consideration at a location near the Olkaria geothermal power plant.

Performance and Data Localization Requirements

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

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

The Finance Act (2017) amends the Public Procurement and Asset Disposal Act (2015) to introduce Specially Permitted Procurement as an alternative method of acquiring public goods and services.  The new method permits state agencies to bypass existing public procurement laws under certain circumstances. Procuring entities will be allowed to use this method where market conditions or behavior do not allow effective application of the 10 methods outlined in the Public Procurement and Disposal Act.  The act gives the National Treasury Cabinet Secretary the authority to prescribe the procedure for carrying out specially permitted procurement.

The GOK does not currently have any laws requiring data localization, though the draft Data Protection Bill (2018) would impose restrictions on the transfer of data in and out of Kenya, functionally requiring data localization.  The draft bill is similar to the European General Data Protection Regulation requirements on data processing. The GOK’s 2016 draft ICT Policy stated a preference for legislated data localization, but was never implemented.

Capital Markets and Portfolio Investment

Though relatively small by Western standards, Kenya’s capital markets are the deepest and most sophisticated in East Africa.  The Kenyan capital market has grown rapidly in recent years and has also exhibited strong capital raising capacity. The bond market is underdeveloped and dominated by trading in government debt securities.  The government domestic debt market, however, is deep and liquid. Long-term corporate bond issuances are uncommon, leading to a lack of long-term investment capital.

Foreign investors can obtain credit on the local market; however, the number of available credit instruments is relatively small and the government’s interest rate cap since 2016 continues to constrain the availability of credit.  Legal, regulatory, and accounting systems are generally aligned with international norms. The Kenyan National Treasury has launched its mobile money platform government bond to retail investors locally. The name of the product is M-Akiba, through which local Kenyans are able to purchase bonds as small as USD 30 on their mobile phones.  The product was enthusiastically received and generated 400,000 new accounts in the first two weeks of its issuance. The GOK expects to issue USD 10 million over this platform in 2019 in an effort to deepen financial inclusion and financial literacy.

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

Money and Banking System

The Kenyan banking sector in 2018 included 47 commercial banks, one mortgage finance company, 14 microfinance banks, eight representative offices of foreign banks, 74 foreign exchange bureaus, 18 money remittance providers, and three credit reference bureaus.  Kenya also has 12 deposit-taking microfinance institutions. Of Kenya’s 47 banking institutions, 28 are locally owned and 13 are foreign owned. Major international banks operating in Kenya include Citibank, Barclays, Bank of India, Standard Bank (South Africa), and Standard Chartered.

In March, 2017, CBK lifted its moratorium on licensing new banks, issued in November 2015 following the collapse of Imperial Bank and Dubai Bank.  The CBK’s decision to restart licensing signaled a return of stability in the Kenyan banking sector. JPMorgan Chase has expressed interest in setting up a representative office in Nairobi and Qatari National Bank (QNB) is interested in arranging a Sukuk (sovereign bond) for Kenya. In 2018, Societé Generale (France) also set up a representative office in Nairobi.

In August 2016, President Kenyatta signed into law the Banking Act (2016), which caps the maximum interest rate banks can charge on loans at four percent above the CBK’s benchmark lending rate.  It further provides a floor for the deposit rate held in interest earning accounts to at least 70 percent of the CBK benchmark rate. The cap has hurt the GOK’s ability to raise funds in the local debt market.  The cap also has slowed the consumer and small and medium business credit market. The International Monetary Fund and other observers have warned that the restrictions will result in a continuing contraction in the availability of credit.  In March 2019, the Supreme Court found the interest rate cap to be unconstitutional, but suspended its ruling for 12 months to provide Parliament an opportunity to review the cap.

In the ongoing land registry digitization process, the Kenyan Government is working on a database, known as the single source of truth (SSOT), to eliminate fake title deeds in the Ministry of Lands.  The SSOT database development plan is premised on blockchain technology – distributed ledger technology – as the primary reference for all land transactions. The SSOT database would help the land transaction process to be efficient, open, and transparent.

The percentage of Kenya’s total population with access to financial services through conventional or mobile banking platforms is approximately 80 percent.  According to the World Bank, M-Pesa, Kenya’s largest mobile banking platform, processes more transactions within Kenya each year than Western Union does globally.  In September 2018, 30 million Kenyans were using mobile phone platforms to transfer money, according to the Communication Authority of Kenya. The 2017 National ICT Masterplan envisages the sector contributing at least 10 percent of GDP, up from 4.7 percent in 2015.  Several mobile money platform have achieved international interoperability, allowing the Kenyan diaspora to conduct financial transactions in Kenya from abroad.

Foreign Exchange and Remittances

Foreign Exchange Policies

Kenya has no restrictions on converting or transferring funds associated with investment.  Kenyan law requires the declaration to customs of amounts greater than KSH 1,000,000 (approximately USD 10,000) or the equivalent in foreign currencies for non-residents as a formal check against money laundering.  Kenya is an open economy with a liberalized capital account and a floating exchange rate. The CBK engages in volatility controls aimed exclusively at smoothing temporary market fluctuations. Between June 2015 and June 2016, the Kenyan shilling declined 3.5 percent after a sharp decline of 15 percent during the same period in 2014/2015.  In 2018, foreign exchange reserves remained relatively steady. The average inflation rate was between 3.7-5.7 percent in 2018 and the average rate on 91-day treasury bills had fallen to 7.75 percent in 2018. According to CBK figures, the average exchange rate was KSH 101.3to USD 1.00 in 2018.

Remittance Policies

Kenya’s Foreign Investment Protection Act (FIPA) guarantees capital repatriation and remittance of dividends and interest to foreign investors, who are free to convert and repatriate profits including un-capitalized retained profits (proceeds of an investment after payment of the relevant taxes and the principal and interest associated with any loan).

Foreign currency is readily available from commercial banks and foreign exchange bureaus and can be freely bought and sold by local and foreign investors.  The Central Bank of Kenya Act (2014), however, states that all foreign exchange dealers are required to obtain and retain appropriate documents for all transactions above the equivalent of KSH 1,000,000 (approximately USD 10,000).  As of March 2018, the CBK has licensed 18 money remittance providers following the operationalization of the Money Remittance Regulations in April 2013.

Kenya is listed as a country of primary concern for money laundering and financial crime by the State Department’s Bureau of International Narcotics and Law Enforcement.  Kenya was removed from the inter-governmental Financial Action Task Force (FATF) Watchlist in 2014 following progress in creating the legal and institutional framework to combat money laundering and terrorism financing.

Sovereign Wealth Funds

Kenya is in the process of establishing a sovereign wealth fund under the Kenya National Sovereign Wealth Fund Bill (2014).  The fund would receive income from any future privatization proceeds, dividends from state corporations, oil and gas, and minerals revenues due to the national government, revenue from other natural resources, and funds from any other source.  The bill remains under internal review and stakeholder consultations.

The Kenya Information and Communications Act (2009) provides for the establishment of a Universal Service Fund (USF).  The purpose of the USF is to fund national projects that have significant impact on the availability and accessibility of ICT services in rural, remote, and poor urban areas.  The USF has amassed sizeable assets, but to date, the fund and its managing committee have not been able to mobilize it for use on any project.

Policies Towards Foreign Direct Investment (FDI)

Generally, the government supports foreign investment.  In 2018, Liberia established a Business Climate Working Group (BCWG) to develop plans and strategies to improve the business environment.  However, progress in creating an attractive business-friendly climate is hampered by a weak legal and regulatory framework, corruption and lack of transparency in contract award processes, poor infrastructure, and low capacity of the private sector.  Clauses in the 2010 Investment Act prohibit and restrict market access for foreign investors, including U.S. investors, in certain economic sectors or industries. On January 30, 2019, the Ministry of Commerce and Industry (MOCI) announced a ban, which it has yet to implement, on the importation of certain commodities including nails, biscuits, and flour in an effort to protect domestic production of these items.  The National Investment Commission (NIC) is the investment promotion agency that creates investment strategies, designs investment policies, and executes investment programs including attracting foreign investment and negotiating investment contracts or concessions. The NIC, in collaboration with the BCWG, facilitates dialogue through formal business roundtables on investment climate issues. Some private sector groups, such as the Liberia Chamber of Commerce (LCC), regularly meet with investors and government officials to discuss and suggest solutions to critical policy issues.  However, in 2018, some business leaders in the LCC and other groups reported difficulties in obtaining meetings with government representatives to discuss policy changes that were perceived to negatively affect the business climate.

In April 2019, the President of Liberia issued Executive Order #96 to stimulate economic growth.  The order includes a provision that extends residence and work permits from one year to up to five years.  It also exempts commercial importers from seeking import permits and filing import permit declarations.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have the right to establish and own business enterprises and engage in various forms of remunerative activity.  In the Investment Act and Revenue Code, foreign investors have similar rights and are subject to similar duties and obligations as those that apply to domestic investors, with several notable exceptions.  The exceptions include clauses in the Investment Act that impose statutory limits on foreign ownership of, or entry into, 16 business activities/enterprises, and set minimum foreign capital investment thresholds in 12 others.  This law restricts ownership of the following business activities or enterprises exclusively for Liberians: (1) Supply of sand, (2) Block making, (3) Peddling, (4) Travel agencies, (5) Retail sale of rice and cement, (6) Ice making and sale of ice, (7) Tire repair shops, (8) Auto repair shops with investment of less than USD 550,000, (9) Shoe repair shops, (10) Retail sale of timber and planks, (11) Operation of gas stations, (12) Video clubs, (13) Operation of taxis, (14) Importation or sale of second-hand or used clothing, (15) Distribution in Liberia of locally manufactured products, and (16) Importation and sale of used cars (except authorized dealerships, which may deal in certified used vehicles of their make).  It also sets minimum capital investment thresholds for foreign investors in twelve other business activities, industries and enterprises. The Act further stipulates that, for enterprises owned exclusively by non-Liberians, the total capital invested shall not be less than USD 500,000; and for enterprises owned in partnership with Liberians, the aggregate shareholding of the Liberian partners must be at least 25 percent, and the total capital invested shall not be less than USD 300,000. In 2018, the legislature discussed but did not pass a draft “Business and Economic Empowerment Act,” which aimed to expand these requirements to additional sectors of the economy, increase the minimum capital threshold to USD 2 million, and require that Liberians hold at least 30 percent of senior management positions. 

While the Liberian constitution restricts land ownership to citizens, land acquisition by non-Liberians is possible through leasehold.  Foreign companies seeking to lease land have the option to lease privately or publicly held land. Frequently, foreign companies seeking to acquire land leases do so through direct negotiations with the relevant landlords/owners.  In September 2018, Liberia passed into law the long-awaited Land Rights Act which categorizes land ownership into public land, which is owned, but currently not used by the government; government land, which is used by government agencies (for office buildings or other purposes); customary land, on which the livelihoods of most rural communities depend; and private land, which is owned by private citizens.  In addition to strongly protecting community land rights, the new law ensures consistent land governance as well as legal certainty for every category of land ownership. The law is designed to resolve historical land problems that have caused conflicts and communal strife in the past. For the first time in history, the customary rights of Liberia’s village communities are protected by formal legislation. Implementation, which is currently underway, should result in significantly improved investment opportunities.

The government does not maintain investment screening mechanisms for inbound foreign investment.  There are no laws especially intended to disadvantage U.S. investors or single them out; generally, Liberians welcome U.S. investment as well as American products, which they consider to be of exceptional quality.

Other Investment Policy Reviews

Neither the United Nations Conference on Trade and Development   (UNCTAD) nor the Organization for Economic Co-operation and Development (OECD) has conducted an investment policy review for Liberia in the past three years.  In 2016, Liberia became a member of the World Trade Organization (WTO), but the WTO has not yet conducted Liberia’s Trade Policy Review (TPR).

Link to a list of countries for which OECD, WTO (in context of a trade policy), and UNCTAD have conducted investment or trade policy reviews:  http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm  ,  http://unctad.org/en/Pages/DIAE/Investment percent20Policy percent20Reviews/Investment-Policy-Reviews.aspx  

Business Facilitation

All businesses are required to register with, and obtain authorization from, the Liberia Business Registry (LBR) to conduct business or provide services in Liberia.  LBR services are available to local and foreign companies at its head office in Monrovia. It does not provide an online registration platform and its website does not currently function.  According to the World Bank, it takes five procedures and 18 days to establish a business in Liberia, http://www.doingbusiness.org/en/data/exploreeconomies/liberia#DB_sb  .  Foreign companies must obtain investment approval from the National Investment Commission (NIC) if they would like to benefit from investment incentives.  Foreign companies must use local counsel when establishing a subsidiary and must provide notarized documents of the parent company. If a subsidiary is engaged in manufacturing and international trade, then it must obtain a trade license from the LBR, a process that can take an average of three days. 

Liberia is one of the few countries surveyed by the World Bank’s Investing Across Borders that does not make its commercial laws and regulations publicly available online.  There is no minimum paid-in capital requirement, except in regulated industries related to financial institutions, such as banking and insurance. More detailed information is available on the World Bank’s Investing Across Borders website: http://iab.worldbank.org/Data/ExploreEconomies/liberia#starting-a-foreign-business  .  The registration procedures and standards are the same for Liberian and foreign investors.

For long-term investment contracts, such as concessions, the National Investment Commission (NIC) is the statutory chair of an ad hoc cabinet-level Inter-Ministerial Concessions Committee (IMCC) that convenes often-lengthy bidding and negotiation processes.  Concessions are approved when ratified by the national legislature, signed by the President of Liberia, and printed into handbills by the Ministry of Foreign Affairs. The Liberia Revenue Authority (LRA) handles tax payment processes and administration. Social security issues are handled by the National Social Security and Welfare Corporation (NASSCORP).  Websites for these agencies are found at: https://lra.gov.lr/   and http://www.nasscorp.org.lr/  . 

[Reference]

• National Investment Commission (NIC), http://investliberia.gov.lr/new/  
• Liberia Revenue Authority (LRA), https://lra.gov.lr/  
• National Social Security and Welfares Corporation (NASSCORP), http://www.nasscorp.org.lr/  
• http://investmentpolicyhub.unctad.org/Publications/Details/148   provides an outline of investment facilitation proposals.
• http://iab.worldbank.org   provides quantitative indicators on economies’ laws, regulations and practices affecting how foreign companies invest across sectors, start businesses, access industrial land, and arbitrate disputes.
• http://www.doingbusiness.org/data/exploretopics/starting-a-business#close   provides indicators from economies on the ease of starting a limited liability company.
• www.GER.co   provides links to business registration sites worldwide.

Outward Investment

The National Investment Commission (NIC) does not have a systematic, active mechanism or program to promote or incentivize outward investment.  There is no known restriction or policy limiting or preventing domestic investors from investing abroad. See the NIC’s website, http://investliberia.gov.lr/new/  

Investment Incentives

The Revenue Code and the Investment Act provide different forms of investment incentives to foreign investors.  The National Investment Commission (NIC) and the Ministry of Finance and Development Planning (MFDP) are the authorities which provide investment incentives.  Foreign investors who meet the statutory eligibility criteria for incentives must apply to the MFDP. The Revenue Code specifies that the investment activity must be in one of the several specified sectors in order to qualify for incentives.  One may obtain the list of those sectors from the NIC, http://investliberia.gov.lr/new/  .

The investment incentives specified for these sectors include tax deductions for equipment, machinery, cost of buildings and fixtures used in manufacturing, as well as import duties, and goods and services tax exemptions.  Tax incentives are subject to legislative approval as stated in the Revenue Code: “for investments exceeding USD 10 million and subject to approval by the President and the Legislature, the tax incentives permitted by this section may be allowed for a period of up to fifteen (15) years; no tax incentive under this subsection shall be valid or enforceable without legislative approval.”  The law also allows exemptions from import duty of up to 100 percent of their dutiable value for capital assets and other goods to be used in the project. Note that a Customs user fee of 1.5 percent plus ECOWAS trade levy of 0.5 percent is currently applicable. The Minister of Finance and Development Planning can grant additional incentives based on the capital invested, economic zones, or geographic areas as well as the employment creation potential that could promote economic growth.  The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects. See the NIC website for more information on special investment incentives: http://investliberia.gov.lr/new/  .

Foreign Trade Zones/Free Ports/Trade Facilitation

Currently, there are no functional designated free trade zones or special economic zones in Liberia.  However, the 2017 Special Economic Zone (SEZ) Act authorizes the establishment of the Liberia Special Economic Zone Authority (LSEZA).  The government has established the legal basis for the LSEZA but has not yet designated industries or physical areas as SEZs, in line with the law.  The law combines the Liberia Industrial Free Zone Authority (LIFZA) and Monrovia Industrial Park (MIP), and allows the LSEZA to set aside exclusive areas for industrial production, and processing for domestic and export markets.  According to the law, the LSEZA is responsible for proposing, regulating, supervising, and monitoring all areas or sites it may earmark as SEZs. The law mandates the LSEZA to coordinate with relevant agencies such as the National Investment Commission (NIC), the Ministry of Commerce and Industry (MOCI), and the Liberia Revenue Authority (LRA) to issue applicable licenses, permits, certificates, and other required authorizations.  The law provides that “national tax and incentive regimes designated by applicable law shall not apply in the SEZs; an entire SEZ or any part thereof would constitute a customs-controlled area.” In April 2019, the President of Liberia established a Special Economic Zone (SEZ) Steering Committee, “to create, drive, guide, enhance, coordinate and manage single, multiple and mixed-use [SEZs] in Liberia.”

Performance and Data Localization Requirements

The government, through the Decent Work Act, mandates local employment, particularly at senior management level, including the boards of directors.  The Act gives preference to employing Liberians and many investment contracts specify that a certain percentage of Liberians be hired in senior positions.  The act stipulates “the Ministry [of Labor] shall not issue a permit to work in Liberia unless it is satisfied that: i) there is no suitably qualified Liberian available to carry out the work required by the employer; and ii) the applicant satisfies the requirements for foreign residence in Liberia.”  However, the Investment Act eliminates an earlier mandate that foreign companies must employ qualified Liberians “at all levels.”  Liberian immigration law (An Act Adopting New Aliens and Nationality Law) requires all non-Liberian citizens entering the country to hold an entry visa, except for ECOWAS citizens who require valid passports or laissez-passers.  There are no excessively onerous visa, residence, work permit, or similar requirements that inhibit mobility of foreign investors and their employees, with the exception of the government requiring that residence/work permits be renewed annually with a renewal fee.  Long-term investors have found this unfavorable to the terms of their investment or residency. In April 2019, the President of Liberia issued Executive Order #96 to stimulate economic growth and included a provision that extends residence and work permits from one year to up to five years.  The Order also exempts commercial importers from seeking import permits and filing import permit declarations.

The NIC includes a “local content” policy in certain major investment contracts that mandates the use of domestic content, goods, or raw materials.  The NIC has not followed “forced localization” policies that would compel foreign investors to use domestic content, and there are no enforcement procedures for performance requirements.  There are no legal requirements for foreign information technology investors to turn over source code and/or provide access to encryption. There are no mechanisms that prevent or unduly impede companies from freely transmitting customer or other business-related data outside Liberia, and there are no local data storage requirements for foreign companies operating in Liberia.  The government does not use any systematic mechanisms to enforce any rules on local data storage within the economy.

Capital Markets and Portfolio Investment

The government does not have foreign portfolio investments abroad and there is no domestic capital market or portfolio investment option, such as a stock market.  Private sector investors have limited credit and investment options. The Central Bank of Liberia (CBL) uses financial instruments such as Treasury bills (T-bills) in an effort to develop a capital market.  In 2018, the CBL made a CBL Bill available for purchase and started to develop regulatory guidance for the issuance of corporate bonds, commercial papers (CP), and bankers’ acceptance (BA) letters in the money market.  It also facilitated nine repurchase transactions between seven commercial banks as part of its inter-bank market development. The CBL continues to promote an interbank market, money market, secondary market, and investor’s education as well as public awareness.  The CBL respects IMF Article VIII by refraining from implementing restrictions on payments and transfers for current international transactions. Many foreign investors prefer to obtain credit from and retain profits in foreign banking institutions.

Money and Banking System

Banking services within Liberia are provided by nine commercial banks, branch outlets including payment windows/annexes, a development finance company, and a deposit-taking microfinance institution.  Eight of the commercial banks are foreign banks. There are numerous intermediate financial services providers across the country, such as licensed foreign exchange bureaus, microfinance institutions, credit unions, rural community finance institutions, and village savings and loan associations.  The CBL reported growth in the commercial banks’ balance sheets in 2018. According to the CBL, total assets, total loans and advances, total deposit, and capital increased by 44 percent, 39 percent, 38 percent, and 44 percent, respectively. The industry’s liquidity ratio was recorded at 40 percent, and all commercial banks recorded liquidity ratios above the 15 percent regulatory minimum requirement in 2018.  However, these increases are partly attributed to the conversion effect of the U.S. dollar into Liberian dollars, which is the reporting currency. The CBL Annual Report 2018 can be found at: https://www.cbl.org.lr/  .  Although not addressed in the CBL’s report, commercial banks and businesses reported considerable difficulty in accessing Liberian dollars during the second quarter in 2018, including those saved by private individuals at commercial banks and by commercial banks at the CBL.  From August 2018 through late February 2019, the CBL directed banks to limit Liberian dollar withdrawals to no more than LRD 250,000 (about USD 1,500) per day per customer, including large businesses. Some commercial banks lowered their Liberian dollar deposits at the CBL by keeping more cash on hand to service customers.

The issue of non-performing loans (NPLs) remained a major challenge in the banking sector and continued to negatively impact profitability.  In 2018, the ratio of NPLs to total loans stood at 13.8 percent. Commercial banks face persistent challenges in profit generation and loan repayment.  There are no known restrictions on a foreigner’s ability to establish a bank account, and there is no currency control or restriction as to how much a customer can transfer out of Liberia through the banking system.  Foreign banks or branches are allowed to establish operations in Liberia, and are subject to prudential measures or other regulations set out by the CBL. 

Foreign Exchange and Remittances

Foreign Exchange Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g., remittances of investment capital, earnings, loans, lease payments, and royalties).  Liberian law allows for the transfer of dividends and net profits after tax to investors’ home countries. The Investment Act permits the unrestricted transfer of capital, profits, and dividends “through any authorized dealer bank in a freely convertible currency.”  Therefore, funds associated with any form of investment can be freely converted into any world currency. The CBL’s regulation concerning transfers of foreign currency stipulates that every business, entity, or individual wishing to make a foreign transfer of funds may do so without limitation of amount to be transferred.  However, the amount to be transferred must have been in an entity’s bank account for no less than three banking days prior to the transfer. Liberia has a floating exchange rate system with both LRD, known as “Liberty” notes, and USD used as legal tender. The exchange rate is determined by market supply and demand. The CBL displays and requires commercial banks to display indicative market exchange rates of the LRD vs. USD, and the rates largely fluctuate based on demand and supply.  The USD can be freely exchanged for LRD in commercial banks, licensed foreign exchange bureaus, petrol stations, and large supermarkets. It is advisable for foreign investors to conduct foreign exchange operations with commercial banks or established licensed forex bureaus. Unlicensed forex bureaus may not provide customers with a rate equal to that of the CBL.

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  ).

Remittance Policies

There are no recent changes to Liberia’s investment remittance policies to affect access to foreign exchange.  Generally, there are no legal time limitations on remittances or on the inflows or outflows of funds for remittances of profits or revenue.  Correspondent banking relationships are limited, and bank fees related to currency exchange and wire transfers can be high. In general, corporations can remit up to USD 1 million through commercial banks.  Transferring banks are required to file normal cash transaction reports with the CBL. Depending on the amount to remit and the bank(s), the wait-period to remit investment revenues ranges from a few hours to three business days.  However, individuals without a bank account are limited to two over-the-counter transfers of up to USD 5,000 within a 30-day period. The CBL has instituted thresholds for suspicious transactions for which banks must exercise customer due diligence and know your customer (KYC) rules.  The thresholds are USD 25,000 and above for individuals, and USD 40,000 and above for corporations. The channels through which remittances are sent in Liberia are Western Union, Money Gram, RIA Money Transfer, and wire transfer.

Sovereign Wealth Funds

The government does not maintain a Sovereign Wealth Fund (SWF) or other similar entity.

Policies Towards Foreign Direct Investment

The United Republic of Tanzania, according to Government officials, welcomes foreign direct investment (FDI) as it pursues its industrialization and development agenda.  However, in practice, government policies and actions do not effectively keep and attract investment. The 2018 World Investment Report indicates that FDI flows to Tanzania shrank by 14 percent in 2017 to USD 1.18 billion, a 24 percent decline from 2015.  Some concerns noted by stakeholders included difficulty in hiring foreign workers, reduced profits caused by unfriendly and opaque tax policies, increased local content requirements, regulatory/policy instability, lack of trust between the GoT and the private sector, and mandatory initial public offerings (IPOs) in mining and communication industries.

The United Republic of Tanzania does have framework agreements on investment, and offers various incentives and the services of investment promotion agencies.  Investment is mainly a non-Union matter, thus there are different laws, policies, and practices for the mainland and Zanzibar. However, international agreements on investment are covered as Union matters and therefore apply to both regions. 

The Tanzania Investment Center (TIC) is intended to be a one-stop center for investors, providing services to investors such as permits, licenses, visas, and land.  The Zanzibar Investment Promotion Authority (ZIPA) provides the same function in Zanzibar. In January 2019, the President moved the TIC from the Ministry of Industry, Trade, and Investment (MITI) to the Prime Minister’s Office (PMO) and appointed a Minister of State for Investment in the Prime Minister’s Office.  The move, part of Tanzania’s “2019: The Year of Investment” campaign, aims to improve the business climate by enabling better coordination and reduced bureaucracy. (See Chapter 4 for more information on TIC).

The Government of Tanzania has an ongoing dialogue with the private sector via the Tanzania National Business Council (TNBC), created in 2001.  TNBC meetings are chaired by the President of the United Republic of Tanzania and co-chaired by the head of the Tanzania Private Sector Foundation (TPSF).  Unfortunately, the TNBC has only met twice in the past four years. There is also a Zanzibar Business Council (ZBC) launched in 2005, and Regional Business Councils (RBCs) and District Business Councils (DBCs).  In April 2019, the new Minister of State for Investment announced she was launching a new series of forums with foreign investors, including U.S. investors. 

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors generally receive treatment equivalent to domestic investors but limits still persist in a number of sectors.  Tanzania conforms to best practice in several cases. There are no geographical restrictions on location for private establishments with foreign participation or ownership, no limitations on number of foreign entities that can operate in a given sector, and no sectors in which foreign investment approval is required for greenfield FDI and not for domestic companies. 

However, Tanzania discourages foreign investment by imposing limitations on foreign equity ownership or activity in several sectors, including aerospace, agribusiness (fishing), construction, and heavy equipment, travel and tourism, energy and environmental industries, information and communication, and publishing, media, and entertainment.  For example,

• Foreign companies may not provide tourism services like mountain guides, tour guides, car rental, or travel agency services, per the Tourism Act, 2008.
• Per the Merchant Shipping Act of 2003, only citizen-owned ships are authorized to engage in local trade (waiver by ministerial discretion), and the Shipping Agency Act states that only Tanzanians may be licensed as shipping agents.  Port services licenses are solely for citizen-owned Tanzania companies.
• The Fisheries (Amendment) Regulations, 2009 implies onerous conditions for foreigners to fish and export fishery products, and fishing licenses cost three times more for foreigners than locals, and foreigners can only deal with certain fish and fish products.
• Foreign construction contractors can only obtain temporary licenses, per the Contractors Registration Act of 1997, and contractors must commit in writing to leave Tanzania upon completion of the set project.  The Contractors Registration (Amendment) By- Laws, 2004 limit foreign contractors to specified, more complex classes of work.
• Foreign capital participation in the telecommunications sector is limited to a maximum of 75 percent. 
• All insurers require one-third controlling interest by Tanzania citizens, per the Insurance Act.
• The Electronic and Postal Communications (Licensing) Regulations 2011 limits foreign ownership of Tanzanian TV stations to 49 percent, and prohibits foreign capital participation in national newspapers. 
• Mining projects must be at least partially owned by the GoT and “indigenous” companies and hire, or at least favor, local suppliers, service providers, and employees.  (See Chapter 4: Laws and Regulations on FDI for details.). Gemstone mining is limited to Tanzanian citizens with a possible waiver by ministerial discretion. In February 2019, responding to low growth and investment in the sector, the government revised the 2018 Mining (Local Content) Regulations 2018 by reducing the local shareholder requirement from 51 percent to 20 percent.  

Currently, foreigners can invest in stock traded on the Dar es Salaam Stock Exchange (DSE), but only East African residents can invest in government bonds.  East Africans, excluding Tanzanian residents, however, are not allowed to sell government bonds bought in the primary market for at least one year following purchase.

Other Investment Policy Reviews

There have not been any third-party investment policy reviews (IPRs) on Tanzania in the past three years, the most recent OECD report is for 2013.  The World Trade Organization (WTO) published a Trade Policy Review in 2019 on all the East African Community states, including Tanzania. 

WTO – Trade Policy Review: East African Community (2019)
https://www.wto.org/english/tratop_e/tpr_e/tp484_e.htm

OECD – Tanzania Investment Policy Review (2013)
http://www.oecd.org/daf/inv/investment-policy/tanzania-investment-policy-review.htm  

WTO – Secretariat Report of Tanzania
https://www.wto.org/english/tratop_e/tpr_e/s384-04_e.pdf

UNCTAD – Trade and Gender Implications (2018)
https://unctad.org/en/PublicationsLibrary/ditc2017d2_en.pdf

Business Facilitation

The World Bank’s Doing Business 2019 Indicators rank Tanzania 144 out of 190 overall for ease of doing business, and 163rd for ease of starting a business.  There are 10 procedures to open a business, higher than the sub-Saharan average of 7.4. The Business Registration and Licensing Agency (BRELA) issues certificates of compliance for foreign companies, certificates of incorporation for private and public companies, and business name registration for sole proprietor and corporate bodies.  After registering with BRELA, the company must: obtain the taxpayer identification number (TIN) certificate, apply for a business license, apply for the VAT certificate, register for workmen’s compensation insurance, register with the Occupational Safety and Health Authority (OSHA), receive inspection from the Occupational Safety and Health Authority (OSHA), and obtain a Social Security registration number. 

The TIC provides simultaneous registration with BRELA, TRA, and social security (http://tiw.tic.co.tz/  ) for enterprises whose minimum capital investment is not less than USD 500,000 if foreign owned or USD 100,000 if locally owned. 

In May 2018, the government adopted the Blueprint for Regulatory Reforms to improve the business environment and attract more investors.  The reforms, which were developed as a collaborative effort between the Ministry of Industry, Trade and Investment and the private sector, seek to improve the country’s ease of doing business through regulatory reforms and to increase efficiency in dealing with the government and its regulatory authorities.  The Blueprint is largely pending implementation. 

Outward Investment

Tanzania does not promote or incentivize outward investment, and in fact, generally discourages capital flight.  There are restrictions on Tanzanian residents’ participation in foreign capital markets and ability to purchase foreign securities.  Under the Foreign Exchange (Amendment) Regulations 2014 (FEAR), however, there are circumstances where Tanzanian residents may trade securities within the East African Community (EAC).  In addition, FEAR provides some opportunities for residents to engage in foreign direct investment and acquire real assets outside of the EAC.

Investment Incentives

The TIC offers a package of investment benefits and incentives to both domestic and foreign investors without performance requirements.  A minimum capital investment of USD 500,000 if foreign owned or USD 100,000 if locally owned is required. These incentives include:

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

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

The government habitually introduces waivers through the Public Finance Act with the aim of attracting investment in certain targeted sectors. In Financial Year 2018/19, the government introduced a VAT exemption for the following items in order to encourage investment: Packaging materials produced for use by local manufacturers of pharmaceutical products; imported animal and poultry feeds additives; and sanitary pads. The government also introduced 100 percent tax amnesty on interest and penalties from July 1 to December 31, 2018 in order to encourage tax compliance among the business community.  

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

• An exemption from corporate taxes for 10 years.
• An exemption from duties and taxes on capital goods and raw materials.
• An exemption on VAT for utility services and on construction materials.
• An exemption from withholding taxes on rent, dividends, and interests.
• Exemption from pre-shipment or destination inspection requirements.
• SEZs offer similar incentives, excluding the 10 year exemption from corporate taxes.

The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar Free Economic Zones Authority (ZAFREZA) offer roughly equivalent incentives as those offered by TIC and EPZA policies.

Foreign Trade Zones/Free Ports/Trade Facilitation

Tanzania’s export processing zones (EPZs) and special economic zones (SEZs) are assigned geographical areas or industries designated to undertake specific economic activities with special regulations and infrastructure requirements.  EPZ status can also be extended to stand-alone factories at any geographical location. EPZ status requires the export of 80 percent or more of the goods produced while SEZ status has no export requirement, allowing manufacturers to sell their goods locally.  As of March 2018, there were 14 designated EPZ/SEZ industrial parks, 10 of which are in development, and 75 stand-alone EPZ factories.

Performance and Data Localization Requirements

The Non-Citizens (Employment Regulation) Act (see Section 12 Labor Policies and Practices below) requires employers to attempt to fill positions with Tanzanian citizens before seeking work permits for foreign employees, and to develop plans to transition to local employees.

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

The GoT requires banks to physically house their computer servers in Tanzania.  In 2016, the GoT launched a USD 94 million national data center (NDC), which is operated by the GoT’s Telecommunications Corporation (TTC).  Under the Tanzania Telecommunications Corporation (TTC) Act 2017, the TTC plans, builds, operates and maintains the “strategic telecommunications infrastructure,” which is defined as transport core infrastructure, data center and other infrastructure that the GoT proclaims “strategic” via official public notice.  It is not yet clear how the law will be implemented and whether telecommunications operators will be required to use the TTC’s data center or provide the TTC greater data access. 

Capital Markets and Portfolio Investment

Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly-owned company.  In 2013, the DSE launched a second tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential.  As of December 2017, DSE’s total market capitalization reached USD 10.5 billion, a 20.6 percent increase over the previous year’s figure. The Capital Markets and Securities Authority (CMSA) Act facilitates the free flow of capital and financial resources to support the capital market and securities industry.  Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.

Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities.  Despite progress, the country’s capital account is not fully liberalized and only foreign individuals or companies from other EAC nations are permitted to participate in the government securities market.  Even with this recent development allowing EAC participation, ownership of government securities is still limited to 40 percent of each security issued.

Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE.  Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval. In 2017, Vodacom planned to offer its shares from March 9 to April 19, but lack of demand required it to extend the offering period to July 28.  Moreover, to spur demand, the GoT opened the IPO to foreign investors who purchased 40 percent of the total shares offered.

As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018.  On February 24, 2017, however, the GoT surprised the industry by amending the regulations so that the 30 percent stake had to be floated by August 23, 2017, rather than October 7, 2018. However, some mining companies have not listed on the DSE.

Money and Banking System

Finscope’s 2017 Financial Inclusion Report revealed that Tanzania’s financial inclusion rate increased to 65 percent in 2017 from 58 percent in 2013, primarily because of increased mobile phone usage.  However, participation in the formal banking sector still remains low. In 2017, low private sector credit growth and high non-performing loan (NPL) rates were persistent problems. In March 2017, the Bank of Tanzania (BoT) cut its discount rate to 12 percent from 16 percent to boost lending and economic growth, the first time it had cut interest rates since 2013.  In April 2017, the BoT reduced commercial banks’ statutory minimum reserves (SMR) requirement from 10 to 8 percent. These measures did not adequately spur lending, so in August 2017, the BoT reduced its discount rate for the second time from 12 to 9 percent. Despite these measures, private sector credit growth was lower than expected and NPL rates in December 2017 remained more than double the BoT’s targeted 5 percent rate.

In 2018, the BoT continued to address problems in the banking sector.  In January 2018, the BoT closed five community banks for under capitalization and gave an additional three until June 2018 to raise capital.  In its February 14, 2018 Tanzania Country Partnership Framework FY18-FY22, the World Bank reported that Tanzania’s “financial sector is stable despite high nonperforming loans…, which must be addressed.”  In a February 19, 2018 Circular titled “Measures to Increase Credit to Private Sector and Contain Non-Performing Loans,” the BoT issued guidelines to boost lending and reduce NPLs.

As of March 31, 2018, the banking sector was composed of 41 commercial banks, 6 community banks, 5 microfinance banks, 3 development financial institutions, 3 financial leasing companies and 2 credit bureaus. The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market.  Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks.

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

Foreign Exchange and Remittances

Foreign Exchange Policies

Tanzanian regulations permit unconditional transfers through any authorized bank in freely convertible currency of net profits, repayment of foreign loans, royalties, fees charged for foreign technology, and remittance of proceeds. The only official limit on transfers of foreign currency is on cash carried by individuals traveling abroad, which cannot exceed USD 10,000 over a period of 40 days. Investors rarely use convertible instruments.

In 2018 and 2019, the Bank of Tanzania inspected all forex shops in the country and ultimately found that most of them did not meet the requirements of new laws governing the businesses.  As a result, more than ninety percent of the Forex bureaus in country were closed. The government then licensed the commercial banks and Tanzania Post Corporation to open forex shops.

Remittance Policies

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

Sovereign Wealth Funds

Tanzania has not established a sovereign wealth fund.

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.

Investment Incentives

The government is still formulating new investment incentives after the enactment of the new ICA.  The Public Private Partnership Act of 2015 creates a legal framework for the government to partner with private investors, both local and foreign, in financing investment in key sectors.  The government has undertaken joint ventures with foreign investors in key sectors such as oil and gas and infrastructure.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Uganda Free Zones Authority (UFZA) (https://freezones.go.ug/  ) regulates free trade zones, which offer a range of tax advantages.  The government’s process in awarding free zone status is not transparent, however.  There have been reports that corrupt individuals in government are allocating free trade zones in return for bribes.  UFZA has issued 20 Free Zone Licenses to 17 developers and three operators. In the first half of 2018-2019, the government estimates the value of exports through Free Zones at USD 93.6 million.

Performance and Data Localization Requirements

The new ICA does not impose any direct requirements regarding local employment and does not specify mandatory numbers for local employment in management positions.  The broadness of its provisions, however, arguably leaves the door open for enforcement of local employment requirements. The Petroleum Exploration, Development, and Production Act and the Petroleum Refining, Conversion, Transmission, and Midstream Storage Act may require investors in the oil sector to contribute to the creation of a local skilled Ugandan workforce.  Bureaucratic hurdles and inconsistent enforcement can make obtaining visas and work permits for foreign workers an onerous and expensive process. Foreign investors must have a license to invest in Uganda.

The government regularly moots local content laws.  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.  The new ICA provides for broad performance requirements, but is vague on enforcement action.

While there are no general requirements for foreign information technology (IT) providers to give the government any source code or information related to encryption, the National Information Technology Authority Act allows the Minister for Information, Communication and Technology to order an IT provider to submit any information to the National Information Technology Authority (NITA).  Similarly, the Computer Misuse Act allows the government to “compel a service provider…to co-operate and assist the competent authorities in the collection or recording of traffic data in real time, associated with specified communication transmitted by means of a computer system.” These regulatory powers apply to all IT providers, both foreign and local. There are no measures to prevent or unduly impede companies from freely transmitting customer or other business-related data outside of Uganda.  In 2017, however, the Bank of Uganda interpreted Uganda’s cyber security legislation as providing it with the mandate to require financial institutions to relocate their data centers to Uganda to provide the government with access to customers’ digital financial information. Citing customer privacy concerns, financial firms remain in negotiations with the Bank of Uganda over this policy.

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.

Policies Toward Foreign Direct Investment

In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below.  The country has affirmed its commitment to fostering private sector development and attracting FDI. FDI, which is monitored by the government, continues to play an increasing role in Zambia’s economy, contributing to increased capital inflows and overall investment.  FDI is facilitated through the Zambia Development Agency (ZDA), which is responsible for fostering economic growth and development in Zambia through promoting trade and investment and an efficient, effective, and coordinated private sector-led economic development strategy.

Zambia has undertaken institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses issues related to cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses some issues relating to transparency and good governance.  However, frequent government policy changes create uncertainty for foreign investors. Recent examples include: a planned, rapid transition from a value-added tax regime to a sales tax currently projected to take effect on July 1, 2019; taxes and royalty increases in the mining sector that took effect on January 1, 2019 and mark the 10th significant change to mining taxes and regulations in 16 years; and constant and unpredictable limits on various crop exports.

Limits on Foreign Control and Right to Private Ownership and Establishment

The ZDA does not discriminate against foreign investors, and all sectors are open to both local and foreign investors.  Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activities, and no business ventures are reserved solely for the government.  Although private entities may freely establish and dispose of interests in business enterprises, investment board approval is required to transfer an investment license for a given enterprise to a new owner.

Currently, all land in Zambia is considered state land and ownership is vested in the president; there is no private land in the country.  Land titles held by foreigners are for 99-year state leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities.  The government began reviewing the current land policy in earnest in March 2017. The resulting draft land policy would assert more central government control over traditional lands and seeks to reduce the lease tenure on foreign-owned properties from 99 years to renewable terms of 25 years.  Both traditional chiefs and foreign investors have objected to terms in the draft bill, which has not been presented to Parliament and is currently with the Ministry of Lands for further stakeholder consultation.

Foreign investors in the telecom sector are required to disclose certain proprietary information to the ZDA as part of the regulatory approval process.  Further information regarding information and communication regulation can be found at the website of the Zambia Information and Communication Technology Authority at  http://www.zicta.zm  .

The ZDA board screens all investment proposals and usually makes its decision within 30 days. The reviews appear routine and non-discriminatory and applicants have the right to appeal the investment board decisions.  An investment application is screened to determine: the extent to which the proposed investment will help create employment; the development of human resources; the degree to which the project is export-oriented; the likely impact on the environment; the possible technology transfer; and any other considerations the Board considers appropriate.

The following are the requirements for registering a foreign company in Zambia:

1. At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company.  At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
2. There must be at least one documentary agent (a firm, corporate body registered in Zambia or an individual who is a resident in Zambia).
3. A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
4. The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
5. The Registration Fee of K4,166 (~ USD 348.00) must be paid.
6. The issuance and sealing of the Certificate of Registration marks the end of the process for registration.

This information can also be found at the web address of the Patents and Companies Registration Agency (PACRA), http://www.pacra.org.zm  .

Other Investment Policy Reviews

The Organization for Economic Co-operation and Development (OECD) conducted its first review in sub-Saharan Africa on the basis of the OECD Policy Framework for Investment in Zambia in 2012.  The OECD review made the following recommendations regarding Zambia’s investment environment: 1) develop a harmonized national investment policy; 2) take better advantage of the investment promotion and facilitation options available; 3) undertake a cost-benefit analysis with regard to fiscal incentives; 4) improve the consultative mechanisms for policy development; 5) strengthen the framework for Public-Private Partnerships (PPPs); 6) strengthen the oversight and enforcement mechanisms of the regulatory framework; and 7) develop mechanisms to channel industry demands for human resource development.

Following the review, the government began an ongoing process to consider new investment reforms, including development of a harmonized investment policy and a review of its tax incentive system and framework for PPPs.  In 2016, the government, under the leadership of the Ministry of Commerce, Trade, and Industry, adopted an industrial policy to support and accelerate industrialization in Zambia. The policy addressed issues of productive capacity for enterprises to promote the production and consumption of local content.  Zambia has also committed to develop a Green Growth Strategy that makes sustainable and equitable use of Zambia’s natural resources within ecological limits.

Report found here: http://www.oecd.org/daf/inv/investment-policy/zambia-investmentpolicyreview-oecd.htm  

The GRZ conducted a trade policy review through the World Trade Organization (WTO) in June 2016.  The report found that Zambia recorded relatively strong economic growth at an average rate of 6.6 percent per year up to 2015.  The improvement was attributed to growing demand for copper (the main export product) and its spillover effects on some other sectors such as transport, communications, and wholesale and retail trade.  Buoyant construction activity and higher agricultural production also helped.

The trade policy review report of 2016 reached the following conclusions: the government will continue to implement programs and initiatives directed at attaining inclusive growth and job creation and pay particular attention to macroeconomic stability, diversification of the economy, support to small and medium enterprises (SMEs), engagement with cooperating partners, and promotion of investment.  Zambia is committed to continue to use bilateral, regional, and multilateral frameworks to support the growth and development of the economy.

Report found here: https://www.wto.org/english/tratop_e/tpr_e/tp440_e.htm  

Business Facilitation

The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support transparent policymaking and to encourage competition.  The impact of these progressive policies, however, has been undermined by persistent fiscal deficits and widespread corruption. Business surveys generally indicate that corruption in Zambia is a major obstacle for conducting business in the country. Given these reasons, companies prefer using a specialized public procurement due diligence tool in order to help mitigate the costs and risks of corruption involving public procurement processes in Zambia.

The Zambian Business Regulatory Review Agency (BRRA) has responsibility for Regulatory Services Centers (RSCs) that serve as a one-stop shop for investors.  RSCs provide for an efficient regulatory clearance system by streamlining business registration processes; providing single licensing system; reducing the procedures and time it takes to complete the registration process; and increasing accessibility of business registration institutions by placing them under one roof.

With an RSC, an investor need contact only one entity to obtain all the necessary paperwork in one streamlined and coordinated process.  This means investors, both local and foreign, are provided with centralized organizations that tend to their needs comprehensively, without having to move from one stakeholder agency to another.  The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:

• http://www.brra.org.zm/index.php/656-2/  
• http://www.brra.org.zm/index.php/single-licensing-system-2/  

The Companies Act No. 10 of 2017 was operationalized through a statutory instrument (June 2018) and implementing regulations (February 2019) aimed at fostering accountability and transparency in the management of companies.  Companies are now required to maintain a register of beneficial owners, and persons holding shares on behalf of other persons or entities must now disclose those beneficial owners.

In order to facilitate improved access to credit, the Patents and Company Registration Office (PACRA) established the collateral registry system, a central database that records all registrations of charges or collaterals created by borrowers to secure credits provided by lenders.  This service allows lenders to search for collateral offered by loan applicants to see if that collateral already has an existing claim registered against it.  Creditors can also register security interests against the proposed collateral to protect their priority status in accordance with the Movable Property (Security Interest) Act No. 3 of 2016.  Generally, the first registered security interest in the collateral has first priority over any subsequent registrations.

Parliament passed the Border Management and Trade Facilitation Act in December 2018.  The Act, among other things, calls for coordinated border management and control to facilitate the efficient movement and clearance of goods; puts into effect provisions for one-stop border posts; and simplifies clearance of goods with neighboring countries.  While one-stop border posts have existed for several years and agencies are co-located at some border crossings, agencies still had conflicting regulations and processes. The new law seeks to harmonize outstanding issues.

Outward Investment

Through the ZDA, the government continues to undertake a number of activities to promote investment through provision of fiscal and non-fiscal incentives, establishment of Multi-Facility Economic Zones (MFEZs), the development of SMEs, as well as the promotion of skills development, productive investment, and increased trade.  However, there is no incentive for outward investment nor is there any known government restriction on domestic investors from investing abroad.

Investment Incentives

The ZDA Act provides for a number of incentives available to both local and foreign investors.

Under the Income Tax Act, Chapter 323 or the Customs and Excise Act, Chapter 322, investors who invest not less than USD 500,000 in an MFEZ, an industrial park, a priority sector, or invest in a Rural Enterprise under the ZDA Act, are entitled to the following fiscal incentives:

1. A corporate tax rate of 0 percent for 5 years from commencement of operations.
2. Taxation on only 50 percent of profits in year 6 through year 8 from commencement of operations and only 75 percent for years 9 and 10.
3. 5-year exemption on dividend taxes following the first year of declaration.
4. 5-year customs duties exemption on imported machinery and equipment.
5. Improvement allowance of 100 percent of capital expenditure on improvements or upgrading of infrastructure.

In addition to fiscal incentives, the above category of investors, along with those who invest an amount not less than USD 250,000 in any sector or product not provided for as a priority sector or product under the Act, are entitled to investment guarantees and protection against state nationalization along with free facilitation for application of immigration permits, secondary licenses, land acquisition, and utilities.  For major investments, the Minister of Finance may specify additional incentives for investment in an identified sector or product of not less than USD 10 million or equivalent in convertible currency in new assets that qualify for those incentives.

During the presentation of the 2018 national budget, the Minister of Finance proposed discontinuing the five-year income tax holidays provided under the ZDA Act.  Instead, the Minister proposed accelerated depreciation for capital expenditure in an effort to safeguard government revenues eroded through tax holidays. The proposal was criticized by foreign investors, and has led to some investors putting the brakes on additional investment in the country.  The proposal to discontinue the five-year income tax holiday is not yet enacted.

Foreign Trade Zones/Free Ports/Trade Facilitation

An investor may apply to be appointed and licensed by the Commissioner General to establish and operate a bonded factory under Section 65 of the Customs and Excise Act.  In early 2007, the GRZ announced the creation of MFEZs in which investors enjoy waivers on customs duty on imported equipment, excise duty, and value added tax, among other concessions.  It is currently unclear if the government will maintain these incentives (see Investment Incentives section).

There are three MFEZs currently operating: the Chambishi MFEZ in Copperbelt Province and the Lusaka East MFEZ located near Lusaka’s international airport, both of which are heavily (if not exclusively) dominated by Chinese-owned enterprises; and the Lusaka South MFEZ, which has a mix of multi-national firms.  Foreign-owned firms enjoy the same investment opportunities as domestic firms in MFEZs. The ZDA Act is the primary legislation for investment in Zambia. An investor, foreign or local, is free to identify and suggest any other location in the country deemed economical for MFEZ development, although the government has prioritized designated areas in Lusaka, Ndola, Mpulungu, Chembe, Nakonde, Kasumbalesa, and Mwinilunga.  Investors are encouraged to provide local employment and skills transfer to local entrepreneurs and communities. Investors are also encouraged to utilize local raw materials and intermediate goods and engage in technology transfer to qualify to operate in an MFEZ.

Zambia is active in several key regional organizations that promote regional trade and regulatory harmonization.  COMESA launched its FTA in October 2000 and established a customs union in June 2009. The top five intra-COMESA exports from Zambia include tobacco, raw sugarcane, wire, refined copper, and cement.  The SADC Protocol on Trade came into force in 2008. The Trade Protocol promotes regional integration through trade development and develops natural and human resources for the mutual benefit of their people.  Trade among SADC member states is conducted on reciprocal preferential terms. Rules of Origin define the conditions for products to qualify for preferential trade in the SADC region. Products have to be “wholly produced” or “sufficiently processed” in the SADC region to be considered compliant with the SADC Rules of Origin.  The SADC Rules of Origin are product-specific and not generic, like the Rules of Origin for COMESA.

COMESA, the EAC, and SADC member states agreed in October 2008 to negotiate a Tripartite Free Trade Area (TFTA) covering half of Africa.  The Tripartite Free Trade Area (TFTA) was launched in June 2015 in Egypt; to date, Zambia is one of the 22 out of the 27 member states which have signed the agreement.  The Agreement will enter into force once it has been ratified by 14 Member States. Only Egypt and Uganda have ratified the Agreement thus far. In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA); it must still be ratified by Parliament.  The trade agreement between 49 African Union member states plans to create a single market, followed by the free movement of people and a single-currency union; much work remains to develop implementation protocols and mechanisms continent-wide. The TFTA and AfCFTA declaration have yet to enter into effect.

Zambia performs better than the average sub-Saharan African and lower middle income countries in the areas of information availability, involvement of the trade community, appeal procedures, and automation, according to OECD trade facilitation indicators.   Zambia’s performance for internal border agency co-operation and governance and impartiality is below average for sub-Saharan African and lower middle income countries.

Performance and Data Localization Requirements

Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.  Foreign contractors bidding on infrastructure projects are required by law to give 20 percent of works to Zambian small contractors. Outside of infrastructure projects, no requirements currently exist for data localization, local content, equity, financing, employment, or technology transfers.  However, in January 2018 the government issued a Statutory Instrument (SI) instructing all industries to transport 30 percent of their cargo by rail. The government does not impose offset requirements or impose conditions on permission to invest in a specific geographic area or local content, but investors are encouraged to employ local nationals.  There is no legal definition of local content, and the most comprehensive local content legislation is contained in the Mines and Minerals Development Act of 2008. The Citizens Economic Empowerment Act of 2006 and Statutory Instrument of 2008 also contain local content provisions.

The GRZ favors the use of local workers for unskilled labor as well as for skilled middle or senior management workers.  Under the ZDA Act, any foreign investor who invests a minimum of USD 250,000 or its equivalent and employs a minimum of 200 employees at certain technical or managerial levels is entitled to a self-employment permit or resident permit.  The ZDA assists the qualifying investor to obtain work permits for up to five expatriate employees. In practice, however, some foreign companies, especially smaller-scale investors, have had difficulty securing these permits. Any entry permit holder can apply for a dependent’s pass for each of his dependents.  The government is considering limiting foreigners to obtain work permits only for rare skills not found in Zambia. While not yet implemented, the GRZ has at times denied work permits or work permit renewals. The ZDA is also in the process of developing standards regarding investment performance benchmarks that it seeks to establish within an MFEZ to assist the government in monitoring company performance against the commitments made when investment incentives are granted.

The GRZ encourages investors where possible to use domestic content in goods or technology if available.  In 2017 the government started the formulation of a local content strategy to promote inclusive and sustainable growth through increased use of locally available goods and services in development sectors.  According to the Ministry of Commerce, Trade, and Industry, once the strategy is developed, a law will be passed to compel businesses to use a certain percentage of local inputs and products in the production and provision of goods and services.  In a speech to Parliament in March 2018, the president criticized a perceived influx of foreign workers into Zambia’s mining industry; the government has announced it will conduct a month-long review of foreign labor quotas in the sector. The move follows sustained opposition to working practices by domestic unions and civil society organizations.

While this was not the first time that scrutiny of foreign labor has surfaced as a strategic issue for the government, the latest review is a reminder of the burgeoning pressures that continue to underpin sector management and policymaking.  To date, the current administration has adopted a relatively pragmatic approach to managing the mining sector’s fiscal and regulatory framework, acknowledging the challenging commercial conditions for some mining companies, and the need for stability in the operating environment.

Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance.  The telecommunications sector is governed by the Information and Communications Technology Act No. 15 of 2009 (ICT Act) and falls under the Ministry of Communications and Transport.

The government strives to be consistent with Trade Related Investment Measures (TRIMs) requirements and generally abides by the WTO’s TRIMS obligation.  Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.

Capital Markets and Portfolio Investment

Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market.  Banking supervision and regulation by the Bank of Zambia (BoZ) has improved slightly over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training of and incentives for bank supervisors.  High domestic lending rates and the limited accessibility of domestic financing constrain business. High returns on government securities encourage commercial banks to invest heavily in government debt to the exclusion of financing productive private sector investments.

The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations.  There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds.  Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas.  As of the beginning of 2018, there are 22 companies listed on the LuSE with a portfolio worth about K63 billion (USD 6.6 billion).

Existing policies facilitate the free flow of financial resources into the product and factor markets.  The government and the BoZ respect IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Credit is allocated on market terms and foreign investors can get credit on the local market, although local credit is relatively expensive and most investors therefore prefer to obtain credit outside the country.

Money and Banking System

The financial sector is comprised of three sub-sectors according to financial sector supervisory authorities.  The banking and financial institutions sub-sector is supervised by the BoZ, the securities sub-sector by the SEC, and the pensions and insurance sub-sector by the Pensions and Insurance Authority.  Zambia’s banking sector is considered relatively well-developed in the African context, but the sector remains highly concentrated. There are currently 19 banks in Zambia with the largest four banks holding nearly two-thirds of total banking assets.  The dominance of the four largest banks in deposits and total assets has been diluted by increased market capture of smaller banks and new industry entrants, an indication of growing competitive intensity in this segment of the banking market. Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market.  There continued to be a steady increase in electronic banking and related services over the last few years. As stated above, banking supervision and regulation by the BoZ has improved slightly over the past few years. The Banking and Financial Services Act, Chapter 387, and the Bank of Zambia Act, Chapter 360, govern the banking industry.

The BoZ’s current policy rate, as of February 2019, is 9.75 percent.  The commercial lending rate ranged between 23 and 26 percent as of 2018, among the highest in the region.  The persistence of high interest rates led the government to urge commercial banks to reduce their lending rates in order to stimulate private sector growth and the economy as a whole.  One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) in the sector are growing with some estimates as high as 15 percent.  The government itself is a contributor as it is in arrears of about USD 1.3 billion to many contractors who reportedly hold a high percentage of the NPLs.

Lender data reporting remains erratic and credit rating information is not widely available.  In addition, high returns on government securities encourage commercial banks to invest heavily in government debt, to the exclusion of financing productive private sector investments.  Banking officials acknowledge that they need to upgrade the risk assessment and credit management skills within their institutions in order to better serve borrowers. At the same time, they argue that widespread financial illiteracy limits borrowers’ ability to access credit.  Banks provide credit denominated in foreign currency only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.

To operate a bank in Zambia, the bank must be licensed by the Registrar of Banks, Financial Institutions, and Financial Businesses (“the Registrar”) whose office is based at the BoZ.  The decision to license banks lies with the Registrar. Foreign banks or branches are allowed to operate in country as long as they fulfill BoZ requirements and meet the minimum capital requirement of USD 100 million for foreign banks and USD 20 million for local banks.  According to the BoZ, many banks in the country have correspondent banking relationships; it is difficult to assess how many there are or whether any bank has lost any correspondent banking relationships in the past three years. It is also difficult to analyze if any of those correspondent relationships are currently in jeopardy as the daily management of those relationships are carried out by the individual banks and not by the BoZ.

The Non-Bank Financial Institutions (NBFIs) are licensed and regulated in accordance with the provisions of the Banking and Financial Services Act of 1994 (BFSA) and related Regulations and Prudential Guidelines.  As key players in the financial sector, NBFIs are subject to regulatory requirements governing their prudential position, consumer protection, and market conduct in order to safeguard the overall soundness and stability of the financial system.  The NBFIs comprise 8 leasing and finance companies, 3 building societies, 1 credit reference bureau, 1 savings and credit institution, 1 development finance institution, 80 bureau de change, 1 credit reference bureau, and 34 micro-finance institutions.

Private firms are open to foreign investment through mergers and acquisitions.  The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission.  Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not, however, have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.  In the past decade, some mergers and acquisitions include Bharti Airtel’s purchase of Zain/Celtel Zambia, the acquisition of a huge U.S. multinational energy corporation’s assets in Zambia by Engen Petroleum, a large U.S. retailer takeover of Game Stores through the acquisition of Massmart Holdings Limited of South Africa, Barrick Gold Corp takeover of Equinox Lumwana Copper Mines, the purchase of BP shares in Southern Africa, including BP Zambia, by Puma Energy, the Jinchuan Group Limited takeover of Metorex Chibuluma Copper Mine, Atlas Mara’s acquisition of Finance Bank Zambia and subsequent combination with BANC ABC, and private equity house EMR Capital’s purchase of eighty percent of indirect interest in Lubambe Mine, held equally by African Rainbow Minerals (ARM) and Vale International.

Foreign Exchange and Remittances

Foreign Exchange Policies

There are currently no restrictions or limitations placed on foreign investors converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, and lease payments) into freely usable currency and at a legal market-clearing rate.  Investors are free to repatriate capital investments, as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia. Funds associated with investments can be freely converted into internationally convertible currencies.  The BoZ pursues a flexible exchange rate policy, which generally allows the currency to freely float, though it has intervened heavily to support the local currency, the kwacha, in 2014 to 2016. Transfers of currency are protected by IMF Article VII.

In March 2014, the government announced the revocation of SI Number 33 (mandating use of the kwacha for domestic transactions) and SI Number 55 (monitoring foreign exchange transactions).  The government experienced challenges implementing these statutory instruments and – along with problems of fiscal management and weakening global copper prices – the SIs were perceived as undermining confidence in Zambia’s economy and currency, leading to sharp depreciation of the kwacha.  The decision to revoke the SIs was widely praised in the business community. The kwacha, however, has remained weak in historical terms against the dollar and in early April 2019 was trading between 12-12.5 kwacha per dollar.

Over-the-counter cash conversion of the kwacha into foreign currency is restricted to a USD 5,000 maximum per transaction for account holders and USD 1,000 for non-account holders.  No exchange controls exist in Zambia for anyone doing business as either a resident or non-resident. There are no restrictions on non-cash transactions. The exchange rate of the Zambian national currency is mostly determined by market forces; because the volume and value of exports from Zambia are overwhelmingly related to the extractive industries sector, mining companies’ financial transactions play a major role in exchange rate determination.

Remittance Policies

There are no recent changes or plans to change investment remittance policies that tighten or relax access to foreign exchange for investment remittances.  There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into freely usable currency at the legal market clearing rate.  Foreign investors can remit through a legal parallel market, including one utilizing convertible, negotiable instruments such as dollar-denominated government bonds issued in lieu of immediate payment in dollars. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue and there is no evidence to show that Zambia manipulates the currency.  Zambia is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which conducted an assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CTF) measures in Zambia in November 2007. ESAAMLG coordinates with other international organizations concerned with combating money laundering, studying emerging regional typologies, developing institutional and human resource capacities to deal with these issues, and coordinating technical assistance where necessary.  Zambia has demonstrated commitment to establish an AML/CTF framework. The enactment of the Prohibition and Prevention of Money Laundering Act and the Anti-Terrorism Act, establishment of the Anti-Money Laundering Investigations Unit and the Financial Intelligence Center as the sole designated national agencies mandated to handle AML/CTF and other serious offences, and September 2018 accession to the Egmont Group reflect this commitment.

Sovereign Wealth Funds

The GRZ had planned to launch a Sovereign Wealth Fund (SWF) following the 2015 reincorporation of the Industrial Development Corporation (IDC) as the parastatal holding company, but has yet to establish the fund.