2023 Investment Climate Statements: Sao Tome and Principe

Policies Towards Foreign Direct Investment

According to Article 4 of the Investment Code, both domestic and foreign investors are free to establish and own business enterprises, as well as engage in all forms of business activity in STP, except in the sectors defined by law as reserved for the state, specifically military and paramilitary activities, and Central Bank operations. STP is gradually moving towards open competition in all sectors of the economy, and competitive equality is the official standard applied to private enterprises in competition with public enterprises regarding access to markets, credit, and other business activities. The government has eliminated former public monopolies in farming, banking, insurance, airline services, telecommunications, and trade (export and import).

São Tomé and Príncipe is taking steps toward sustainable economic growth. Its economic prospects depend on the government’s ability to reinforce the capacity of its small and medium-sized enterprises (SMEs) and attract sustainable foreign direct investment. Therefore, the government is eager to improve the country’s investment climate, including by modernizing the justice system and restoring infrastructure to make it a more attractive destination for foreign investors. Under Article 14 of the Investment Code, the State guarantees equal and non-discriminatory treatment to both foreign and domestic investors operating in the country. The Trade and Investment Promotion Agency (APCI), housed in the Ministry of Planning, Finance, and Blue Economy, promotes and facilitates investment through a “single window” service and multi-sectoral coordination. However, the agency is still struggling to fully comply with its mandate due to a lack of capacity.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are no limits on foreign ownership or control except for activities customarily reserved for the state. The form of public participation, namely the percentage of government ownership in joint ventures, varies according to the agreement. Based on Article 8 of the Regulation of the Investment Code, all inbound investment proposals must be screened and approved by the applicable ministry for the economic sector in coordination with APCI. According to Article 14, an investment proposal can be rejected if it threatens national security, public health, or ecological equilibrium, and if the proposal has a negative effect or insufficient contribution to country’s economy. The government encourages but does not require the hiring of the local workforce.

Other Investment Policy Reviews

STP is not a member of the Organization for Economic Cooperation and Development (OECD) and has not participated in in any investment policy reviews conducted by the body. Neither the World Trade Organization (WTO) nor United National Conference on Trade and Development (UNCTAD) has conducted a review. STP has also not received a visit from the Office of the High Commissioner on Human Rights Working Group on Business and Human Rights.

Business Facilitation

STP has taken steps to facilitate investment and improve the business environment in recent years. The Millennium Challenge Corporation (MCC) worked with STP from 2007 to 2011 on a Threshold Country Program to improve investment opportunities, including by creating a “one-stop shop” to help encourage new investments by making it easier and cheaper to import and export goods, reducing the time required to start a new business, and improving STP’s tax and customs clearance administration. Currently a business can be registered within one to five days. In 2013, with the support of the International Trade Center, the Trade and Investment Promotion Agency (APCI) was created. APCI’s business facilitation services, including a “one-stop shop” for business registration, offer equal treatment for women and underrepresented minorities in the economy; however, there is no special assistance provided to these groups. A Single Window website  (in Portuguese only) provides information and the application form needed to create and register a company in STP. Information on tax administration can be requested from the Tax Directorate  in the Ministry of Planning, Finance and Blue Economy. While the National Institute for Social Security  in the Ministry of Health and Social Affairs provides information on social security.

The visa application process is straightforward and transparent, and visas or work permits are typically easy to obtain if companies meet all the requirements. Nevertheless, few São Toméan embassies worldwide process visa applications. The country lifted visa requirements for citizens of the United States, EU, Canada, UK, South Africa, Rwanda, and the Community of Portuguese Language Countries. U.S. passport holders can stay up to 15 days without a visa. In addition, any foreign citizen holding a valid passport with a valid Schengen or U.S. visa can enter and stay in the country up to 15 days. STP recently began accepting online visa applications . Visa applications can also be done via email  or in person. In March 2022, the government approved a decree stating that effective June 1, 2022, visa-exempt visitors must pay an entry fee of STN 500 (roughly USD 23). The government lifted all Covid-19 related travel measures, including a negative test and vaccine certificate requirement for entry in August 2022.

Outward Investment

While STP’s government does not actively promote outward investment, it does not restrict domestic investors from investing abroad. STP also has signed Investment Protection Agreements with several countries.

Transparency of the Regulatory System

The laws and regulations that affect direct investment, including environmental, health, and safety rules and regulations, apply equally to foreign and domestic firms. Before approval, investment proposals are evaluated for their environmental impacts by the Ministry of Environment and for their social impacts by the Ministry of Social Affairs and the Ministry of Finance. STP’s tax laws reward citizens who return to STP to invest, while also containing provisions for attracting foreigners to invest in STP. The STP legal code is based on Portuguese law, and laws and regulations are applied at the national level. Rule-making and regulatory authority exist at the national level and regulations are developed at the ministerial level, approved by the National Assembly, and promulgated by the President. The ministry concerned is responsible for any regulatory enforcement mechanisms. Rarely, draft bills or regulations are made available for public comment. Copies of most regulations can be purchased online at https://www.legis-palop.org/  or directly at the Ministry of Justice, Public Administration, and Human Rights in the format of the Official Gazette. The public finances and debt obligations are relatively transparent and are periodically available on the Ministry of Finance website: https://financas.gov.st/ 

International Regulatory Considerations

STP is a member of the Economic Community of Central African States (ECCAS), whose fundamental goals are to promote exchange and collaboration among the member countries and provide an institutional and legal framework to their cooperative efforts. In the last Africa Regional Integration Index (2019), STP had an average score for integration within the regional economic community, including on trade, infrastructure, and free movement of people. ECCAS is the largest economic community in Central Africa, including Central African Economic and Monetary Community (CEMAC) member states (Cameroon, the Central African Republic, Chad, Republic of Congo, and Equatorial Guinea, and Gabon), as well as Burundi, the Democratic Republic of Congo, Angola, Rwanda, and STP. STP is also a member of the Community of Portuguese Language Countries (CPLP) and its economic confederation (CE). STP is not a member of the WTO, but it does have observer status. STP is among the 46 African Nations to have signed the agreement on African Continental Free Trade Area (AfCFTA), having signed in March 2018 in Kigali, Rwanda, and became the 25th African country to ratify the AfCFTA in June 2019.

Legal System and Judicial Independence

The legal system is based on Portuguese civil law with elements of customary law. Investment disputes are generally solved through dialogue or negotiations between parties without litigation. However, in January 2023, the government suspended a ports concession agreement signed in August 2022 between the previous government and the Ghanaian Consortium Safebond. The agreement would have granted Safebond a 30-year management agreement for the existing port in Sao Tome (Ana Chaves) and port in Principe (Santo António), and Safebond pledged to build a US $400 million to $500 million deep seaport within five years’ time. In February 2023, Safebond filed a complaint against the government through the Supreme Court asking for a reversal of the new government’s decision, alleging that Safebond was accumulating enormous losses.

There have been a few instances of disagreements involving foreign investors reaching international courts, though the most recent case, involving the government and Portuguese-owned National Investment Bank was dismissed by the UN Commission on International Trade Law (UNCITRAL) and the Permanent Court of Arbitration in 2021. The country has a written commercial law but does not have specialized courts, so commercial cases are tried by the country’s civil courts.

Per article 121 of the constitution, which dates to 1975 and was most recently updated in 2003, “the courts are independent and subject only to the laws.” However, the direct appointment of judges by the National Assembly creates space for ruling party influence Article 40 of the constitution provides for fair trials, but the judicial process is subject to manipulation on occasion. All regulations or enforcement actions are appealable to the Supreme Court.

Laws and Regulations on Foreign Direct Investment

The Value-Added Tax (VAT) Law (13/2019) approved in 2019 will be in force from June 1, 2023, and the government  is working closely with the IMF  to implement the VAT system. The VAT rate will be 15 percent, while items in the basic basket of goods will be taxed at a rate of 7.5 percent. Additionally, a special rate of 2 percent will be applied for companies that have a business volume of less than 100,000 dobras ($4,470), with a rate of 7 percent for companies earning between 100,000 and 1 million dobras ($4,470 – $44,654) per year.

A modern Labor Code (6/2019) enacted in April 2019, is designed to make labor standards easier for investors to understand and implement. In June 2019, STP ratified the African Continental Free Trade Area agreement (AfCFTA). The Public Private Partnership (PPP) Law, the new Notary Code, and the Commercial Register Code all entered into force in 2018; the Regulation of Investment Code was adopted in 2017; and the Investment Code and Code of Fiscal Benefits and Incentives were adopted in 2016. The Trade and Investment Promotion Agency (APCI) is a one-stop shop for all investment information.

Following the creation of APCI, the cost and waiting period to start a new business have been substantially reduced. A new business can obtain expedited registration within 24 hours for an increased fee and otherwise within five days. The fee schedule based on the type of business to be created follows:

• Limited liability companies, between 3-5 days for STN 4,015 (US $178) or within 24 hours for STN 5,761 (US $256).
• Private limited companies between 3-5 days for STN 6,015 (US $267) or within 24 hours for STN 8,765 (US $390).
• Joint-stock companies between 3-5 days for STN 15,000 (US $667) or within 24 hours for STN 22,265 (US $989).

Although no online business registration process exists, companies can register their businesses at the Single Window (GUE) counter in person with the process spanning between one and five days. The following is a general description of how a foreign company can establish a local office:

1.  Provide full company documentation, translated into Portuguese. The GUE sends this information to the Ministry of Justice ahead of the next step.
2. Check the uniqueness of the proposed company name and reserve a name.
3. Notarize the company statutes with the registration office at the Ministry of Justice.
4. File a company declaration with the Tax Administration Office at the Ministry of Finance, Commerce, and Blue Economy.
5. Register with the Social Security Office at the Ministry of Labor and Social Affairs.
6. Publish the incorporation notice in the official government gazette (Diário da República).
7. Publish the incorporation notice in a national newspaper.
8. Register the company with the Commercial Registry Office at the Ministry of Finance, Commerce, and Blue Economy.
9. Apply for a commercial operations permit (also known as an “alvara”), issued by the Directorate of Commerce.
10. Apply for a taxpayer identification number with the Office of Tax Administration at the Ministry of Finance, Commerce, and Blue Economy.
11. Register employees with the Social Security Office.

Other required documents include: 1) copies of the by-laws of the parent company and of the minutes of the meeting of the board of directors in which the opening of the STP branch is approved; 2) a certificate of appointment of the general manager for the STP office; 3) a copy of any agreement signed with a São Toméan company or with the STP government; 4) two copies of permits from the court granting authorization to operate; and 5) two photographs and a copy of the passport of the general manager.

In addition, the Single Window website  ( http://www.gue-stp.net/spip.php?article24 ; in Portuguese only) provides information on creating and registering companies in STP.

Beyond the APCI’s “one-stop shop,” there are no agencies or legal brokers that provide services to further simplify the procedures for establishing an office in STP. Generally, foreign companies consult with a law firm for assistance.

Competition and Antitrust Laws

The Directorate of Regulation and Control of Economic Activities (DRCAE) has the mandate to inspect all economic activities and impose penalties, but it lacks the resources necessary to fully perform its duties. DRCAE is housed under the Ministry of Planning, Finance and Blue Economy.

The General Regulatory Authority of the Democratic Republic of São Tomé and Príncipe (AGER) was created to promote competition and prevent operator abuses in the water, electricity, and telecommunications sectors, as well as for the postal service. The AGER was established in 2005 and is housed under the Ministry of Infrastructure, Natural Resources, and Environment.

Expropriation and Compensation

The STP Constitution and the Expropriation Code allows only the central government to expropriate private property. The law permits expropriation of private property only if it is deemed to be in the national public interest and only with adequate compensation. There is no evidence to suggest that the government would undertake expropriation in a discriminatory manner or in violation of established principles of international law and standards.

Aside from a massive land expropriation from colonial farmers in 1976 – later recognized by the government as detrimental to STP’s economy – there have not been any documented cases of expropriation of foreign-owned properties. The government has reportedly considered expropriating land to expand the runway at the international airport, but thus far has reportedly been reluctant to do so out of concern that expropriation will deter new investment.

Dispute Settlement

ICSID Convention and New York Convention

STP is a member of the International Centre for the Settlement of Investment Disputes (ICSID) Convention and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

STP does not have a Bilateral Investment Treaty with the United States. In February 2023, a Ghanaian port administration consortium filed a complaint against the STP Government in the Supreme Court against the STP government for suspending a 30-year port concession agreement signed with the previous government in 2022. In May 2018, a dispute between a local businessperson and an Angolan investor over a brewery led to government intervention and the unconstitutional approval of a parliamentary resolution dismissing Supreme Court Judges, including the court’s President. There are no reports of investor-state disputes involving a U.S. person in the past 10 years. STP courts recognize and enforce foreign arbitral awards issued against the government.

International Commercial Arbitration and Foreign Courts

STP does not have any conflict mediation system, but the country has a Voluntary Arbitration Law (LAV), enacted in 2006. The LAV is largely based on the Portuguese Arbitration Act of 1986 and incorporates principles of the UNCITRAL Model Law. The Arbitration Center, which was created as part of the LAV, has been overseen by the Chamber of Commerce, never fully carried out its role. However, in 2022, the UNDP helped construct an Arbitration Center building scheduled to be inaugurated by the end of April 2023. It has not yet been inaugurated. The Arbitration Center will still be managed by the Chamber of Commerce, Industry, Agriculture, and Services.

The STP legal system recognizes international arbitration, and local courts recognize foreign arbitral awards, though enforcement may be difficult. The state-owned enterprise (SOE) for Port Administration, National Enterprise for Port Administration (ENAPORT), is involved in an investment dispute with the Ghanaian Consortium Safebond over the government’s suspension of a port concession.

Bankruptcy Regulations

STP has a bankruptcy law, but it is not well developed. In January 2022, the STP-based commercial bank Energy Bank, founded in 2011 by a Nigerian investor, declared bankruptcy. This led to the Central Bank cancelling the bank’s financial operations in STP.

Investment Incentives

According to the 2016 Investment Code, all investments, including those for clean energy, above 50,000 Euros ($55,000) are eligible for guarantees and benefits, including fiscal incentives stated in the Fiscal Benefits and Incentives Code of November 2016. These incentives include deductions on corporation taxes, stamp taxes, taxes on banking operations, and withholding taxes. Other incentives include reductions or exemptions of import and re-export tariffs. The government also provides incentives for human resources training, as well other exceptional and complementary benefits and incentives. Based on Article 31 of the Fiscal Benefits and Incentives Code, the incentives are granted through the Private Investment Registration Certificate (CRIP) issued by the APCI following the approval of the investment project. The conditions for access to these incentives apply equally to both men and women. However, contrary to the 2008 Investment Code, the 2016 Code does not provide access to state-owned land and facilities as incentive to investments. No significant measure was adopted in the last year to incentivize investments.

Foreign Trade Zones/Free Ports/Trade Facilitation

STP currently has no free trade zones or free ports but in October 2020, the government approved a free trade zone law and formalized a free trade zone project to be developed in Malanza, Caué district, south of São Tomé. Article 33 of the Fiscal Benefits and Incentives Code defines the districts of Cantagalo, Lemba, Lobata, and Caué, as well as Príncipe, as Special Development or Economic Zones. Any new investment established in these areas under the Investment Code can qualify for special incentives. According to Article 14 of the Investment Code, the state assures fair, non-discriminatory, and equal treatment for all investment in the national territory. Companies that qualify may benefit from reductions or exemptions of taxes under the conditions set forth in the Code of Free and Offshore Activities. An update to the Free Trade Zone regime promulgated as Decree 6/2021 of March 5, 2021, permits the land on which a free trade zone is located to be granted to an investor company by the government for 50 years, and in exceptional cases, up to 90 years with a resolution by the Council of Ministers.

Performance and Data Localization Requirements

The government encourages but does not mandate local employment. STP has no specific performance requirements or data localization requirement as a condition for establishing, maintaining, or expanding investment. However, under the Code of Fiscal Benefits and Incentives, the government offers better incentives for those companies that choose to reinvest or expand their investment. The government encourages but has not defined requirements for investors to buy local products, to export a certain percentage of output, to invest in a specific geographical area, or use a domestic technology. There is no blanket requirement that STP nationals own shares in foreign investments in STP.

The National Agency for Personal Data Protection ( ANPDP ) oversees all the rules and requirements for data storage and transfer.

Real Property

Based on Article 46 of the Constitution, private property rights are guaranteed by the State. According to Article 13 of the Expropriation Code, authorities must provide fair, adequate, and effective payment at market value in advance before expropriating any private property. The government owns more than 90 percent of land in the country, most of which is agricultural land granted by the Ministry of Agriculture, Fishing, and Rural Development through concessions of land titles under the Land Reform Law. Foreigners cannot purchase land, although they can purchase structures, so investors should confirm the true ownership of land where they are attempting to acquire a structure through the Land Registry (Cadastro) within the Ministry of Infrastructure, Natural Resources, and Environment. The 2018 Notary Law provides the country with a modern and practical legal framework that allows for fast and efficient notarial acts, while ensuring judicial security. U.S. companies have not raised property rights concerns with the Embassy.

Intellectual Property Rights

U.S. companies have not raised intellectual property (IP) rights concerns with the Embassy. During the past year, no new IP related laws and regulation were enacted, nor are any reform bills pending. All copyright and industrial property rights proceedings are covered by the Directorate of Industry in collaboration with the National Directorate of Culture, under the Secretariat of State for Commerce and Industry and the Ministry of Tourism and Culture, respectively.

STP is not listed in the USTR’s Special 301 report nor in the notorious market report. STP is a member of the World Intellectual Property Organization (WIPO). The Regulation on Industrial Property covers the enforcement of IP, including geographical indications, patents, and trademarks. STP does not report on seizures of counterfeit goods. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Portfolio investment is undeveloped and unclear. The Central Bank of STP (BCSTP) issued Treasury bills (T-bills) for the first time on June 29, 2015, for STN 75 million (approximately $3.7 million) at the fixed interest rate of 6.2 percent, with a maturity of six months. The demand was 20 percent higher than the offer, due to the participation of three domestic banks. The most recent issuance occurred on March 15, 2018. STP does not have a stock market. Articles 13 and 14 of the Foreign Exchange Regulations facilitate the free flow of financial resources under the supervision of the Central Bank. Foreign investors are allowed to apply for credit on the local market; however, access to credit is difficult due to the limited variety of credit instruments, high interest rates, and the number of guarantees requested by the commercial banks. There are no significant U.S. portfolio investors active in STP currently.

Money and Banking System

STP has four private commercial banks. Portuguese, Angolan, Cameroonian, Gabonese, Togolese, and Sao Tomean interests are represented in the ownership and management of the commercial banks. The Banco Internacional de Sao Tome e Principe (BISTP) is believed to be the largest bank in terms of assets, with just over US $123 million in net assets at the end of 2021, the last year for which it has an annual report. Asset estimations for the other banks are not publicly available. In January 2022, STP-based commercial bank Energy Bank, founded in 2011 by a Nigerian investor, declared bankruptcy leading the Central Bank to cancel all its financial operations in STP. In early 2018, the Central Bank declared the commercial bank Banco Privado insolvent and opened a public tender to liquidate its assets and liabilities. The Gabonese investment bank BGFI opened its São Toméan operation in March 2012. Banking services, especially from BISTP, are available in the capital with a few smaller branches in cities in the north, south, and center of the country, as well as in Príncipe. In 2021, the Visa card was introduced into the country’s financial system.

In addition to retail banking, commercial banks offer most corporate banking services, or can procure them from overseas. Local credit to the private sector is limited and expensive, but available to both foreign and local investors on equal terms. The country’s main economic actors find financing outside STP. Foreigners must establish residency to open a bank account.

Foreign Exchange and Remittances

Foreign Exchange

The BCSTP supervises the national financial system and defines monetary and exchange rate policies in STP. Among other responsibilities, it sells hard currency and establishes the reference rate. In case of a shortage, access to foreign currency is limited; however, there is no official norm restricting access. Article 18 of the Investment Code dictates that foreign investors are allowed to transfer or repatriate funds associated with an investment.

The Dobra (STN) is the national currency. In July 2009, STP and Portugal signed an economic cooperation agreement to peg the Dobra to the Euro rather than a weighted basket of currencies. Based on the 2017 Monetary Law, the BCSTP introduced a new currency to modernize and strengthen the country’s financial system. With the redenomination of the Dobra, starting January 1, 2018, the exchange rate moved to 24.5 Dobras per Euro. This currency peg intended to offer credible parity, minimize monetary instability costs, and provide better credibility for exchange rate and monetary policy. The exchange rate to the U.S. Dollar fluctuates based on the Dollar-Euro exchange fluctuations. It currently varies between 22.5 and 23 Dobras per dollar.

Remittance Policies

Repatriation of capital is possible with prior authorization. According to both the Foreign Exchange Law and the Investment Code, transfer of profits outside the country is also allowed after the deductions for legal and statutory reserves and the payment of existing taxes owed. The government encourages reinvestments with associated reductions in income taxes.

Sovereign Wealth Funds

STP does not have a traditional sovereign wealth fund. It does have a small National Oil Account (NOA). The NOA was previously funded by signing bonuses paid by energy and oil companies to gain rights to conduct exploration and production activities. According to officials from the budget department, the Law of Petroleum allows the government to withdraw up to 20 percent of the balance of the NOA every year as calculated on June 30 of the previous year. Details are available on the state budget and in the government’s Public Information Registry . The National Oil Account does not report any external investments.

Privatization Program

STP does not have an active privatization program. However, through its periodic reports, the IMF has recommended the privatization of the SOEs, especially EMAE. On occasion, there are concession opportunities. They are normally advertised under a non-discriminatory public bidding process with opportunities for foreign investors. The following government websites and local newspapers will post some of the opportunities to purchase state-owned assets:

• Ministry of Planning, Finance and Blue Economy: https://financas.gov.st/ 
• BCSTP’s website: https://bcstp.st/ 
• Tela Non online newspaper: https://www.telanon.info/ 
• STP Press online Newspaper: https://www.stp-press.st/ 

To achieve its privatization goals, the government prioritizes the diversification of energy production sources with a particular focus on renewables. The government also seeks investors to refurbish rural roads, bridges, and ports to support agriculture, fisheries, tourism, and exports.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities;
• U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises; and;
• Xinjiang Supply Chain Business Advisory 

Department of the Treasury

• OFAC Recent Actions

Department of Labor

• Findings on the Worst Forms of Child Labor Report;
• List of Goods Produced by Child Labor or Forced Labor;
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World and;
• Comply Chain.

Climate Issues

STP does not have a standalone national climate strategy or strategy for enhancing environmental protection. However, its 2018 National Determined Contribution (NDC) Implementation Plan has served as a planning, coordination, transparency, and resource mobilization tool for the government. The government updated its NDC in 2021, pledging to cut emissions by 27 percent and increase the share of renewable energy in its energy mix to around 50 percent by 2030. STP has not articulated recently any specific private sector expectations or regulatory incentives to achieve climate goals. The government created a National Committee for Climate Change in 2012 and established a legal regime for the energy sector in 2014, which included prioritization of increasing renewable energy production.

Resources to Report Corruption

“Watchdog” organization:
Deodato Capela
Presidente
Centro de Integridade Pública de São Tomé e Príncipe (STP Public Integrity Center) –
Anticorruption, Transparency and Integrity – NGO
P.C: 330, Almeirim-São Tomé; São Tomé e Príncipe
+ 239 991 1116
cipstp.org@gmail.com