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Albania

Executive Summary

Albania is an upper middle-income country with a gross domestic product (GDP) of USD 16.77 billion (2021 IMF estimate) and a population of approximately 2.9 million people.

In 2020, the economy contracted by 4 percent in the height of COVID-19 and in 2021 re-bounded with a growth rate of 8.7 percent. The increase was fueled by construction, easing of pandemic related restrictions, recovery of tourism sector, increase in the real estate sector, record domestic electricity production, and continued budgetary, monetary, and fiscal policy support, including IMF and EU pandemic and earthquake related support. The initial growth projection for 2022 was 4.1 percent, despite uncertainties related to the pandemic, elevated fiscal deficits and public debt, and external and internal inflationary pressures. However, uncertainties due to Russia’s 2022 invasion of Ukraine, surging energy prices, and inflationary pressures, coupled with limited room for fiscal maneuvering due to high public debt that exceeded 80 percent at the end of 2021, present challenges to the Albanian economy.

Albania joined NATO in 2009 and has been a member of WTO since 2000. The country signed the Stabilization and Association Agreement with the European Union in 2006, received the status of the EU candidate country in 2014, and began accession negotiations with the EU in July 2022.

Albania’s legal framework is in line with international standards in protecting and encouraging foreign investments and does not discriminate against foreign investors. The Law on Foreign Investments of 1993 outlines specific protections for foreign investors and allows 100 percent foreign ownership of companies in all but a few sectors. The U.S.-Albanian Bilateral Investment Treaty, which entered into force in 1998, ensures that U.S. investors receive national treatment and most-favored-nation treatment. Albania and the United States signed a Memorandum of Economic Cooperation in October 2020 with an aim of increasing trade and investment between the two countries. Since the signing multiple U.S. companies have signed agreements for major projects in the country.

As a developing country, Albania offers large untapped potential for foreign investments across many sectors including energy, tourism, healthcare, agriculture, oil and mining, and information and communications technology (ICT). In the last decade, Albania has been able to attract greater levels of foreign direct investment (FDI). According to the UNCTAD data, during 2010-2020, the flow of FDI has averaged USD 1.1 billion and stock FDI at the end of 2020 reached USD 10 billion or triple the amount of 2010. According to preliminary data of the Bank of Albania the FDI flow in 2021 is expected to reach USD 1 billion. Investments are concentrated in extractive industries and processing, real estate, the energy sector, banking and insurance, and information and communication technology. Switzerland, the Netherlands, Canada, Italy, Turkey, Austria, Bulgaria, and France are the largest sources of FDI. The stock FDI from United States accounts for a small, but rapidly growing share. At the end of Q3 2021, the United States stock FDI in Albania reached USD168 million, up from USD 99 million at the end of 2020, nearly a 70 percent increase.

Despite a sound legal framework, foreign investors perceive Albania as a difficult place to do business. They cite endemic corruption, including in the judiciary and public procurements, unfair competition, informal economy, frequent changes of the fiscal legislation, and poor enforcement of contracts as continuing challenges for investment and business in Albania. Reports of corruption in government procurement are commonplace. The continued use of public private partnership (PPP) contracts has reduced opportunities for competition, including by foreign investors, in infrastructure and other sectors. Poor cost-benefit analyses and a lack of technical expertise in drafting and monitoring PPP contracts are ongoing concerns. U.S. investors are challenged by corruption and the perpetuation of informal business practices. Several U.S. investors have faced contentious commercial disputes with both public and private entities, including some that went to international arbitration. In 2019 and 2020, a U.S. company’s attempted investment was allegedly thwarted by several judicial decisions and questionable actions of stakeholders involved in a dispute over the investment. The case is now in international arbitration.

Property rights continue to be a challenge in Albania because clear title is difficult to obtain. There have been instances of individuals allegedly manipulating the court system to obtain illegal land titles. Overlapping property titles is a serious and common issue. The compensation process for land confiscated by the former communist regime continues to be cumbersome, inefficient, and inadequate. Nevertheless, parliament passed a law on registering property claims on April 16, 2020, which will provide some relief for title holders.

In an attempt to limit opportunities for corruption, the GoA embarked on a comprehensive reform to digitalize all public services. As of March 2021, 1,200 services or 95 percent of all public services to citizens and businesses were available online through the E-Albania Portal . However, Albania continues to score poorly on the Transparency International’s Corruption Perceptions Index. In 2021, Albania declined to 110th out of 180 countries, a fall of six places from 2020. Albania continues to rank low in the Global Innovation Index, ranking 84 out of 132 countries.

To address endemic corruption, the GOA passed sweeping constitutional amendments to reform the country’s judicial system and improve the rule of law in 2016. The implementation of judicial reform is underway, heavily supported by the United States and the EU, including the vetting of judges and prosecutors for unexplained wealth. More than half the judges and prosecutors who have undergone vetting have been dismissed for unexplained wealth or ties to organized crime. The EU expects Albania to show progress on prosecuting judges and prosecutors whose vetting revealed possible criminal conduct. The implementation of judicial reform is ongoing, and its completion is expected to improve the investment climate in the country. The Albanian parliament voted overwhelmingly and unopposed to extend this vetting mandate in February 2022.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 110 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 84 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2018 $35 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $ 5,210 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

State-owned enterprises (SOEs) are defined as legal entities that are entirely state-owned or state-controlled and operate as commercial companies in compliance with the Law on Entrepreneurs and Commercial Companies. SOEs operate mostly in the generation, distribution, and transmission of electricity, oil and gas, railways, postal services, ports, and water supply. There is no published list of SOEs.

The law does not discriminate between public and private companies operating in the same sector. The government requires SOEs to submit annual reports and undergo independent audits. SOEs are subject to the same tax levels and procedures and the same domestic accounting and international financial reporting standards as other commercial companies. The High State Audit audits SOE activities. SOEs are also subject to public procurement law.

Albania is yet to become party to the Government Procurement Agreement (GPA) of the WTO but has obtained observer status and is negotiating full accession (see  https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm  ).  Private companies can compete openly and under the same terms and conditions with respect to market share, products and services, and incentives.

SOE operation in Albania is regulated by the Law on Entrepreneurs and Commercial Companies, the Law on State Owned Enterprises, and the Law on the Transformation of State-Owned Enterprises into Commercial Companies. The Ministry of Economy and Finance and other relevant ministries, depending on the sector, represent the state as the owner of the SOEs. SOEs are not obligated by law to adhere to Organization for Economic Cooperation and Development (OECD) guidelines explicitly. However, basic principles of corporate governance are stipulated in the relevant laws and generally accord with OECD guidelines. The corporate governance structure of SOEs includes the supervisory board and the general director (administrator) in the case of joint stock companies. The supervisory board comprises three to nine members, who are not employed by the SOE. Two-thirds of board members are appointed by the representative of the Ministry of Economy and Finance, and one-third by the line ministry, local government unit, or institution to which the company reports. The Supervisory Board is the highest decision-making authority and appoints and dismisses the administrator of the SOE through a two-thirds vote.

8. Responsible Business Conduct

Public awareness of corporate social responsibility (CSR) and Responsible Business Conduct (RBC) in Albania is low, and CSR and RBC remains new concepts for much of the business community. The small level of CSR and RBC engagement in Albania comes primarily from international corporations operating in the energy, telecommunications, heavy industry, and banking sectors, and tends to focus on philanthropy and environmental issues. International organizations have recently improved efforts to promote CSR. Thanks to efforts by the international community and large international companies, the first Albanian CSR network was founded in March 2013 as a business-led, non-profit organization. The American Chamber of Commerce in Albania also formed a subcommittee in 2015 to promote CSR among its members.

Legislation governing CSR, labor, and employment rights, consumer protection, and environmental protection is robust, but enforcement and implementation are inconsistent. The Law on Commercial Companies and Entrepreneurs outlines generic corporate governance and accounting standards. According to that law and the Law on the National Business Registration Center, companies must disclose publicly when they change administrators and shareholders and to disclose financial statements. The Corporate Governance Code for unlisted joint stock companies incorporates the OECD definitions and principles on corporate governance but is not legally binding. The code provides guidance for Albanian companies and aims to provide best-practices while assisting Albanian companies to develop a governance framework.

Albania has been a member of the Extractive Industries Transparency Initiative (EITI) since 2013.

9. Corruption

Endemic corruption continues to undermine the rule of law and jeopardize economic development. Foreign investors cite corruption including in the judiciary, a lack of transparency in public procurement, lack of transparency and competition, informal economy, and poor enforcement of contracts as some of the biggest problems in Albania. Despite some improvement in Albania’s score from 2013 to 2016, progress in tackling corruption has been slow and unsteady. In 2021, Albania’s Corruption Perceptions Index (CPI) score was 35 and its ranking fell by six slots from 104 to 110, a significant decline from the 2016 score and rank of respectively 39 and 83. Albania is still one of the most corrupt countries in Europe, according to the CPI and other observers.

The country has a sound legal framework to prevent conflict of interest and to fight corruption of public officials and politicians, including their family members. However, law enforcement is jeopardized by a heavily corrupt judicial system.

The passage of constitutional amendments in July 2016 to reform the judicial system was a major step forward, and reform, once fully implemented, is expected to position the country as a more attractive destination for international investors. Judicial reform has been described as the most significant development in Albania since the end of communism, and nearly one-third of the constitution was rewritten as part of the effort. The reform also entails the passage of laws to ensure implementation of the constitutional amendments. Judicial reform’s vetting process will ensure that prosecutors and judges with unexplained wealth or insufficient training, or those who have issued questionable verdicts, are removed from the system. As of publication, more than half of the judges and prosecutors who have faced vetting have either failed or resigned. The establishment of the Special Prosecution Office Against Corruption (SPAK) and Organized Crime and of the National Investigation Bureau, two new judicial bodies, will step up the fight against corruption and organized crime. Once fully implemented, judicial reform will discourage corruption, promote foreign and domestic investment, and allow Albania to compete more successfully in the global economy.

The government has ratified several corruption-related international treaties and conventions and is a member of major international organizations and programs dealing with corruption and organized crime. Albania has ratified the Civil Law Convention on Corruption (Council of Europe), the Criminal Law Convention on Corruption (Council of Europe), the Additional Protocol to Criminal Law Convention on Corruption (Council of Europe), and the United Nations Convention against Corruption (UNCAC). Albania has also ratified several key conventions in the broader field of economic crime, including the Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (2001) and the Convention on Cybercrime (2002). Albania has been a member of the Group of States against Corruption (GRECO) since the ratification of the Criminal Law Convention on Corruption in 2001 and is a member of the Stability Pact Anti-Corruption Initiative (SPAI). Albania is not a member of the OECD Anti-Bribery Convention. Albania has adopted legislation for the protection of whistleblowers.

To curb corruption, the government announced a new online platform in 2017, “  Shqiperia qe Duam  ” (“The Albania We Want”), which invites citizens to submit complaints and allegations of corruption and misuse of office by government officials. The platform has a dedicated link for businesses. The Integrated Services Delivery Agency (ADISA), a government entity, provides a second online portal to report corruption. Effectiveness of the portal is minimal.

In February 2020, GoA approved the establishment of the Special Anticorruption and Anti-Evasion Unit which operates under the Council of Ministers. The mission of the unit is the coordination between the main public institutions, agencies, and state-owned companies in order to discover, investigate and punish corruption and abusive practices. During 2021, the National Network of Anti-Corruption Coordinators, a structure that is under the Minister of Justice, who also serves as the National Coordinator against corruption, became functional. The coordinators are placed in seventeen institutions that have the highest public perception of corruption. The coordinators collect, process, and analyze complaints filed by the citizens and businesses and report to the law enforcement authorities if necessary.

Despite progress, corruption remains pervasive. Albania has yet to build a solid track record of investigations, prosecution, conviction, and confiscation of criminal assets resulting from corruption-related offences.

10. Political and Security Environment

Political violence is rare, the more recent instances being an attempt led by a former Albanian leader designated by the USG for corruption to breach a party headquarters in January 2022 that required police intervention and political protests in 2019 that included instances of civil disobedience, low-level violence and damage to property, and the use of tear gas by police. Albania’s April 2021 elections and transition to a new government were peaceful, as were its June 2019 local elections. On January 21, 2011, security forces shot and killed four protesters during a violent political demonstration. In its external relations, Albania has usually encouraged stability in the region and maintains generally friendly relations with neighboring countries.

11. Labor Policies and Practices

Albania’s labor force numbers around 1.2 million people, according to official data. After peaking at 18.2 percent in the first quarter of 2014, the official estimated unemployment rate has significantly decreased in recent years. In December 2021, unemployment reached 11.4 percent compared to 11.8 percent at the end of 2020 marking an improvement following the economic disruption due to the COVID-19 pandemic. Unemployment among people aged 15-29 remains high, at 20.6 percent. Around 40 percent of the population is self-employed in the agriculture sector. According to the International Labor Organization (ILO), share of informal employment in the employed population was almost 57 percent in 2019, the highest in the region.

The institutions that oversee the labor market include the Ministry of Finance, Economy and Labor, the Ministry of Health and Social Protection, the National Employment Service, the State Labor Inspectorate, and private entities such as employment agencies and vocational training centers.  Albania has adopted a wide variety of regulations to monitor labor abuses, but enforcement is weak.

Outward labor migration remains an ongoing problem affecting the Albanian labor market especially in the IT and health sector. There is a growing concern about labor shortage for both skilled and unskilled workforces.  In recent years, media outlets have reported that a significant number of doctors and nurses have emigrated to the European Union, especially Germany. According to the World Bank, Albania has the lowest number of doctors per capita in the region with just 1.647 doctors per 1,000 inhabitants in 2019. In December 2021, the average public administration salary was approximately 70,531 lek (approximately USD 650) per month. The GoA has announced it will increase the minimum wage by 6.5 percent to 32,000 lek per month (approximately USD 300) in April 2022, which remains the lowest in the region.

In March 2019, parliament approved a new law on employment promotion, which defined public policies on employment and support programs. Albania has a tradition of a strong secondary educational system, while vocational schools are viewed as less prestigious and attract fewer students.  However, the government has more recently focused attention on vocational education. In the 2020-2021 academic year, about 19,000, or 18.5 percent, of high school pupils were enrolled in vocational schools.

The Law on Foreigners 79/2021 that was approved in July 2021 and various decisions of the Council of Ministers regulate the employment regime in Albania.  Employment can also be regulated through special laws in the case of specific projects, or to attract foreign investment.  The Law on TEDA’s provides financial and tax incentives for investments in the zone. Law on Foreigners extends the same employment and self-employment rights of Albanian citizens to citizens of the five Western Balkan countries and provides the same benefits that the original law provided to the citizens of EU and Schengen countries.

The Labor Code includes rules regarding contract termination procedures that distinguish layoffs from terminations.  Employment contracts can be limited or unlimited in duration, but typically cover an unlimited period if not specified in the contract. Employees can collect up to 12 months of salary in the event of an unexpected interruption of the contract. Unemployment compensation is approximately 50 percent of the minimum wage.

Pursuant to the Labor Code and the recently amended “Law on the Status of the Civil Employee,” both individual and collective employment contracts regulate labor relations between employees and management.  While there are no official data recording the number of collective bargaining agreements used throughout the economy, they are widely used in the public sector, including by SOEs. Albania has a labor dispute resolution mechanism as specified in the Labor Code, article 170, but the mechanism is considered inefficient. Strikes are rare in Albania, mostly due to the limited power of the trade unions and they have not posed a significant risk to investments.

Albania has been a member of the International Labor Organization since 1991 and has ratified 54 out of 189 ILO conventions, including the eight Fundamental Conventions, the four Governance Conventions, and 42 Technical Conventions. The implementation of labor relations and standards continues to be a challenge, according to the ILO.

See the U.S. Department of State Human Rights Report: https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/; and the U.S. Department of Labor Child Labor Report: http://www.dol.gov/ilab/reports/child-labor  .

14. Contact for More Information

U.S. Embassy Tirana, Albania
Rruga Stavro Vinjau, Nr. 14
Tirana, Albania
+355 4 224 7285
USALBusiness@state.gov  

Côte d’Ivoire

Executive Summary

Côte d’Ivoire (CDI) offers a welcoming environment for U.S. investment.  The Ivoirian government wants to deepen commercial cooperation with the U.S. The Ivoirian and foreign business community in CDI considers the 2018 investment code generous with welcome incentives and few restrictions on foreign investors.  Côte d’Ivoire’s resiliency to the COVID-19 crisis led to quick economic recovery.  Gross Domestic Product (GDP) growth stayed positive at two percent in 2020 and rebounded to 6.5 percent in 2021, with government of CDI projecting average growth at 7.65 percent during the period 2021-2025.  International credit rating agency Fitch upgraded the country’s political risk rating in July 2021 from B+ to BB-, while the International Monetary Fund’s (IMF) assessment confirms CDI’s economic resilience, despite the Omicron variant of COVID.  However, possible repetition of 2021 energy shortages, poor transparency, and delays in reforms could dampen confidence.

U.S. businesses operate successfully in several Ivoirian sectors including oil and gas exploration and production; agriculture and value-added agribusiness processing; power generation and renewable energy; IT services; the digital economy; banking; insurance; and infrastructure.  The competitiveness of U.S. companies in IT services is exemplified by one company that altered the local payment system by introducing a digital payment system that rapidly increased its market share, forcing competitors to lower prices.

Côte d’Ivoire is well poised to attract increased Foreign Direct Investments (FDI) based on the government’s strong response to the pandemic, the buoyancy of the economy, high-level support for private sector investment, and clear priorities set forth in the new 2021-2025 National Development Plan (PND – Plan National de Développement).  An important factor is Côte d’Ivoire’s resurgence as a regional economic and transportation hub.  Government authorities are continuing to implement structural reforms to improve the business environment, modernize public administration, increase human capital, and boost productivity and private sector development.  However, this will not come without challenges and uncertainties in the medium term, particularly regarding the evolution of the pandemic and global recovery as well as regulatory and transparency concerns.  Government authorities underscore their commitment to strengthening peace and security systems in the northern zone of the country, while striving for inclusive growth in the context of post-pandemic recovery.  Finally, recent political instability in northern and western neighboring countries Burkina Faso, Mali, and Guinea, could impede investor confidence in the region, especially when it comes to security.

Doing business with the Ivoirian government remains a significant challenge in some areas such as procurement, taxation, and regulatory processes.  Some new public procurement procedures adopted in 2019 were only implemented in 2021, including implementation of an e-procurement module, and improved evaluation, prioritization, selection, and monitoring procedures.  This is a work in process, and concerns remain that these procedures are not consistently and transparently applied.  Similar concerns circulate about tax procedures, especially retroactive assessments based on changes in tax formulas.  An overly complicated tax system and slow, opaque government decision-making processes hinder investment.  Government has identified VAT (Value Added Tax), mining, digitalization, and property taxes as key areas for broadening the tax base and improving state revenues.  Other challenges include low levels of literacy and income, weak access to credit for small businesses, corruption, and the need to broaden the tax base to relieve some of the tax-paying burden on businesses.

Table 1: Key Metrics and Rankings 
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 105 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2020 110 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2021 114 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 -$495 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $2,280 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Companies owned or controlled by the state are subject to national laws and the tax code.  The Ivoirian government still holds substantial interests in many firms, including the refinery SIR (49 percent), the public transport firm (60 percent), the national television station RTI (98 percent), the national lottery (80 percent), the national airline Air Côte d’Ivoire (58 percent), and the land management agency Agence de Gestion Foncière AGEF (35 percent).  Total assets of state-owned enterprises (SOEs) were $796 million and total net income of SOEs was $116 million in 2018 (latest figures).  Of the 82 SOEs, 28 are wholly government-owned and 12 are majority government-owned, the government owns a blocking minority in seven and holds minority shares in 35.  Each SOE has an independent board.  The government has begun the process of divestiture for some SOEs (see next section).  There are active SOEs in the banking, agri-business, mining, and telecom industries.

The published list of SOEs is available at https://dgpe.gouv.ci/ind ex.php?p=portefeuille_etat

SOEs competing in the domestic market do not receive non-market-based advantages from the government.  They are subject to the same tax burdens and policies as private companies.

Côte d’Ivoire does not adhere to OECD guidelines for SOE corporate governance (it is not a member of OECD).

In 2021, audits of several SOEs highlighted serious irregularities (alleged embezzlement estimated at several tens or even hundreds of billions of FCFA, i.e. up to hundreds of millions of dollars.  The SOEs include FER, FDFP, ARTCI, and ANSUT, whose leaders have been removed and replaced.

8. Responsible Business Conduct

The private sector, the government, NGOs, and local communities are becoming progressively aware of the importance of Responsible Business Conduct (RBC) regarding environmental, social, and governance issues in CDI.

Investors seeking to implement projects in energy, infrastructure, agriculture, forestry, waste management, and extractive industries are required by decree to provide an environmental impact study prior to approval.  Under the new development plan and sustainable finance regime, government has laid down specific criteria to review, select, fund, and monitor private investment with the goal of channeling funds into priority sectors.  Foreign businesses, particularly in mining, energy, and agriculture, often provide social infrastructure, including schools and health care clinics, to communities close to their sites of operation.  Companies are not required under Ivoirian law to disclose information relating to RBC, although many companies, especially in the cocoa sector, publicize their work.  Cocoa companies publicize efforts to improve sustainability and combat the worst forms of child labor.  As a part of public-procurement reform, the Ministry of Budget plans to include social needs in public-procurement contracts to support job creation, fair trade, decent working conditions, social inclusion, and compliance with social standards.  On the environment, suggested reforms include the selection of goods and services that have a smaller impact on the environment.

There are reports of children subjected to forced labor in agricultural work, particularly on cocoa farms.  In February 2021, several individuals from Mali sued major international chocolate companies, claiming that the cocoa they bought came from farms in Côte d’Ivoire where the plaintiffs were subjected to abuse.

The government, through the Ministry of Employment and Social Protection, sets workplace health and safety standards and is responsible for enforcing labor laws.

The OHADA outlines corporate governance standards that protect shareholders.

There are government-funded agencies in charge of monitoring business conduct.  Human rights, environmental protection, and other NGOs report misconduct and violations of good governance practices.

Côte d’Ivoire participates in the Extractive Industries Transparency Initiative (EITI) and discloses revenues and payments in the oil, gas, and mineral sectors.  More information can be found at: www.cnitie.ci/.

Côte d’Ivoire is not a signatory of the Montreux Document on Private Military and Security Companies.  Some private security companies operating in the country are participants of the International Code of Conduct for Private Security Service Providers Association (ICoCA).

This year, government took active measures against State Owned Enterprises not paying their local contractors, generally SMEs.  After the FER general manager was removed, the acting manager made immediate payments to concerned SMEs.

9. Corruption

Many companies cite corruption as the most significant obstacle to investment.  Corruption in many forms is deeply ingrained in public- and private-sector practices and remains a serious impediment to investment and economic growth in CDI.  It has the greatest impact on judicial proceedings, contract awards, customs, and tax issues.  Lack of transparency and the government’s failure to follow its own tendering procedures in the awarding of contracts lead businesses to conclude bribery was involved.  Businesses have reported encountering corruption at every level of the civil service, with some judges appearing to base their decisions on bribes. Clearance of goods at the ports often requires substantial “commissions.”  The demand for bribes can mean that containers stay at the Port of Abidjan for months, incurring substantial demurrage charges, despite companies having the proper paperwork.

In 2013, the Ivoirian government issued Executive Order number 2013-660 related to preventing and combatting corruption.  The High Authority for Good Governance serves as the government’s anti-corruption authority.  Its mandate includes raising awareness about corruption, investigating corruption in the public and private sectors, and collecting mandated asset disclosures from certain public officials (e.g., the president, ministers, and mayors) upon entering and leaving office.  The High Authority for Good Governance, however, does not have a mandate to prosecute; it must refer cases to the Attorney General who decides whether to take up those cases.  The country’s financial intelligence office, CENTIF, has broad authority to investigate suspicious financial transactions, including those of government officials.

Despite the establishment of these bodies and credible allegations of widespread corruption, there have been few charges filed, and few prosecutions and judgments against prominent people for corruption.  The domestic business community generally assesses that these watchdog agencies lack the power and/or will to combat corruption effectively.  In April 2021, the government formally added Good Governance and Anti-Corruption to the title and portfolio of the Ministry of Capacity Building.

Côte d’Ivoire ratified the UN Anti-Corruption Convention, but the country is not a signatory to the OECD Anti-Bribery Convention (which is open to non-OECD members).  In 2016, Côte d’Ivoire joined the Partnership on Illicit Finance, which obliges it to develop an action plan to combat corruption.

Under the Ivoirian Penal Code, a bribe by a local company to a foreign official is a criminal act. Some private companies use compliance programs or measures to prevent bribery of government officials.  U.S. firms underscore to their Ivoirian counterparts that they are subject to the Foreign Corrupt Practices Act (FCPA).  Anti-corruption laws extend to family members of officials and to political parties.  The country’s Code of Public Procurement No. 259 and the associated WAEMU directives cover conflicts-of-interest in awarding contracts or government procurement.

There are no special protections for NGOs involved in investigating corruption.  Whistleblower protections are also weak.

Resources to Report Corruption

Inspector General of Finance
(Brigade de Lutte Contre la Corruption)
Mr. Lassina Sylla
Inspector General
TELEPHONE: +225 20212000/2252 9797
FAX: +225 20211082/2252 9798
HOTLINE: +225 8000 0380
http://www.igf.finances.gouv.ci/
info@igf.finances.gouv.ci

High Authority for Good Governance
(Haute Autorité pour la Bonne Gouvernance)
Mr. N’Golo Coulibaly
President
TELEPHONE: +225 272 2479 5000
FAX: +225 2247 8261
https://habg.ci/
Email: info@habg.ci

Police Anti-Racketeering Unit
(Unité de Lutte Contre le Racket –ULCR)
Mr. Alain Oura
Unit Commander
TELEPHONE: +225 272 244 9256
info@ulcr.ci

Social Justice
(Initiative pour la Justice Sociale, la Transparence et la Bonne Gouvernance en Côte d’Ivoire)
Ananeraie face pharmacie Mamie Adjoua
Abidjan
TELEPHONE:  +225 272 177 6373
socialjustice.ci@gmail.com

10. Political and Security Environment

Following peaceful and inclusive legislative elections in March 2021, CDI entered a period of stability.  Major opposition parties participated and won a meaningful number of seats in elections internationally deemed credible.  The political leadership clearly recognizes that internal and regional security are prerequisites for sustained economic growth and longer-term stability.  All political parties participated in a structured Political Dialogue aimed at fostering reconciliation and strengthening democratic institutions, including dispute resolution mechanisms.  The fifth round of the Political Dialogue concluded in March 2022 and produced a consensus list of tangible recommendations to the President of the Republic.  The next presidential election is not due until 2025, so there is now a window of opportunity for the country’s political leaders to focus on difficult reforms.

The Ivoirian government has demonstrated a strong commitment to addressing insecurity in the region by strengthening its capacity to counter terrorism, strengthen social resilience, professionalize law enforcement, strengthen its justice system, and improve border security.  In June 2021, CDI and France inaugurated the International Academy for the Fight Against Terrorism (AILCT) near Jacqueville, west of Abidjan. The aim of this academy is to train relevant cadres (e.g., prosecutors, forensic investigators) and security forces from the African continent to strengthen capacity to prevail against self-styled jihadists within respect for law and human rights, thereby reinforcing ties between the population and the state.  This comes at a time of increased security challenges emanating from the Sahel and spilling over into CDI’s northern region.

11. Labor Policies and Practices

The official unemployment rate is 3.5 percent, 5.5 percent in the 15-24 age group; however, unemployment is difficult to measure in the informal sector, which is estimated to account for as much as 80 percent of the Ivoirian economy.  Of the non-agricultural workforce, 47 percent is employed in the informal economy.  Official statistics fail to fully account for the large informal economy throughout the country, and do not accurately portray the general dearth of well-paying employment opportunities.  Despite the government’s efforts, child labor remained a widespread problem in rural and urban areas, notably on cocoa and coffee plantations, as well as in artisanal gold mining areas and in domestic work.

There are significant shortages of skilled labor in fields requiring higher education, including information technology, engineering, finance, management, health, and science.  The Ivoirian government is working with the Millennium Challenge Corporation (MCC) to build and develop four technical and vocational training centers as part of a six-year Compact valued at some $536 million that will end in August 2025. The Compact comprises two projects: road transportation and education.

Labor laws favor the employment of Ivoirians in private enterprises.  Any vacant position must be advertised for two months.  If after two months no qualified Ivoirian is found, the employer may recruit a foreigner provided it plans to recruit an Ivoirian to fill the position within the next two years.

There are no restrictions on employers adjusting employment in response to fluctuating market conditions.  Employees terminated for reasons other than theft or flagrant neglect of duty have the right to termination benefits.  Unemployment insurance and other social-safety programs exist for employees laid off for economic reasons.  For the roughly 60-80% percent of workers employed in the informal sector, unemployment insurance is not an option.  However, there are other social-safety-net programs that apply to informal economy workers, including monthly stipends and waiving of universal health care fees.

Labor laws are not waived to attract or retain investment.

Collective bargaining agreements are in effect in many major business enterprises and sectors of the civil service.  A prolonged teachers’ strike in 2019 was submitted for arbitration but due to the fractured nature of the teachers’ unions, not all parties agreed to the decision.

Labor disputes are submitted to the labor inspector for amicable settlement before engaging in any legal proceedings.  If this attempt to settle the dispute fails, then the labor court can be engaged to resolve the dispute.

No strike has posed an investment risk during the last year.

There are no gaps between Ivoirian and international labor standards in law or practice that pose a reputational risk to investors.

The government did not adopt any new labor-related laws or regulations in 2021.  In 2017, the government passed a law forbidding most forms of child labor for children under 12 and restricting it for minors aged 13 to 17.  The law’s passage put Ivoirian law on par with ILO standards for child labor.  The government established the National Surveillance Council (Conseil National de Surveillance, or CNS) and the Interministerial Committee (CIM – Conseil Interministériel). These agencies deal with child labor issues, especially in the cocoa sector.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2020 $61,349 www.worldbank.org/en/country
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A N/A N/A BEA data available at https://apps.bea.gov/international/factsheet/
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2020 -$1 BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-
enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP N/A N/A 2020 2.1% UNCTAD data available at

https://stats.unctad.org/handbook/EconomicTrends/
Fdi.html    

Table 3: Sources and Destination of FDI 
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $11,997 Total Outward $2,520
France $2,532 21.1% Burkina Faso $426 16.9%
Canada $1,217 10.1% Mali $246 9.8%
United Kingdom $986 8.2% Liberia $227 9%
Morocco $801 6.7% Ghana $180 7.1%
Mauritius $664 5.5% Benin $177 7%
“0” reflects amounts rounded to +/- USD 500,000.

14. Contact for More Information

U.S. Embassy Abidjan
Political/Economic Section
Cocody Riviera Golf
BP 730 Abidjan Cidex 03
Republic of Côte d’Ivoire
Phone: (+225) 27-22-49-40-00

Kenya

Executive Summary

Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations.  The novel coronavirus pandemic has negatively affected the short-term economic outlook, but the country remains resilient in addressing the health and economic challenges.  In July 2020 the U.S. and Kenya launched negotiations for a Free Trade Agreement, the first in sub-Saharan Africa.  Despite this progress, U.S. businesses operating in Kenya still face aggressive tax collection attempts, burdensome bureaucratic processes, and significant delays in receiving necessary business licenses.  Corruption remains pervasive and Transparency International ranked Kenya 128 out of 180 countries in its 2021 Global Corruption Perception Index – reflecting modest progress over the last decade but still well below the global average.

Kenya has strong telecommunications infrastructure and a robust financial sector and is a developed logistics hub with extensive aviation connections throughout Africa, Europe, and Asia.  In 2018, Kenya Airways initiated direct flights to New York City in the United States.  Mombasa Port is the gateway for East Africa’s trade.  Kenya’s membership in the East African Community (EAC), the Africa Continental Free Trade Area (AfCFTA), and other regional trade blocs provides it with preferential trade access to growing regional markets.

In 2017 and 2018 Kenya instituted broad reforms to improve its business environment, including passing the Tax Laws Amendment (2018) and the Finance Act (2018), which established new procedures and provisions related to taxes, eased the payment of taxes through the iTax platform, simplified registration procedures for small businesses, reduced the cost of construction permits, and established a “one-stop” border post system to expedite the movement of goods across borders.  However, the Finance Act (2019) introduced taxes to non-resident ship owners, and the Finance Act (2020) enacted a Digital Service Tax (DST).  The DST, which went into effect in January 2021, imposes a 1.5 percent tax on any transaction that occurs in Kenya through a “digital marketplace.”  The oscillation between business reforms and conflicting taxation policies has raised uncertainty over the Government of Kenya’s (GOK) long-term plans for improving the investment climate.

Kenya’s macroeconomic fundamentals remain among the strongest in Africa, averaging five to six percent gross domestic product (GDP) growth since 2015 (excepting 2020due to the negative economic impact of the COVID-19 pandemic), five percent inflation since 2015, improving infrastructure, and strong consumer demand from a growing middle class.  There is relative political stability and President Uhuru Kenyatta has remained focused on his “Big Four” development agenda, seeking to provide universal healthcare coverage, establish national food and nutrition security, build 500,000 affordable new homes, and increase employment by growing the manufacturing sector.

Kenya is a regional leader in clean energy development with more than 90 percent of its on-grid electricity coming from renewable sources.  Through its 2020, second Nationally Determined Contribution to the Paris Agreement targets, Kenya has prioritized low-carbon resilient investments to reduce its already low greenhouse gas emissions a further 32 percent by 2030.  Kenya has established policies and a regulatory environment to spearhead green investments, enabling its first private-sector-issued green bond floated in 2019 to finance the construction of sustainable housing projects.

American companies continue to show strong interest to establish or expand their business presence and engagement in Kenya.  Sectors offering the most opportunities for investors include:  agro-processing, financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 128 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 85 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $339 http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $11,067.86 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

In 2013, the Presidential Task Force on Parastatal Reforms (PTFPR) published a list of all state-owned enterprises (SOEs) and recommended proposals to reduce the number of State Corporations from 262 to 187 to eliminate redundant functions between parastatals; close or dispose of non-performing organizations; consolidate functions wherever possible; and reduce the workforce — however, progress is slow (https://drive.google.com/file/d/0BytnSZLruS3GQmxHc1VtZkhVVW8/edit).  SOEs’ boards are independently appointed and published in Kenya Gazette notices by the Cabinet Secretary of the ministry responsible for the respective SOE.  The State Corporations Act (2015) mandated the State Corporations Advisory Committee to advise the GOK on matters related to SOEs.  Despite being public entities, only SOEs listed on the Nairobi Securities Exchange publish their financial positions, as required by Capital Markets Authority guidelines.  SOEs’ corporate governance is guided by the constitution’s chapter 6 on Leadership and Integrity, the Leadership and Integrity Act (2012) (L&I) and the Public Officer Ethics Act (2003), which establish integrity and ethics requirements governing the conduct of public officials.

In general, competitive equality is the standard applied to private enterprises in competition with public enterprises.  Certain parastatals, however, have enjoyed preferential access to markets. Examples include Kenya Reinsurance, which enjoys a guaranteed market share; Kenya Seed Company, which has fewer marketing barriers than its foreign competitors; and the National Oil Corporation of Kenya (NOCK), which benefits from retail market outlets developed with government funds.  Some state corporations have also benefited from easier access to government guarantees, subsidies, or credit at favorable interest rates.  In addition, “partial listings” on the Nairobi Securities Exchange offer parastatals the benefit of accessing equity financing and GOK loans (or guarantees) without being completely privatized.

In August 2020, the executive reorganized the management of SOEs in the cargo transportation sector and mandated the Industrial and Commercial Development Corporation (ICDC) to oversee rail, pipeline and port operations through a holding company called Kenya Transport and Logistics Network (KTLN).  ICDC assumes a coordinating role over the Kenya Ports Authority (KPA), Kenya Railways Corporation (KRC), and Kenya Pipeline Company (KPC).  KTLN focuses on lowering the cost of doing business in the country through the provision of cost effective and efficient transportation and logistics infrastructure.

SOE procurement from the private sector is guided by the Public Procurement and Asset Disposal Act (2015) and the published Public Procurement and Asset Disposal Regulations (2020) which introduced exemptions from the Act for procurement on bilateral or multilateral basis, commonly referred to as government-to-government procurement; introduced E-procurement procedures; and preferences and reservations, which gives preferences to the “Buy Kenya Build Kenya” strategy (http://kenyalaw.org/kl/fileadmin/pdfdownloads/LegalNotices/2020/LN69_2020.pdf).

Kenya is neither party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO) nor an Observer Government.

8. Responsible Business Conduct

The Environmental Management and Coordination Act (1999) establishes a legal and institutional framework for responsible environment management, while the Factories Act (1951) safeguards labor rights in industries.  The Mining Act (2016) directs holders of mineral rights to develop comprehensive community development agreements that ensure socially responsible investment and resource extraction and establish preferential hiring standards for residents of nearby communities.  The legal system, however, has remained slow to prosecute violations of these policies.

The GOK is not a signatory to the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct, and it is not yet an Extractive Industry Transparency Initiative (EITI) implementing country or a Voluntary Principles Initiative signatory.  Nonetheless, good examples of corporate social responsibility (CSR) abound as major foreign enterprises drive CSR efforts by applying international standards relating to human rights, business ethics, environmental policies, community development, and corporate governance.

9. Corruption

Corruption is pervasive and entrenched in Kenya and international corruption rankings reflect its modest progress over the last decade.  The Transparency International (TI) 2021 Global Corruption Perception Index ranked Kenya 128 out of 180 countries, its second-best ranking, and a marked improvement from its 2011 rank of 145 out of 176.  Kenya’s score of 30, however, remained below the global average of 43 and below the sub-Saharan Africa average of 33.  TI cited lack of political will, limited progress in prosecuting corruption cases, and the slow pace of reform in key sectors as the primary drivers of Kenya’s relatively low ranking.  Corruption has been an impediment to FDI, with local media reporting allegations of high-level corruption related to health, energy, ICT, and infrastructure contracts.  Numerous reports have alleged that corruption influenced the outcome of government tenders, and some U.S. firms assert that compliance with the Foreign Corrupt Practices Act significantly undermines their chances of winning public procurements.

In 2018, President Kenyatta began a public campaign against corruption.  While GOK agencies mandated to fight corruption have been inconsistent in coordinating activities, particularly regarding cases against senior officials, cabinet, and other senior-level arrests in 2019 and 2020 suggested a renewed commitment by the GOK to fight corruption.  In 2020, the judiciary convicted a member of parliament to 67 years in jail or a fine of KES 707 million (approximately USD 7 million) for defrauding the government of KES 297 million (approximately USD 2.9 million).  The Ethics and Anti-Corruption Commission (EACC), in 2019, secured 44 corruption-related convictions, the highest number of convictions in a single year in Kenya’s history.  The EACC also recovered assets totaling more than USD 28 million in 2019 – more than the previous five years combined.  Despite these efforts, much work remains to battle corruption in Kenya.

Relevant legislation and regulations include the Anti-Corruption and Economic Crimes Act (2003), the Public Officers Ethics Act (2003), the Code of Ethics Act for Public Servants (2004), the Public Procurement and Disposal Act (2010), the Leadership and Integrity Act (2012), and the Bribery Act (2016).  The Access to Information Act (2016) also provides mechanisms through which private citizens can obtain information on government activities; however, government agencies’ compliance with this act remains inconsistent.  The EACC monitors and enforces compliance with the above legislation.

The Leadership and Integrity Act (2012) requires public officers to register potential conflicts of interest with the relevant commissions.  The law identifies interests that public officials must register, including directorships in public or private companies, remunerated employment, securities holdings, and contracts for supply of goods or services, among others.  The law requires candidates seeking appointment to non-elective public offices to declare their wealth, political affiliations, and relationships with other senior public officers.  This requirement is in addition to background screening on education, tax compliance, leadership, and integrity.

The law requires that all public officials, and their spouses and dependent children under age 18, declare their income, assets, and liabilities every two years.  Information contained in these declarations is not publicly available, and requests to obtain and publish this information must be approved by the relevant commission.  Any person who publishes or makes public information contained in a public officer’s declarations without permission may be subject to fine or imprisonment.

The Access to Information Act (2016) requires government entities, and private entities doing business with the government, to proactively disclose certain information, such as government contracts, and comply with citizens’ requests for government information.  The act also provides a mechanism to request a review of the government’s failure to disclose requested information, along with penalties for failures to disclose.  The act exempts certain information from disclosure on grounds of national security.  However, the GOK has yet to issue the act’s implementing regulations and compliance remains inconsistent.

The private sector-supported Bribery Act (2016) stiffened penalties for corruption in public tendering and requires private firms participating in such tenders to sign a code of ethics and develop measures to prevent bribery.  Both the constitution and the Access to Information Act (2016) provide protections to NGOs, investigative journalism, and individuals involved in investigating corruption.  The Witness Protection Act (2006) establishes protections for witnesses in criminal cases and created an independent Witness Protection Agency.  A draft Whistleblowers Protection Bill has been stalled in Parliament since 2016.

President Kenyatta directed government ministries, departments, and agencies to publish all information related to government procurement to enhance transparency and combat corruption.  While compliance is improving, it is not yet universal.  The information is published online (https://tenders.go.ke/website/contracts/Index).

Kenya is a signatory to the UN Convention Against Corruption (UNCAC) and in 2016 published the results of a peer review process on UNCAC compliance:  (https://www.unodc.org/documents/treaties/UNCAC/CountryVisitFinalReports/2015_09_28_Kenya_Final_Country_Report.pdf).  Kenya is also a signatory to the UN Anticorruption Convention and the OECD Convention on Combatting Bribery, and a member of the Open Government Partnership.  Kenya is not a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.  Kenya is also a signatory to the East African Community’s Protocol on Preventing and Combating Corruption.

10. Political and Security Environment

Kenya’s 2017 national election was marred by violence, which claimed the lives of nearly 100 Kenyans, a contentious political atmosphere, which pitted the ruling Jubilee Party against the opposition National Super Alliance (NASA), as well as political interference and attacks on key institutions by both sides.  In November 2017, the Kenyan Supreme Court unanimously upheld the October 2017 repeat presidential election results and President Uhuru Kenyatta’s win in an election boycotted by NASA leader Raila Odinga.  In March 2018, President Kenyatta and Odinga publicly shook hands and pledged to work together to heal the political, social, and economic divides highlighted by the election.  The GOK, civil society actors, private sector, and religious leaders are implementing a number of initiatives to promote peace in advance of the next national election in August 2022.

The United States’ Travel Advisory for Kenya advises U.S. citizens to exercise increased caution due to the threat of crime and terrorism, and not to travel to counties bordering Somalia and to certain coastal areas due to terrorism.  Due to the high risk of crime, it is common for private businesses and residences to have 24-hour guard services and well-fortified property perimeters.

Instability in Somalia has heightened concerns of terrorist attacks, leading businesses and public institutions nationwide to increase their security measures.  Tensions flare occasionally within and between ethnic communities in Kenya.  Regional conflict, most notably in Ethiopia, Somalia, and South Sudan, sometimes have spill-over effects in Kenya.  There could be an increase in refugees entering Kenya due to drought and instability in neighboring countries, adding to the already large refugee population in the country.

Kenya and its neighbors are working together to mitigate threats of terrorism and insecurity through African-led initiatives such as the African Union Mission in Somalia (AMISOM) and the Eastern African Standby Force (EASF).  Despite attacks against Kenyan forces in Kenya and Somalia, the Government of Kenya has maintained its commitment to promoting peace and stability in Somalia.

11. Labor Policies and Practices

In 2021, Kenya’s employed labor force was recorded at 17.4 million.  Kenya’s informal economy is estimated to employ about 80 percent of the work force and to contribute 34 percent to Kenya’s gross domestic product.  Informal enterprises are mainly run by women, have low levels of innovation, lack social security coverage, job security, and low levels of unionization.  Kenya’s constitution mandates that no gender hold more than two-thirds of any positions in all elective or appointive bodies.  Gender balance and regional inclusivity are key facets of public appointments.  The Government of Kenya has not, however, ensured regional inclusivity in its appointments and public service human capital reports show dominant regional communities in appointments.  The gender mandate is not mandatory for private sector companies.  The private sector, however, has been instrumental in advancing gender balance in its work force composition.  NSE-listed companies have 36 percent female board representations.

The Government of Kenya mandates local employment in the category of unskilled labor.  The Kenyan government regularly issues permit 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 required skills are not available in Kenya.  However, firms seeking to hire expatriates must demonstrate that they conducted an exhaustive search to find persons with the requisite skills in Kenya and were unable to find any such persons.  The Ministry of EAC and Regional Development, 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 KES 400,000 (approximately USD 4,000).

Kenya has one of the highest literacy rates in the region at 90 percent.  Investors have access to a large pool of highly qualified professionals in diverse sectors from a working population of over 47.5 percent out of a population of 47.6 million people.  Expatriates are permitted to work in Kenya provided they have a work (entry) permit issued under the Kenya Citizenship and Immigration Act (2011).  In December 2018, the Ministry of Interior and Coordination of National Government Cabinet Secretary issued a directive requiring foreign nationals to apply for their work permits prior to entering Kenya and to confirm that the skill they will provide is unavailable in Kenyan via the Ministry of Labor and Social Protection’s Kenya Labor Market Information System (KLMIS).  KLMIS provides information regarding demand, supply, and skills available in Kenya’s labor market (https://www.labourmarket.go.ke/labour/supply/).  Work permits are usually granted to foreign enterprises approved to operate in Kenya as long as the applicants are key personnel.  In 2015, the Directorate of Immigration Services (DIS) expanded the list of requirements to qualify for work permits and special passes.  Issuance of a work permit now requires an assured income of at least USD 24,000 annually or documented proof of capital of a minimum of USD 100,000 for investors.  Exemptions are available, however, for firms in agriculture, mining, manufacturing, or consulting sectors with a special permit.  International companies have complained that the visa and work permit approval process is slow, and some officials request bribes to speed the process.  Since 2018, the DIS has more stringently applied regulations regarding the issuance of work permits.  As a result, delayed or rejected work permit applications have become one of the most significant challenges for foreign companies in Kenya.

A company holding an investment certificate granted by registering with KenInvest and passing health, safety, and environmental inspections becomes automatically eligible for three class D work (entry) permits for management or technical staff and three class G, I, or J work permits for owners, shareholders, or partners.  More information on permit classes can be found at https://kenya.eregulations.org/menu/61?l=en.

According to the Kenya National Bureau of Statistics (KNBS), in 2019, the formal sector, excluding agriculture, employed 18.1 million people, with nominal average earnings of KES 778,248 (USD 7,780) per person per annum.  Kenya has the highest rate of youth joblessness in East Africa.  According to the 2019 census data, 5,341,182 or 38.9 percent of the 13,777,600 youths eligible to work are jobless.  Employment in Kenya’s formal sector was 2.9 million in 2019 up from 2.8 million in 2018.  The government is the largest employer in the formal sector, with an estimated 865,200 government workers in 2019.  In the private sector, agriculture, forestry, and fishing employed 296,700 workers while manufacturing employed 329,000 workers.  However, Kenya’s large informal sector – consisting of approximately 80 percent of the labor force – makes accurate labor reporting difficult.

The GOK has instituted different programs to link and create employment opportunities for the youth, published weekly in GOK’s “MyGov” newspaper insert.  Other measures include the establishment of the National Employment Authority which hosts the National Employment Authority Integrated Management System website that provides public employment service by listing vacancies ( https://neaims.go.ke/).  The Kenya Labour Market Information System (KLMIS) portal (https://www.labourmarket.go.ke/), run by the Ministry of Labour and Social Protection in collaboration with the labor stakeholders, is a one-stop shop for labor information in the country.  The site seeks to help address the challenge of inadequate supply of crucial employment statistics in Kenya by providing an interactive platform for prospective employers and job seekers.  Both local and foreign employers are required to register with National Industrial Training Authority (NITA) within 30 days of operating.  There are no known material compliance gaps in either law or practice with international labor standards that would be expected to pose a reputational risk to investors.  The International Labor Organization has not identified any material gaps in Kenya’s labor law or practice with international labor standards.  Kenya’s labor laws comply, for the most part, with internationally recognized standards and conventions, and the Ministry of Labor and Social Protection is currently reviewing and ensuring that Kenya’s labor laws are consistent with the constitution.  The Labor Relations Act (2007) provides that workers, including those in export processing zones, are free to form and join unions of their choice.

Collective bargaining is common in the formal sector but there is no data on the percentage of the economy covered by collective bargaining agreements (CBA).  However, in 2019 263 CBAs were registered in the labor relations court with the Wholesale and Retail trade sector recording the most, at 88.  The law permits workers in collective bargaining disputes to strike but requires the exhaustion of formal conciliation procedures and seven days’ notice to both the government and the employer.  Anti-union discrimination is prohibited, and the government does not have a history of retaliating against striking workers.  The law provides for equal pay for equal work.  Regulation of wages is part of the Labor Institutions Act (2014), and the government has established basic minimum wages by occupation and location.

The GOK has a growing trade relationship with the United States under the AGOA framework which requires compliance with labor standards.  The Ministry of Labor is reviewing its labor laws to align with international standards as labor is also a chapter in the Free Trade Agreement negotiations with the U.S.  In 2019, the government continued efforts with dozens of partner agencies to implement a range of programs for the elimination of child and forced labor.  However, low salaries, insufficient resources, and attrition from retirement of labor inspectors are significant challenges to effective enforcement.  Employers in all sectors routinely bribe labor inspectors to prevent them from reporting infractions, especially regarding child labor violations.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USD) 2020 $96.01 billion 2019 $101.01 billion https://data.worldbank.org/indicator/NY.GDP.
MKTP.CD?locations=KE
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $353 M BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $-16 M BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm
Total inbound stock of FDI as % host GDP 2019 1.2% 2020 0.1% https://unctad.org/webflyer/world-investment-report-2021

*Host Country Statistical Source: Central Bank of Kenya, Foreign Investment Survey 2020  

Table 3: Sources and Destination of FDI
Data not available.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information

U.S. Embassy Economic Section
U.N. Avenue, Nairobi, Kenya
+254 (0)20 363 6050

Nigeria

Executive Summary

Nigeria’s economy – Africa’s largest – exited recession with a 3.4% GDP growth rate in 2021 following a contraction of 1.9% the previous year.  The IMF forecasts growth rates of under 3% in 2022 and 2023 while the Nigerian National Bureau of Statistics predicts a more robust 4.2% growth rate in 2022.  President Muhammadu Buhari’s administration has prioritized diversification of Nigeria’s economy beyond oil and gas, with the stated goals of building a competitive manufacturing sector, expanding agricultural output, and capitalizing on Nigeria’s technological and innovative advantages.  With the largest population in Africa, Nigeria is an attractive consumer market for investors and traders, and offering abundant natural resources and a low-cost labor pool.  

The government has undertaken reforms to help improve the business environment, including by facilitating faster business start-up by allowing electronic stamping of registration documents and making it easier to obtain construction permits, register property, obtain credit, and pay taxes.  Foreign direct investment (FDI) inflows nevertheless declined from roughly $1 billion in 2020 to $699 million in 2021 as persistent challenges remain.  

Corruption is a serious obstacle to Nigeria’s economic growth and is often cited by domestic and foreign investors as a significant barrier to doing business.  Nigeria’s ranking in Transparency International’s 2021 Corruption Perception Index fell slightly from its 2020 score of 149 out of 175 countries to154 of 180 in 2021.   Businesses report that corruption by customs and port officials often leads to extended delays in port clearance processes and to other issues importing goods.  

Nigeria’s trade regime is protectionist in key areas.  High tariffs, restricted foreign exchange availability for 44 categories of imports, and prohibitions on many other import items have the aim of spurring domestic agricultural and manufacturing sector growth.  The government provides tax incentives and customs duty exemptions for pioneer industries including renewable energy.  A decline in oil exports, rising prices for imported goods, an overvalued currency, and Nigeria’s expensive fuel subsidy regime continued to exert pressure on the country’s foreign exchange reserves in 2021.  Domestic and foreign businesses frequently cite lack of access to foreign currency as a significant impediment to doing business. 

Nigeria’s underdeveloped power sector is a bottleneck to broad-based economic development and forces most businesses to generate a significant portion of their own electricity.  Reform of Nigeria’s power sector is ongoing, but investor confidence continues to be weakened by regulatory uncertainty and limited domestic natural gas supply.  

Security remains a concern to investors in Nigeria due to violent crime, kidnappings for ransom, and terrorism in certain parts of the country.  The ongoing Boko Haram and Islamic State in West Africa (ISIS-WA) insurgencies have included attacks against civilian and military targets in the northeast of the country.  Nigeria has experienced a rise in kidnappings for ransom and attacks on villages by armed gangs in the North West and North Central regions.  Criminal attacks on oil and gas infrastructure in the Niger Delta region that restricted oil production in 2016 have eased, but a significant rise in illegal bunkering and oil theft has left the sector in a similar state of decreased output.  

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 154 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 118 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $6,811 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 $2,000 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Nigeria belongs to the Economic Community of West African States (ECOWAS), a free trade area comprising 15 countries located in West Africa.  Nigeria signed the African Continental Free Trade Agreement (AfCFTA) – a free trade agreement consisting of 54 African countries, which became operational on January 1, 2021 – but its legislature has yet to ratify it and implementation of the agreement remains nascent.  Nigeria has bilateral investment agreements with:  Algeria, Austria, Bulgaria, Canada, China, Egypt, Ethiopia, France, Finland, Germany, Italy, Jamaica, the Republic of Korea, Kuwait, Morocco, the Netherlands, Romania, Russia, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, Uganda, and the United Kingdom.  Fifteen of these treaties (those with China, France, Finland, Germany, Italy, the Republic of Korea, the Netherlands, Romania, Serbia, South Africa, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom) have been ratified by both parties.  

The government signed a Trade and Investment Framework Agreement (TIFA) with the United States in 2000.  U.S. and Nigerian officials held their latest round of TIFA talks in 2016.  In 2017, Nigeria and the United States signed a memorandum of understanding to formally establish the U.S.–Nigeria Commercial and Investment Dialogue (CID).  The ministerial-level meeting with private sector representatives was last held in February 2020.  The CID coordinates bilateral private sector-to-private sector, government-to-government, and private sector-to-government discussions on policy and regulatory reforms to promote increased, diverse, and sustained trade and investment between the United States and Nigeria, with an initial focus on infrastructure, agriculture, digital economy, investment, and regulatory reform.  

Nigeria has 14 ratified double taxation agreements, including:  Belgium, Canada, China, Czech Republic, France, Italy, the Netherlands, Pakistan, Philippines, Romania, Singapore, Slovakia, South Africa, and the United Kingdom.  Nigeria does not have such an agreement with the United States.  Nigeria’s Finance Act of 2021 empowered the FIRS to collect corporate taxes from digital firms at a “fair and reasonable turnover” rate, which translates to 6% of turnover generated in Nigeria.  This will address the profit attribution issues raised following the ambiguity of the Finance Act of 2019 which subjected non-resident companies with significant economic presence to corporate and sales taxes.  Most of the affected companies are digital firms, many with U.S. headquarters.  Nigeria enacted the Petroleum Industry Act (2021) which overhauled the institutional, regulatory, administrative, and fiscal arrangements for the oil and gas industry.  While the legislation provides long-awaited additional clarity and  updates Nigeria’s governance structures and fiscal terms for the traditional energy sector, U.S. oil companies contend that it has not increased Nigeria’s competitiveness relative to other oil producing countries and may fail to attract significant new investments in the sector.

Nigeria is a member of the OECD Inclusive Framework on Base Erosion and Profit Sharing but declined to sign the two-pillar solution to global tax challenges in October 2021.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

The government does not have an established practice consistent with the OECD Guidelines on Corporate Governance for state-owned enterprises (SOEs), but SOEs have respective enabling legislations that govern their ownership.  To legalize the existence of state-owned enterprises, provisions have been made in the Nigerian constitution relating to socio-economic development and in section 16 (1).  The government has privatized many former SOEs to encourage more efficient operations, such as state-owned telecommunications company Nigerian Telecommunications and mobile subsidiary Mobile Telecommunications in 2014.  SOEs operate in a variety of sectors ranging from information and communication; power; oil and gas; transportation including rail, maritime, and airports; and finance.  

Nigeria does not operate a centralized ownership system for its state-owned enterprises.  Most SOEs are 100% government owned.  Others are owned by the government through the Ministry of Finance Incorporated (MOFI) or solely or jointly by MOFI and various agencies of government.  The enabling legislation for each SOE also stipulates its governance structure.  The boards of directors are appointed by the president and occasionally on the recommendation of the relevant minister.  The boards operate and are appointed in line with the enabling legislation which usually stipulates the criteria for appointing board members.  Directors are appointed by the board within the relevant sector.  In a few cases, however, appointments have been viewed as a reward to political allies.  Operational autonomy varies amongst SOEs.  Most SOEs are parastatals of a supervising ministry or the presidency with minimal autonomy.  SOEs with regulatory or industry oversight functions are often technically independent of ministerial supervision; however, ministers and other political appointees often interfere in their operations.

All SOEs are required to remit a share of their profits or operational surpluses to the federal government.  This “independent revenue” more than doubled from 2020 to 1.1 trillion naira ($2.6 billion) in 2021 and exceeded budget projections by 13%.  This was as a result of the government’s drive to increase non-oil revenues as well as increasingly stringent oversight of SOE remittances.  The 60 largest SOEs (excluding the Nigerian National Petroleum Corporation (NNPC)) generated a combined 1.2 trillion naira ($2.9 billion) in revenues and spent a total 410 billion naira ($983 million) in the first eleven months of 2021.  The government often provides certain grants to SOEs that are inefficiently run and/or loss-making.  For example, and over the past five years, the government has allocated 102 billion naira ($245 million) to the Transmission Company of Nigeria, 402 billion naira ($964 million) to the Nigerian Bulk Electricity Trading Company, 154 billion naira ($369 million) to the Nigerian Railway Corporation, and 24 billion naira ($58 million) to the Ajaokuta Steel Company.  These SOEs wereall ostensibly established to generate and remit revenue.   

NNPC is Nigeria’s most prominent state-owned enterprise.  Under the implementation of the Petroleum Industry Act, NNPC was incorporated as a limited liability company in September 2021, although the incorporation process does not appear to have led to a de facto change in the company’s operations and the government maintains 100% ownership.  NNPC Board appointments are made by the presidency, but day-to-day management is overseen by the Group Managing Director (GMD).  The GMD reports to the Minister of Petroleum Resources.  In the current administration, the President has retained that ministerial role for himself, and the appointed Minister of State for Petroleum Resources acts as the de facto Minister of Petroleum in the president’s stead with certain limitations.  

NNPC is Nigeria’s biggest and arguably most important state-owned enterprise and is involved in exploration, refining, petrochemicals, products transportation, and marketing.  It owns and operates Nigeria’s four refineries (one each in Warri and Kaduna and two in Port Harcourt), all of which are currently and largely inoperable.  NNPC remits proceeds from the sale of crude oil less operational expenses to the federation account which is managed by the federal government on behalf of all tiers of government.  It is also expected to pay corporate and petroleum profits taxes to the Federal Inland Revenue Service (FIRS).  NNPC began publishing audited financial statements in 2020 for the three prior fiscal years, a significant step toward improving transparency of NNPC operations.  The government generated crude oil net revenue of 1.5 trillion naira ($3.6 billion) in 2020 in large part due to NNPC’s $10 billion gross revenue and the government’s removal of the gasoline subsidy for half of 2020 in the face of low global oil prices.  However, despite higher oil prices, crude oil revenue fell to 970 billion naira ($2.3 billion) in the first eleven months of 2021.  This is largely due to declining crude production and the significant subsidy costs which NNPC deducts from revenue before remitting the balance to the government.

NNPC’s dual role as industry operator and unofficial regulator as well as its proximity to government lends it certain advantages its competitors lack.  For instance, the CBN often prioritizes NNPC’s foreign exchange requests and has offered the corporation a subsidized exchange rate for its importation of petroleum products in the past.  In addition, its proximity to government affords it high-level influence.  NNPC’s inputs formed a critical part of the government’s position during the drafting of the Petroleum Industry Act of 2021.  NNPC’s objection to the sale of an international oil company’s subsidiary with which it operates a joint venture has stayed the government approval required for the divestment.

The government also owns equity in some private-sector-run entities.  It retained 60% and 40% equity in the generation and distribution companies, respectively, that emerged from the power sector privatization exercise in 2013.  Despite being privately-run, revenues across the power sector value chain are hindered by the overall inefficiencies and illiquidity in the sector.  Consequently, a government facility finances a sizeable portion of the sector’s activities.  The Transmission Company of Nigeria, of which the government retained full ownership, is largely financed by the government.  The government owns 49% of Nigeria Liquefied Natural Gas (NLNG) Limited (NLNG) with the balance held by several international oil companies.  NLNG is one of Nigeria’s most profitable companies and the dividends paid to the government accounted for nearly 3% of federal government revenues in 2021.

8. Responsible Business Conduct

There is no specific Responsible Business Conduct law in Nigeria.  Several legislative acts incorporate within their provisions certain expectations that directly or indirectly regulate the observance or practice of corporate social responsibility.  In order to reinforce responsible behavior, various laws have been put in place for the protection of the environment.  These laws stipulate criminal sanctions for non-compliance but are not consistently enforced.  There are also regulating agencies which exist to protect the rights of consumers.  Additionally, the Nigerian government has no specific action plan regarding OECD Responsible Business Conduct guidelines.

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

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Nigerian Upstream Petroleum Regulatory Commission (the Commission) also ensure comprehensive standards and guidelines to direct the execution of projects with proper consideration for the environment.  These two agencies replaced the now defunct Department of Petroleum Resources (DPR) and its Environmental Guidelines and Standards of 1991 for the petroleum industry.  These two agencies aim to continue the DPR’s mission to preserve and protect the environmental issues of the Niger Delta.  

The Nigerian government provides oversight relating to the competition, consumer rights, and environmental protection issues.  The Federal Competition and Consumer Protection Commission (FCCPC), the National Agency for Food and Drug Administration and Control, the Standards Organization of Nigeria, and other entities have the authority to impose fines and ensure the destruction of harmful substances that otherwise may be sold to the general public.  The main regulators and enforcers of corporate governance are the Securities and Exchange Commission and the Corporate Affairs Commission (which register all incorporated companies).  Nigeria has adopted multiple reforms on corporate governance.  

The Companies Allied Matter Act 2020 and the Investment Securities Act provide basic guidelines on company listing.  More detailed regulations are covered in the NSX Listing rules.  Publicly listed companies are expected to disclose their level of compliance with the Code of Corporate Governance in their Annual Financial Reports.

9. Corruption

Domestic and foreign observers identify corruption as a serious obstacle to economic growth and poverty reduction.  Nigeria ranked 154 out of 180 countries in Transparency International’s 2021 Corruption Perception Index.  

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

Since taking office in 2015, President Buhari has focused on implementing a campaign pledge to address corruption, though his critics contend his anti-corruption efforts often target political rivals.  

The Economic and Financial Crimes Commission Establishment Act of 2004 established the EFCC to prosecute individuals involved in financial crimes and other acts of economic “sabotage.”  Traditionally, the EFCC has achieved the most success in prosecuting low-level internet scam operators.  A relatively few high-profile convictions have taken place, such as a former governor of Adamawa State, a former governor of Bayelsa State, a former Inspector General of Police, and a former Chair of the Board of the Nigerian Ports Authority.  The EFCC also arrested a former National Security Advisor (NSA), a former Minister of State for Finance, a former NSA Director of Finance and Administration, and others on charges related to diversion of funds intended for government arms procurement.  EFCC investigations have led to 5,562 convictions since 2010, with 2,200 in 2021.  In 2020 the EFCC announced that the Buhari administration convicted 1,692 defendants and recovered over $2.6 billion in assets over the previous four-year period.  In 2021, EFCC’s investigation of a former petroleum minister resulted in seizure of properties valued more than $80M.  

The Corrupt Practices and Other Related Offences Act of 2001 established an Independent Corrupt Practices and Other Related Offences Commission (ICPC) to prosecute individuals, government officials, and businesses for corruption.  The Corrupt Practices Act punishes over 19 offenses, including accepting or giving bribes, fraudulent acquisition of property, and concealment of fraud.  Nigerian law stipulates that giving and receiving bribes constitute criminal offences and, as such, are not tax deductible.  Between 2019-2020 the ICPC filed 178 cases in court and secured convictions in 51 cases.  The ICPC announced in early 2022 that it had recovered cash and assets valued at 166.51 billion naira (about $400 million at the official exchange rate) from corrupt persons in the preceding two and half years.  

In 2021, the Deputy Commissioner of the Nigerian Police Force (NPF) and Chief of the Intelligence Response Team (IRT), Abba Kyari, often publicly referred to as “Nigeria’s Supercop,” was suspended from the NPF and arrested for drug dealing, evidence tampering, and corruption for reportedly accepting bribes from a Nigerian internet fraudster Ramon Abbas, popularly known as “Hushpuppi,” who pleaded guilty to money laundering in the United States.  The Nigeria Police Service Commission finalized the suspension of Kyari on July 31, following the release of unsealed court documents filed in a U.S. District Court ordering the arrest of Kyari for his involvement in a $1.1 million fraud scheme with Abbas.  Kyari is alleged to have solicited payment for the detainment and arrest of Abbas at Abbas’s behest.  

In 2016, Nigeria announced its participation in the Open Government Partnership, a significant step forward on public financial management and fiscal transparency.  The Ministry of Justice presented Nigeria’s National Action Plan for the Open Government Partnership.  

Implementation of its 14 commitments has made some progress, particularly on the issues such as tax transparency, ease of doing business, and asset recovery.  The National Action Plan, which ran through 2019, covered five major themes:  ensuring citizens’ participation in the budget cycle, implementing open contracting and adoption of open contracting data standards, increasing transparency in the extractive sectors, adopting common reporting standards like the Addis Tax initiative, and improving the ease of doing business.  Full implementation of the National Action Plan would be a significant step forward for Nigeria’s fiscal transparency, although Nigeria has not fully completed any commitment to date. 

The Buhari administration created a network of agencies intended to work together to achieve anticorruption goals – the EFCC, the Asset Management Corporation of Nigeria (AMCON), the Federal Inland Revenue Service (FIRS), and the Nigerian National Petroleum Corporation (NNPC) – and which are principally responsible for the recovery of the ill-gotten assets and diverted tax liabilities.  The government launched the Financial Transparency Policy and Portal, commonly referred to as Open Treasury Portal, in 2019, to increase transparency and governmental accountability of funds transferred by making the daily treasury statement public.  The Open Treasury Portal mandates that all ministries, departments, and agencies publish daily reports of payments in excess of N5m ($13,800).  Agencies are also required to publish budget performance reports and other official financial statements monthly. Anticorruption activists demand more reforms and increased transparency in defense, oil and gas, and infrastructure procurement.   

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

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

The Public Procurement Law of 2007 established the Bureau of Public Procurement as the successor agency to the Budget Monitoring and Price Intelligence Unit.  It acts as a clearinghouse for government contracts and procurement and monitors the implementation of projects to ensure compliance with contract terms and budgetary restrictions.  Procurements above 100 million naira (approximately $243,000) reportedly undergo full “due process,” but government agencies routinely flout public procurement requirements.  Some of the 36 states of the federation have also passed public procurement legislation.

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

10. Political and Security Environment

Political, criminal, and ethnic violence continue to affect Nigeria.  Boko Haram and Islamic State – West Africa (ISIS-WA) have waged violent terrorist campaigns, killing of thousands of people in the country’s North East.  Boko Haram and ISIS-WA attacked civilians, military, police, humanitarian, and religious targets; recruited and forcefully conscripted child soldiers; and carried out scores of attacks on population centers in the North East and in neighboring Cameroon, Chad, and Niger.  Abductions by Boko Haram and ISIS-WA continue.  These attacks resulted in thousands of deaths and injuries, numerous human rights abuses, widespread destruction, the internal displacement of more than three million persons, and the external displacement of at least 327,000 Nigerian refugees to neighboring countries as of the end of 2021.  ISIS-WA terrorists demonstrated increased ability to conduct complex attacks against military outposts and formations.  During 2021, ISIS-WA terrorists took over significant territory formerly held by Boko Haram.  ISIS-WA expanded efforts to implement shadow governance structures in large swaths of Borno State.

President Buhari has sought to address matters of insecurity in Nigeria.  While the terrorists maintain the ability to stage forces in rural areas and launch attacks against civilian and military targets across the North East, Nigeria is also facing rural violence in many parts of the country carried out by criminals who raid villages and abduct civilians for ransom.  Longstanding disputes between migratory pastoralist and farming communities, exacerbated by increasingly scarce resources and intensified by climate change impacts, also continue to afflict the country.  

Due to challenging security dynamics throughout the country, the U.S. Mission to Nigeria has significantly limited official travel in the North East, and travel to other parts of Nigeria requires security precautions.  The Indigenous People of Biafra (IPOB), a political separatist group declared a terrorist organization by the Nigerian government in 2013, established a militant arm in December 2020, the Eastern Security Network (ESN).  ESN has been blamed for a surge in attacks in early 2021 against Nigerian police and security installations across the South East, the region in which IPOB claims the most support.  Following extradition from Kenya and subsequent arrest of IPOB leader Nnamdi Kanu in June 2021, IPOB/ESN issued a “stay at home” order on Mondays for the five states of the South East (Abia, Anambra, Ebonyi, Enugu, and Imo).  Residents or visitors to the area who disobey the order have faced violent intimidation, which has led to a near complete shutdown of activity across the South East each Monday and other days significant to Kanu’s trial.  The U.S. Mission to Nigeria does not allow official travel in those states on days that a stay-at-home order is in place. 

Decades of neglect, persistent poverty, and environmental damage caused by oil spills and illegal refining activities have left Nigeria’s oil rich Niger Delta region vulnerable to renewed violence.  Though each oil-producing state receives a 13% derivation of the oil revenue produced within its borders, and several government agencies, including the Niger Delta Development Corporation (NDDC) and the Ministry of Niger Delta Affairs, are tasked with implementing development projects, bureaucratic mismanagement and corruption have prevented these investments from yielding meaningful economic and social development in the region.  Niger Delta criminals have demonstrated their ability to attack and severely damage oil instillations at will, as seen when they cut Nigeria’s production by more than half in 2016.  Attacks on oil installations decreased due to a revamped amnesty program and high-level engagement with the region at the time, but the underlying economic woes and historical grievances of the local communities were not addressed.  As a result, insecurity in various forms continues to plague the region.  

More significant in recent years is the region’s shift from attacks against oil infrastructure to illegal oil bunkering and illicit refining.  In its July 2021 audit, the Nigeria Extractive Industries Transparency Initiative (NEITI) reported that Nigeria lost 42.25 million barrels of crude oil to oil theft in 2019, valued at $2.77 billion.  While the Nigerian Navy Eastern Naval Command disclosed that it had deactivated 175 illegal refineries and seized 27 vessels throughout its area of operation over a period of 11 months during 2021, such illegal activities have nonetheless continued, and oil theft remains a significant issue for both the industry and the region’s environment.  In 2021, Nigeria reportedly lost $3.5 billion in revenue to crude oil theft, representing approximately 10% of the country’s foreign reserves, and the National Oil Spill Detection and Response Agency (NOSDRA) still reports hundreds of oil spills each year.

11. Labor Policies and Practices

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

The labor movement has long been active and influential in Nigeria.  Labor organizations remain politically active and are prone to call for strikes on a regular basis against the national and state governments.  Since 2000, unions have successfully called eight general strikes.  While most labor actions are peaceful, difficult economic conditions fuel the risk that these actions could become violent.  

Nigeria’s constitution guarantees the rights of free assembly and association and protects workers’ rights to form or belong to trade unions.  Several statutory laws, nonetheless, restrict the rights of workers to associate or disassociate with labor organizations.  Nigerian unions belong to one of three trade union federations:  the Nigeria Labor Congress (NLC), which tends to represent junior (i.e., blue collar) workers; the United Labor Congress of Nigeria (ULC), which represents a group of unions that separated from the NLC in 2015; and the Trade Union Congress of Nigeria (TUC), which represents the “senior” (i.e., white collar) workers.  

According to figures provided by the Ministry of Labor and Employment, total union membership stands at roughly seven million.  A majority of these union members work in the public sector, although unions exist across the private sector.  The Trade Union Amendment Act of 2005 allowed non-management senior staff to join unions.  

Collective bargaining in the oil and gas industry is relatively efficient compared to other sectors. Issues pertaining to salaries, benefits, health and safety, and working conditions tend to be resolved quickly through negotiations.  Workers under collective bargaining agreements cannot participate in strikes unless their unions comply with the requirements of the law, which includes provisions for mandatory mediation and referral of disputes to the Nigerian government.  Despite these restrictions on staging strikes, unions occasionally conduct strikes in the private and public sectors without warning.  In 2021, localized strikes occurred in the education, government, energy, power, and healthcare sectors.  The law forbids employers from granting general wage increases to workers without prior government approval, but the law is not often enforced.  

In April 2019, President Buhari signed into law a new minimum wage, increasing it from 18,000 naira ($50 at the 2019 official exchange rate) to 30,000 naira ($73 at the 2021 official exchange rate) per month.  More than 15 state governments have yet to commence with the implementation of the new minimum wage. [Note:  The federal government has even threatened to sanction the management of the National Assembly over its breach of the provisions of the National Minimum Wage Act, 2019, for failing to pay its employees at the new minimum rate as of April 18, 2019.] Nigeria’s Labor Act provides for a 40-hour work week, two to four weeks of annual leave, and overtime and holiday pay for all workers except agricultural and domestic workers.  No law prohibits compulsory overtime.  The Act establishes general health and safety provisions, some of which specifically apply to young or female workers and requires the Ministry of Labor and Employment to inspect factories for compliance with health and safety standards.  Under-funding and limited resources undermine the Ministry’s oversight capacity, and construction sites and other non-factory work sites are often ignored.  Nigeria’s labor law requires employers to compensate injured workers and dependent survivors of workers killed in industrial accidents.

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

The issue of child labor remains of great concern in Nigeria, where an estimated 15 million children under the age of 14 are working, and about half this population being exploited as workers in hazardous situations according to the International Labor Organization (ILO).  Nigeria’s laws regarding minimum age for child labor and hazardous work are inconsistent. Article 59 of the Labor Act of 1974 sets the minimum age of employment at 12, and it is in force throughout Nigeria.  The Act also permits children of any age to do light work alongside a family member in agriculture, horticulture, or domestic service.

The Federal 2003 Child Rights Act (CRA) codifies the rights of children in Nigeria and must be ratified by each State to become law in its territory.  To date, 28 states and the Federal Capital Territory have ratified the CRA, with all eight of the remaining states located in northern Nigeria. [Note: The legislatures in Kebbi and Yobe States tentatively approved the law and are only awaiting their governors’ signatures to ratify the bills.]

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

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

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

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

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

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2021 $422,240 2020 $432,294 https://data.worldbank.org/indicator/
NY.GDP.MKTP.CD?locations=NG
 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2020 $9,405 BEA data available at BEA : Nigeria –
International Trade and Investment
Country Facts
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2020 $132 BEA data available at BEA : Nigeria –
International Trade and Investment
Country Facts
Total inbound stock of FDI as % host GDP N/A N/A 2020 0.55% https://data.worldbank.org/indicator/
BX.KLT.DINV.WD.GD.ZS?locations=NG
 

* Source for Host Country Data: Nigerian Bureau of Statistics

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $74,256 100% Total Outward $13,213 100%
Netherlands, The $13,640 18% United Kingdom $2,380 18%
United States $9,405 13% Netherlands, The $1,217 9%
France $8,798 12% Bermuda $1,014 8%
United Kingdom $8,132 11% Ghana $917 7%
Bermuda $7,696 10% Norway $808 6%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment
Data not available.

14. Contact for More Information 

Trade and Investment Officer
Plot 1075 Diplomatic Drive
Abuja, Nigeria
Telephone: +234 (0)9 461 4000
Email: EconNigeria@state.gov

Rwanda

Executive Summary

Rwanda has a history of strong economic growth and a reputation for low corruption. Though Rwanda averaged high GDP growth of 7.1 percent from 2009-2019, its economy suffered from the COVID-19 pandemic. According to Government of Rwanda (GOR) statistics, GDP growth was 9.5 percent in 2019 before the economy went into its first recession since 1994 with a 3.4 percent GDP contraction in 2020. The Rwandan economy is now showing signs of recovery, as GDP grew 10.9 percent in 2021. Rwanda has relied on a multi-round domestic economic stimulus plan to fuel a recovery, though some worry about the effect of these policies on the country’s sovereign debt. In late 2020 and early 2021, the GOR took significant policy reforms intended to return the economy to growth, improve Rwanda’s competitiveness in selected strategic growth sectors, increase foreign direct investment (FDI), and attract foreign companies to operate in the newly created Kigali International Financial Centre.

The country presents several FDI opportunities in sectors including: manufacturing, infrastructure, energy distribution and transmission, finance, fintech, off-grid energy, agriculture and agro-processing, affordable housing, tourism services, and information and communications technology (ICT). Rwanda has a partnership with Qatar to construct a new greenfield international airport at Bugesera, just outside of Kigali (estimated completion in 2025 or 2026). This project has already generated significant opportunities for foreign investment and will continue to do so as related projects (roads, hotels, logistics, etc.) come online.

The Rwandan Investment Code calls for equal treatment for both foreigners and nationals in certain operations, free transfer of funds, and compensation in cases of expropriation. Some investors have voiced concerns that a new land law passed in 2021 may run counter to some of the provisions in the Investment Code and similar provisions in the 2008 U.S.-Rwanda Bilateral Investment Treaty (BIT).

Many companies report that although it is easy to start a business in Rwanda, it can be difficult to operate a profitable or sustainable business due to a variety of hurdles and constraints. These include the country’s landlocked geography and resulting high freight transport costs, a small domestic market, limited access to affordable financing, payment delays with government contracts, challenges with tax administration, low-level corruption, and issues in competing with state-owned or affiliated enterprises. Government interventions designed to support overall economic growth can significantly affect investors, with some expressing frustration that they were not consulted prior to the abrupt implementation of government policies and regulations that affected their businesses.

The American business community in Rwanda is well-established and represents a variety of sectors. The American Chamber of Commerce-Rwanda was founded in 2019. As of March 2022, it had 39 members.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 52 of 175 http://www.transparency.org/
research/cpi/overview
 
Global Innovation Index 2021 102 of 132 https://www.globalinnovation
index.org/analysis-indicator
 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $114 https://apps.bea.gov/international/factsheet/
(most recent year available)
World Bank GNI per capita 2019 $830 https://data.worldbank.org/
indicator/NY.GNP.PCAP.CD
   

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Rwandan law allows private enterprises to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations. Since 2006, the GOR has made efforts to privatize SOEs; reduce the government’s non-controlling shares in private enterprises; and attract FDI, especially in the ICT, tourism, banking, and agriculture sectors, but progress has been slow. Currently there are 17 SOEs including water and electricity utilities, as well as companies in construction, ICT, aviation, mining, insurance, agriculture, finance, and other sectors. Some investors complain about unfair competition from state-owned and ruling party-aligned businesses. SOEs are governed by boards with most members having other government positions.

8. Responsible Business Conduct

There is a growing awareness of corporate social responsibility (CSR) within Rwanda, and several foreign-owned companies operating locally implement CSR programs. Rwanda also has guidelines on corporate governance by publicly listed companies. One of the most relevant sectors for CSR-minded investors is mining. Rwanda implements the OECD’s Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Rwanda also implements the International Tin Supply Chain Initiative tracing scheme. In 2016, the Better Sourcing Program (currently RCS Global Group) began an alternative mineral tracing scheme in Rwanda. Rwanda is not a member of the Extractive Industries Transparency Initiative. Recent U.S. sanctions announcements against individuals fueling conflict in the eastern DRC via trafficking of illicit conflict minerals, including gold, mention Rwanda and Uganda as supply chain transit points.

In recognition of the firm’s strong commitment to CSR, the U.S. Department of State awarded Sorwathe, a U.S.-owned tea producer in Kinihira, Rwanda, the Secretary of State’s 2012 Award for Corporate Excellence (ACE) for Small and Medium Enterprises. In 2015, the U.S. firm Gigawatt Global was also a finalist for the Secretary of State’s ACE award in the environmental sustainability category. In January 2021, Illinois-based Abbot laboratories was given the ACE award in recognition of its work to expand preventative health care in rural areas of Rwanda.

9. Corruption

Rwanda is ranked among the least corrupt countries in Africa, with Transparency International’s 2021 Corruption Perception Index putting the country among Africa’s four least corrupt nations and 52nd in the world. The GOR maintains a high-profile anti-corruption effort, and senior leaders consistently emphasize that combating corruption is a key national goal. The government investigates corruption allegations and generally punishes those found guilty. High-ranking officials accused of corruption often resign during the investigation period, and the GOR has prosecuted many of them. Rwanda has ratified the UN Anticorruption Convention, is a signatory to the OECD Convention on Combating Bribery and is a signatory to the African Union Anticorruption Convention. U.S. firms have identified the perceived lack of government corruption in Rwanda as a key incentive for investing in the country. At the same time, some investors have reported widespread corruption at lower, administrative levels of government, including with customs, tax, and police officials. There are no local industry or non-profit groups offering services for vetting potential local investment partners. The Ministry of Justice’s online  repository of judgments can be a useful source of information on companies and individuals in Rwanda. The Rwanda National Public Prosecution Authority  issues criminal records on demand to applicants.

10. Political and Security Environment

Rwanda is a stable country with relatively little violent crime. According to a 2017 report by the World Economic Forum, Rwanda is the ninth safest country in the world. Gallup’s Global Law and Order Index report of 2020 ranked Rwanda as the second safest place in sub-Saharan Africa. Investors have cited the stable political and security environment as an important driver of investments. A strong police and military provide a security umbrella that minimizes potential criminal activity.

The U.S. Department of State recommends that U.S. citizens exercise caution when traveling near the Rwanda-Democratic Republic of Congo border, given the possibility of fighting and cross-border attacks involving armed rebel and militia groups. Relations between Burundi and Rwanda are currently warming but have been tense in recent years, and there remains a risk of cross-border incursions and armed clashes. Since 2018, there have been a few incidents of sporadic fighting in districts bordering Burundi and the DRC and in Rwanda’s Nyungwe National Park and Volcanoes National Park.

In 2021, Rwandan authorities arrested several individuals accused of being ISIS members. Authorities stated the individuals were planning an imminent attack in Kigali. There have been several reported cross-border attacks in Western Rwanda on Rwandan police and military posts since 2016. Despite occasional violence along Rwanda’s borders with the DRC and Burundi, there have been no incidents involving politically motivated damage to investment projects or installations since the late 1990s. Relations with Uganda have been tense in recent years, but leaders continue to emphasize they are seeking a political solution. As of March 2022, Rwanda-Uganda relations appear to be improving. For example, in early 2022, Rwandan and Ugandan officials agreed to reopen the largest border crossing between the two countries. The border crossing had been largely closed to regular traffic since February 2019.

Please see the following link for State Department Country Specific Information.

11. Labor Policies and Practices

General labor is available, but Rwanda suffers from a shortage of skilled labor, including accountants, lawyers, engineers, tradespeople, and technicians. Higher institutes of technology, private universities, and vocational institutes are improving and producing more highly trained graduates each year. The Rwanda Workforce Development Authority sponsors programs to support both short and long-term professional trainings targeting key industries in Rwanda.

Rwanda’s informal economy is concentrated in the agriculture sector, which contributes 24 percent of GDP but employs close to 70 percent of the country’s population. The Government of Rwanda has taken steps to formalize large portions of its informal economy, for example, by banning street vendors. Rwanda also requires all private sector employers to formalize contracts. The economic disruptions of the COVID-19 pandemic have eliminated many formal employment opportunities and forced many workers back into the informal sector.

Investors are strongly encouraged to hire Rwandan nationals whenever possible. According to the Investment Code, a registered investor who invests an equivalent of at least $250,000 may recruit three foreign employees. However, several foreign investors reported difficulties bringing in qualified staff in accordance with the Investment Code due to Rwandan immigration rules and practices. In some cases, these problems occurred even though investors had signed agreements with the government regarding the number of foreign employees.

Rwanda has ratified all the International Labor Organization’s eight core conventions. Policies to protect workers in special labor conditions exist, but enforcement remains inconsistent. The government encourages, but does not require, on-the-job training and technology transfer to local employees. The law restricts voluntary collective bargaining by requiring prior authorization or approval by authorities and requiring binding arbitration in cases of non-conciliation. The law provides some workers the right to conduct strikes, but due to numerous restrictions, workers rarely engage in strikes. In 2020, the government published additional specifications for labor representatives, regulations against strikes, and guidelines providing labor inspectors greater authority to access to workplaces and assess fines. The GOR has been known to take swift action against foreign companies with poor labor practices upon initial complaints from workers. There is no unemployment insurance or other social safety net programs for workers laid off for economic reasons. Labor laws are not waived to attract or retain investment. There are no labor law provisions specific to SEZs or industrial parks. Collective bargaining is a relatively new concept in Rwanda and is not common. Few professional associations fix minimum salaries for their members and some investors have expressed concern that labor law enforcement is uneven or opaque. The official minimum wage has not changed since 1974 and is 100 Rwandan francs ($0.10) per day.

14. Contact for More Information

David Schneider
Economic and Commercial Officer
United States Embassy
30 KG 7 Avenue, P.O. Box 28 Kigali, Rwanda
+250-252-596-538, KigaliEcon@state.gov 

Senegal

Executive Summary

Senegal’s stable democracy, relatively strong economic growth, and open economy offer attractive opportunities for foreign investment. Senegal’s macroeconomic environment remains generally stable, although aggressive measures to counter the economic impact of COVID-19 and rising commodity costs are pushing public debt to nearly 70 percent of GDP, the internal debt distress threshold of the Economic Community of West African States (ECOWAS). The currency – the CFA franc used in eight West African countries – is pegged to the Euro and remains stable.

The Government of Senegal (GOS) welcomes foreign investment and has prioritized efforts to improve the business climate, and many companies choose Senegal as a base for operations in Francophone Africa. Since 2012, Senegal has pursued an ambitious development program, the Plan Senegal Emergent (Emerging Senegal Plan, or “PSE”), to improve infrastructure, achieve economic reforms, increase investment in strategic sectors, and strengthen private sector competitiveness. The GOS expanded the “single window” system to provide services to companies, opening new service centers across the country, harmonizing more than 60 GOS websites, and digitizing dozens of government services and payment mechanisms. The national digital agency, ADIE, plans to lay 4,500 kilometers of additional fiberoptic cable to increase internet access. Senegal has plans to transition power plants from fuel oil to domestic natural gas starting in 2023, when two recently discovered oil and gas fields come online. A new Public-Private Partnership (PPP) law entered into force in November 2021, modernizing and clarifying PPP procedures and encouraging local content.

With good air transportation links, a modern airport, expanding seaports, availability of mobile money and other financial technologies, and improving ground transportation, Senegal aims to become a regional commercial and services hub. Three Special Economic Zones offer investors tax exemptions and other benefits. Repatriation of capital and income is generally straightforward, although the regional central bank sometimes limits the number of “offshore accounts” for companies registered in Senegal and engaged in project finance. Although some companies report problems, Senegal scores favorably on corruption indicators compared to other countries in the region.

Despite Senegal’s many advantages, significant challenges remain. Investors at times cite burdensome and unpredictable tax administration, complex customs procedures, bureaucratic hurdles, opaque public procurement practices, an inefficient judicial system, inadequate access to financing, and a rigid labor market as obstacles. High real estate and energy costs, as well as high costs of inputs for manufacturing, also constrain Senegal’s competitiveness. High levels of unemployment and underemployment, especially among the country’s large youth population, represent a long-term macroeconomic challenge.

A U.S.-Senegal Bilateral Investment Treaty went into effect since 1990. Senegal’s stock of foreign direct investment (FDI) increased from $3.4 billion in 2015 to $6.4 billion in 2019, according to UNCTAD data. U.S. investment in Senegal has expanded since 2014, including investments in power generation, renewable energy, industry, and offshore oil and gas. The IMF reports that U.S. FDI stock in Senegal was approximately $114 million in 2019 (Table 1; up from $91 million in 2018). Although France is historically Senegal’s largest source of FDI, China overtook France as Senegal’s largest bilateral trade partner in 2019. Turkish economic influence is also rising, particularly in construction. Other important investment partners include Morocco, Saudi Arabia, and other Gulf States, as well as the EU. Sectors attracting substantial investment include petroleum and natural gas, agribusiness, mining, tourism, manufacturing, and fisheries.

Investors can consult Senegal’s investment promotion agency (APIX) at www.investinsenegal.com  for information on opportunities, incentives, and procedures for foreign investment, including a copy of Senegal’s investment code.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 73 of 180 Transparency International  
Global Innovation Index 2021 105 of 131 Global Innovation Index 
U.S. FDI in partner country ($M USD, stock positions) 2019 $114.0 million U.S. Foreign Direct Investment 
World Bank GNI per capita 2020 $1,430 World Bank Gross National Income 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Senegal has generally reduced government involvement in SOEs during the last three decades. However, the GOS still owns full or majority interests in 24 SOEs, including the national electricity company (Senelec), Dakar’s public bus service, the Port of Dakar, National Post, the national rail company, and the national water utility. Senelec retains control over power transmission and distribution, but it relies increasingly on independent producers to generate power. The GOS has also retained control of the national oil company, PETROSEN, which is involved in hydrocarbon exploration in partnership with foreign oil companies and operates a small refinery dependent on government subsidies. The GOS has modest and declining ownership of agricultural enterprises, including one involved in rice production. In 2018, the government revived the state-owned airline, Air Senegal. The GOS also owns a minority share in Sonatel-Orange Senegal, the country’s largest internet and mobile communications provider.

The Direction du Secteur Parapublic, an agency within the Ministry of Finance, manages the government’s ownership rights in SOEs. The GOS’s budget includes financial allocations to these enterprises, including subsidies to Senelec. SOE revenues are not projected in budget documents, but actual revenues are included in quarterly reports published by the Ministry of Finance. Senegal’s supreme audit institution (the Cour des Comptes) conducts audits of the public sector and SOEs.

8. Responsible Business Conduct

Following the lead of foreign companies, some Senegalese firms have begun adopting corporate social responsibility programs and responsible business conduct standards. However, this movement is not yet widespread.

Senegal’s 2016 Mining Code specifies the criteria and procedures by which the government awards natural resource extraction contracts or licenses. The code requires mining companies to participate in transparency reporting following the guidelines of the Extractive Industries Transparency Initiative (EITI). The GOS appears to follow the Mining Code and its implementing regulations in practice, although unregulated artisanal mining is common in some areas. Basic information on awards was publicly available online through the government’s official journal, and included details regarding geographic areas, resources under development, companies involved, and the duration of contracts. In January 2019, the government adopted a new Petroleum Code, which clarifies mechanisms for reserving revenues from oil and gas projects to the government. Senegal has been an active member of the EITI since 2013. In May 2018, the EITI Board declared Senegal the first country in Africa to have made “satisfactory progress” in implementing EITI standards. In October 2019, Senegal hosted the 41st quarterly meeting of the EITI Board, along with a conference on EITI implementation in Africa. The government’s EITI committee reports directly to the President.

9. Corruption

Senegalese law provides criminal penalties for corruption. The National Anti-Corruption Commission (OFNAC) has a mandate to enforce anti-corruption laws. In January 2020, OFNAC released overdue reports on its activities for 2017 and 2018 and swore in six new executive-level officials, bringing its managing board to a full complement for the first time in several years. A 2014 law requires the President, cabinet ministers, speaker and chief financial officer of the National Assembly, and managers of public funds more than one billion CFA francs (approximately $1.8 million) to disclose their assets to OFNAC. In 2020, all but one of these government officials complied with these disclosure requirements.

The GOS has made limited progress in improving its anti-corruption efforts. The current administration has mounted corruption investigations against several public officials (primarily the President’s political rivals) and has secured several convictions. In July 2020, President Sall launched an initiative to enforce a requirement that cabinet members and other high-level officials disclose their assets and issued a report disclosing his own personal assets.

The GOS has also taken steps to increase budget transparency in line with regional standards. Senegal ranked 73 out of 180 countries in Transparency International’s 2021 Corruption Perception Index. Notwithstanding Senegal’s positive reputation for corruption relative to regional peers, the government often did not enforce the law effectively, and some officials continued to engage in corrupt practices with impunity. Reports of corruption ranged from rent-seeking by bureaucrats involved in public approvals to opaque public procurement to corruption in the police and judiciary. Allegations of corruption against President Sall and his brother related to the development of oil and gas emerged in the press in 2019. While a subsequent investigation did not uncover wrong-doing, suspicions of high-level government corruption remain among many in civil society and the political opposition.

Senegal’s financial intelligence unit, Cellule Nationale de Traitement des Informations Financières (National Financial Information Processing Unit, CENTIF), is responsible for investigating money laundering and terrorist financing. CENTIF has broad authority to investigate suspicious financial transactions, including those of government officials. In February 2019, the regional FATF body – the Inter-Governmental Action Group against Money Laundering (GIABA) – issued a Mutual Evaluation Report of Senegal’s anti-money laundering and countering terrorist financing (AML/CTF) performance, measured by FATF standards. Although GIABA found the GOS’s understanding of AML/CTF standards and risks adequate, it gave Senegal non-compliant or partially compliant ratings on 26 of FATF’s 40 AML/CTF legal standards. Senegal also received ten low ratings and one moderate rating on the FATF’s 11 indicators measuring efforts to combat money laundering, terrorist financing, and weapons of mass destruction proliferation financing. Key weaknesses included: lack of domestic legislation implementing BCEAO AML/CTF directives; inadequate monitoring of nonprofits and non-financial professions, such as lawyers and accountants, who engage in financial transactions; inadequate inspections and sanctions of financial institutions; weak interagency cooperation; and poor AML/CTF capacity among police, judiciary, and customs. As a result, and in the absence of improvements, in February 2021, FATF added Senegal to its “gray list.” The GOS has committed to an action plan to address its deficiencies.

It is important for U.S. companies to assess corruption risks and develop an effective compliance program to prevent corruption, including bribery. U.S. firms operating in Senegal can underscore to partners that they are subject to the Foreign Corrupt Practices Act and may seek legal counsel to ensure full compliance with anti-corruption laws. The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize all corruption, including bribery of officials, and requiring governments to uphold their obligations under relevant international conventions. A U.S. firm that believes a competitor is using bribery to secure a contract may convey this to U.S. officials.

Senegal is a signatory of the United Nations Convention Against Corruption but is not a signatory of the OECD Convention on Combatting Bribery.

10. Political and Security Environment

Senegal has long been regarded as an anchor of stability in politically unstable West Africa. It is the only regional country that has never had a coup d’état. International observers assessed the February 2019 presidential election, in which President Sall won a second term, as free and fair, despite a few instances of campaign violence. Public protests occasionally spawn isolated incidents of violence when unions, opposition parties, merchants, or students demand better salaries, working conditions, or other benefits.

The March 2021 arrest of opposition figure Ousmane Sonko on alleged rape charges led to several days of intense protests that spiraled into widespread riots and looting. The unrest, Senegal’s worst in decades, was fueled by pandemic-related hardship, particularly among the youth. According to press reports, 14 people died, hundreds were injured, and private businesses across the country were damaged. While a few local businesses were damaged, firms associated with France – historically targeted by some groups as relics of the colonial past — bore the brunt of the looting and property damage. Despite this bout of unrest, foreign investors largely remained confident in Senegal’s stability and economic rebound. Most observers agreed that strong private sector investment, facilitated by improvements to the business climate and better mobilization of capital, is needed to address youth employment.

Years of declining violence in the Casamance region, home of a four-decade-old separatist conflict, ignited into a full military conflict between Senegal’s army and elements of the Movement of Democratic Forces in Casamance (MFDC) in March 2022. The Senegalese government indicated that the military operation would continue until MFDC resistance is eradicated, putting an end to the armed separatist movement.

Security is a top priority for the government, which increased its defense and security budget by 92 percent between 2012 and 2017. The Armed Forces Ministry noted a 32 percent budget increase for the fiscal year 2021.

11. Labor Policies and Practices

Senegal’s Labor Code, based on the French system, was last updated in 1997. The code retains a rigid approach that, according to some observers, favors social over economic goals. Rules relating to employment contracts, layoffs, and redundancy protections are some of the most stringent in the world, imposing high costs on businesses. However, labor law is not well-enforced, especially in the dominant informal sector.

Acquiring work permits for expatriate staff is typically straightforward. Citizens from WAEMU member countries may work freely in Senegal.

Senegal has an abundant supply of unskilled and semi-skilled labor, with a more limited supply of skilled workers in engineering and technical fields. While Senegal has one of the best higher educational systems in West Africa and produces a substantial pool of educated workers, limited job opportunities in Senegal lead many to emigrate.

Relations between employees and employers are governed by the Labor Code, industry-wide collective bargaining agreements, company regulations, and individual employment contracts. The Code provides legal protection for women and children and prohibits forced or compulsory labor. It also establishes minimum standards for working age, working hours, and working conditions, and bars children from performing many dangerous jobs. Senegal ratified International Labor Organization Convention 182 on the worst forms of child labor in 2000. The Code recognizes the right of workers to form and join trade unions. Any group of workers in a similar trade or profession may create a union, although formal approval by the Ministry of the Interior is required. The right to strike is recognized but sometimes restricted. The GOS has the authority to dissolve trade unions and requisition workers from private enterprises.

Two powerful industry associations represent management’s interests: the National Council of Employers and the National Employers’ Association. The principal labor unions are the National Confederation of Senegalese Workers and the National Association of Senegalese Union Workers, a federation of independent labor unions. Collective bargaining agreements cover an estimated 44 percent of formal sector workers. Most workers, however, work in the informal sector, where labor rules are not enforced.

Child labor remains a problem, particularly in the informal sector, mining, construction, transportation, domestic work, agriculture, and fishing, where labor regulations are rarely enforced. Despite some progress, Senegal still struggles with forced child begging. Tens of thousands of religious students (talibés) are enrolled in Koranic schools (daaras) where some are forced to beg to enrich teachers, a corruption of the intended lesson in humility. The GOS has made some progress in combatting these practices, but more progress is needed.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) N/A N/A 2020 $25,051 Senegal GDP 
U.S. FDI in partner country ($M USD, stock positions) N/A N/A 2019 $114 U.S. FDI in Senegal 
Host country’s FDI in the United States ($M USD, stock positions) N/A N/A 2019 $0 Senegal FDI in United States 
Total inbound stock of FDI as % host GDP N/A N/A 2020 34.6% Total FDI in Senegal 

“0” reflects amounts rounded to +/- USD 500,000.

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy
From Top Five Sources/To Top Five Destinations (US Dollars, Millions) in 2019
Inward Direct Investment Outward Direct Investment
Total Inward $4,688 100% Total Outward $949 100%
France #1 $2,333 50% France #1 $409 43%
Mauritius #2 $636 14% Mali #2 $129 14%
Canada #3 $626 14% Cote d’Ivoire #3 $127 13%
Nigeria #4 $200 4% India #4 $93 10%
China #5 $180 4% Mauritius #5 $69 7%

Data 

14. Contact for More Information

Aichatou Fall
Economic Specialist
U.S. Embassy, Route des Almadies, B.P. 49, Dakar, Senegal
+221 33 879 4000
FallAX@state.gov 

South Africa

Executive Summary

South Africa boasts the most advanced, broad-based economy in sub-Saharan Africa. The investment climate is fortified by stable institutions; an independent judiciary and robust legal sector that respects the rule of law; a free press and investigative reporting; a mature financial and services sector; and experienced local partners.

In dealing with the legacy of apartheid, South African laws, policies, and reforms seek economic transformation to accelerate the participation of and opportunities for historically disadvantaged South Africans. The Government of South Africa (GoSA) views its role as the primary driver of development and aims to promote greater industrialization, often employing tariffs and other trade measures that support domestic industry while negatively affecting foreign trade partners. President Ramaphosa’s October 2020 Economic Reconstruction and Recovery Plan unveiled the latest domestic support target: the substitution of 20 percent of imported goods in 42 categories with domestic production within five years. Other GoSA initiatives to accelerate transformation include labor laws to achieve proportional racial, gender, and disability representation in workplaces and prescriptive government procurement requirements such as equity stakes and employment thresholds for historically disadvantaged South Africans. In January 2022, the World Bank approved South Africa’s request for a USD 750 million development policy loan to accelerate the country’s COVID-19 response. South Africa previously received USD 4.3 billion from the International Monetary Fund in July 2020 for COVID-19 response. This is the first time that the institutions have supported South Africa’s public finances/fiscus since the country’s democratic transition.

In November 2021 at COP 26 the GoSA, the United States, the UK, France, Germany, and the European Union (EU) announced the Just Energy Transition Partnership (JETP). The partnership aims to accelerate the decarbonization of South Africa’s economy, with a focus on the electricity system, to help achieve the ambitious emissions reduction goals laid out in South Africa’s Nationally Determined Contribution (NDC) in an inclusive, equitable transition. The partnership will mobilize an initial commitment of USD 8.5 billion over three-to-five years using a variety of financial instruments.

South Africa continues to suffer the effects from a “lost decade” in which economic growth stagnated, hovering at zero percent pre-COVID-19, largely due to corruption and economic mismanagement. During the pandemic the country implemented one of the strictest economic and social lockdown regimes in the world at a significant cost to its economy. South Africa suffered a four-quarter technical recession in 2019 and 2020 with economic growth registering only 0.2 percent growth for the entire year of 2019 and contracting -6.4 percent in 2020. In a 2020 survey of over 2,000 South African businesses conducted by Statistics South Africa (StatsSA), over eight percent of respondents permanently ceased trading, while over 36 percent indicated short-term layoffs. Although the economy grew by 4.9 percent in 2021 due to higher economic activity in the financial sector, the official unemployment rate in the fourth quarter of 2021 was 34.9 percent. Other challenges include policy certainty, lack of regulatory oversight, state-owned enterprise (SOE) drain on the fiscus, widespread corruption, violent crime, labor unrest, lack of basic infrastructure and government service delivery and lack of skilled labor.

Due to growth in 2021, Moody’s moved South Africa’s overall investment outlook to stable; however, it kept South Africa’s sovereign debt at sub-investment grade. S&P and Fitch ratings agencies also maintain assessments that South Africa’s sovereign debt is sub-investment grade at this time.

Despite structural challenges, South Africa remains a destination conducive to U.S. investment as a comparatively low-risk location in Africa, the fastest growing consumer market in the world. Google (US) invested approximately USD 140 million, and PepsiCo invested approximately USD 1.5 billion in 2020. Ford announced a USD 1.6 billion investment, including the expansion of its Gauteng province manufacturing plant in January 2021.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 70 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 61 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $3.5 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 $6,010 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

State-owned enterprises (SOEs) play a significant role in the South African economy in key sectors such as electricity, transport (air, rail, freight, and pipelines), and telecommunications. Limited competition is allowed in some sectors (e.g., telecommunications and air). The GoSA’s interest in these sectors often competes with and discourages foreign investment.

There are over 700 SOEs at the national, provincial, and local levels. Of these, seven key SOEs are overseen by the Department of Public Enterprises (DPE) and employee approximately 105,000 people. These SOEs include Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation, transmission, and distribution); Mango (budget airlines); South African Airways (national carrier); South African Forestry Company (SAFCOL); and Transnet (transportation). For other national-level SOEs, the appropriate cabinet minister acts as shareholder on behalf of the state. The Department of Transport, for example, oversees South African’s National Roads Agency (SANRAL), Passenger Rail Agency of South Africa (PRASA), and Airports Company South Africa (ACSA), which operates nine of South Africa’s airports. The Department of Communications oversees the South African Broadcasting Corporation (SABC). A list of the seven SOEs that are under the DPE portfolio are found on the DPE website at: https://dpe.gov.za/state-owned-companies/ . The national government directory contains a list of 128 SOEs at: https://www.gov.za/about-government/contact-directory/soe-s .

SOEs under DPE’s authority posted a combined loss of R13.9 billion (USD 0.9 billion) in 2019 (latest data available). Many are plagued by mismanagement and corruption, and repeated government bailouts have exposed the public sector’s balance sheet to sizable contingent liabilities. The debt of Eskom alone represents about 10 percent of GDP of which two-thirds is guaranteed by government, and the company’s direct cost to the budget has exceeded nine percent of GDP since 2008/9.

Eskom, provides generation, transmission, and distribution for over 90 percent of South Africa’s electricity of which 80 percent comes from 15 coal-fired power plants. Eskom’s coal plants are an average of 41 years old, and a lack of maintenance has caused unplanned breakdowns and rolling blackouts, known locally as “load shedding,” as old coal plants struggle to keep up with demand. Load shedding reached a record 1136 hours as of November 30, 2021, costing the economy an estimated USD eight billion and is expected to continue for the next several years until the GoSA can increase generating capacity and increase its Energy Availability Factor (EAF). In October 2019 the DMRE finalized its Integrated Resource Plan (IRP) for electricity, which outlines South Africa’s policy roadmap for new power generation until 2030, which includes replacing 10,000 MW of coal-fired generation by 2030 with a mix of technologies, including renewables, gas and coal. The IRP also leaves the possibility open for procurement of nuclear technology at a “scale and pace that flexibly responds to the economy and associated electricity demand” and DMRE issued a Request for Information on new nuclear build in 2020. In accordance with the IRP, the GoSA approved the procurement of almost 14,000 MW of power to address chronic electricity shortages. The GoSA held the long-awaited Bid Window 5 (BW5) of the Renewable Energy Independent Power Producer Procurement Program (REIPPPP) in 2021, the primary method by which renewable energy has been introduced into South Africa. The REIPPPP relies primarily on private capital and since the program launched in 2011 it has already attracted approximately ZAR 210 billion (USD 14 billion) of investment into the country. All three major credit ratings agencies have downgraded Eskom’s debt following Moody’s downgrade of South Africa’s sovereign debt rating in March 2020, which could impact investors’ ability to finance energy projects.

Transnet National Ports Authority (TNPA), the monopoly responsible for South Africa’s ports, charges some of the highest shipping fees in the world. High tariffs on containers subsidize bulk shipments of coal and iron. According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products. TNPA is a division of Transnet, a state-owned company that manages the country’s port, rail, and pipeline networks. In May 2020 S&P downgraded Transnet’s local currency rating from BB to BB- based on a generally negative outlook for South Africa’s economy rather than Transnet’s outlook specifically.

South Africa’s state-owned carrier, South African Airways (SAA), entered business rescue in December 2019 and suspended operations indefinitely in September 2020. The pandemic exacerbated SAA’s already dire financial straits and complicated its attempts to find a strategic equity partner to help it resume operations. Industry experts doubt the airline will be able to resume operations. United Airlines and Delta Air Lines provide regular service between Atlanta (Delta) and Newark (United) to Johannesburg and Cape Town.

The telecommunications sector, while advanced for the continent, is hampered by poor implementation of the digital migration. In 2006, South Africa agreed to meet an International Telecommunication Union deadline to achieve analogue-to-digital migration by June 1, 2015. The long-delayed migration is scheduled to be completed by the end of March 2022, and while potential for legal challenges remain, most analysts believe the migration will be completed in 2022. The independent communications regulator initiated a spectrum auction in September 2020, which was enjoined by court action in February 2021 following suits by two of the three biggest South African telecommunications companies. After months of litigation, the regulator agreed to changes some terms of the auction, and the auction took place successfully in March 2022. One legal challenge remains, however, as third-largest mobile carrier Telkom has alleged the auction’s terms disproportionately favored the two largest carriers, Vodacom and MTN. Telkom’s case is due to be heard in April 2022, and its outcome will determine whether the spectrum allocation will proceed.

The GoSA appears not to have fulfilled its oversight role of ensuring the sound governance of SOEs according to OECD best practices. The Zondo Commission of Inquiry into allegations of state capture in the public sector has outlined corruption at the highest echelons of SOEs such as Transnet, Eskom, SAA and Denel and provides some explanation for the extent of the financial mismanagement at these enterprises. The poor performance of SOEs continues to reflect crumbling infrastructure, poor and ever-changing leadership, corruption, wasteful expenditure and mismanagement of funds.

8. Responsible Business Conduct

There is a general awareness of responsible business conduct in South Africa. The King Committee, established by the Institute of Directors in Southern Africa (IoDSA) in 1993, is responsible for driving ethical business practices. They drafted the King Code and King Reports to form an inclusive approach to corporate governance. King IV is the latest revision of the King Report, having taken effect in April 2017. King IV serves to foster greater transparency in business. It holds an organization’s governing body and stakeholders accountable for their decisions. As of November 2017, it is mandatory for all businesses listed on the JSE to be King IV compliant.

South Africa’s regional human rights commitments and obligations apply in the context of business and human rights. This includes South Africa’s commitments and obligations under the African Charter on Human and Peoples’ Rights, the African Charter on the Rights and Welfare of the Child, the Maputo Protocol on the Rights of Women in Africa, and the African Charter on Democracy, Elections and Governance. In 2015, the South African Human Rights Commission (SAHRC) published a Human Rights and Business Country Guide for South Africa which is underpinned by the UN Guiding Principles on Business and Human Rights (UNGPs) and outlines the roles and responsibilities of the State, corporations and business enterprises in upholding and promoting human rights in the South African context.

The GoSA promotes Responsible Business Conduct (RBC). The B-BBEE policy, the Companies Act, the King IV Report on Corporate Governance 2016, the Employment Equity Act of 1998 (EEA) and the Preferential Procurement Act are generally regarded as the government’s flagship initiatives for RBC in South Africa.

The GoSA factors RBC policies into its procurement decisions. Firms have largely aligned their RBC activities to B-BBEE requirements through the socio-economic development element of the B-BBEE policy. The B-BBEE target is one percent of net profit after tax spent on RBC, and at least 75 percent of the RBC activity must benefit historically disadvantaged South Africans and is directed primarily towards non-profit organizations involved in education, social and community development, and health.

The GoSA effectively and fairly enforces domestic laws pertaining to human rights, labor rights, consumer protection, and environmental protections to protect individuals from adverse business impacts. The Employment Equity Act prohibits employment discrimination and obliges employers to promote equality and eliminate discrimination on grounds of race, gender, sex, pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual orientation, age, disability, religion, HIV status, conscience, belief, political opinion, culture, language and birth in their employment policies and practices. These constitutional provisions align with generally accepted international standards. Discrimination cases and sexual harassment claims can be brought to the Commission for Conciliation, Mediation and Arbitration (CCMA), an independent dispute reconciliation body set up under the terms of the Labour Relations Act. The Consumer Protection Act aims to promote a fair, accessible and sustainable marketplace for consumer products and services. The National Environmental Management Act aims to to provide for co-operative, environmental governance by establishing principles for decision-making on matters affecting the environment, institutions that will promote co-operative governance and procedures for co-ordinating environmental functions exercised by organs of state.

The SAHRC is a National Human Rights Institution established in terms of the South African Constitution. It is mandated to promote respect for human rights, and the culture thereof; promote the protection, development, and attainment of human rights; and monitor and assess the observance of human rights in South Africa. The SAHRC is accredited with an “A” status under the United Nations’ Paris Principles. There are other independent NGOs, investment funds, unions, and business associations that freely promote and monitor RBC.

The South African mining sector follows the rule of law and encourages adherence to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. South Africa is a founding member of the Kimberley Process Certification Scheme (KPCS) aimed at preventing conflict diamonds from entering the market. It does not participate in the Extractive Industries Transparency Initiative (EITI). South African mining, labor and security legislation seek to embody the Voluntary Principles on Security and Human Rights. Mining laws and regulations allow for the accounting of all revenues from the extractive sector in the form of mining taxes, royalties, fees, dividends, and duties.

South Africa has a private security industry and there is a high usage of private security companies by the government and industry. The country is a signatory of The Montreux Document on Private Military and Security Companies.

9. Corruption

South Africa has a robust anti-corruption framework, but laws are inadequately enforced, and public sector accountability is low. High-level political interference has undermined the country’s National Prosecuting Authority (NPA). “State capture,” a term used to describe systemic corruption of the state’s decision-making processes by private interests, is synonymous with the administration of former president Jacob Zuma. In response to widespread calls for accountability, President Ramaphosa launched four separate judicial commissions of inquiry to investigate corruption, fraud, and maladministration, including in the Public Investment Corporation, South African Revenue Service, and the NPA which have revealed pervasive networks of corruption across all levels of government. The Zondo Commission of Inquiry, launched in 2018, has published and submitted three parts of its report to President Ramaphosa and Parliament as of March 2022. Once the entire report is reased and submitted to Parliament, Ramaphosa stated his government will announce its action plan. The Zondo Commission findings reveal the pervasive depth and breadth of corruption under the reign of former President Jacob Zuma.

The Department of Public Service and Administration coordinates the GoSA’s initiatives against corruption, and South Africa’s Directorate for Priority Crime Investigations focuses on organized crime, economic crimes, and corruption. The Office of the Public Protector, a constitutionally mandated body, investigates government abuse and mismanagement. The Prevention and Combating of Corrupt Activities Act (PCCA) officially criminalizes corruption in public and private sectors and codifies specific offenses (such as extortion and money laundering), making it easier for courts to enforce the legislation. Applying to both domestic and foreign organizations doing business in the country, the PCCA covers receiving or offering bribes, influencing witnesses, and tampering with evidence in ongoing investigations, obstruction of justice, contracts, procuring and withdrawal of tenders, and conflict of interests, among other areas. Inconsistently implemented, the PCCA lacks whistleblower protections. The Promotion of Access to Information Act and the Public Finance Management Act call for increased access to public information and review of government expenditures. President Ramaphosa in his reply to the debate on his State of the Nation Address on 20 February 2018 announced Cabinet members would be subject to lifestyle audits despite several subsequent repetitions of this pledge, no lifestyle audits have been shared with the public or Parliament.

The South Africa government’s latest initiative is the opening of an Office on Counter Corruption and Security Services (CCSS) that seeks to address corruption specifically in ports of entry via fraudulent documents and other means.

10. Political and Security Environment

South Africa has strong institutions and is relatively stable, but it also has a history of politically motivated violence and civil disturbance. Violent protests against the lack of effective government service delivery are common. Killings of, and by, mostly low-level political and organized crime rivals occur regularly. In May 2018, President Ramaphosa set up an inter-ministerial committee in the security cluster to serve as a national task force on political killings. The task force includes the Police Minister‚ State Security Minister‚ Justice Minister‚ National Prosecuting Authority, and the National Police Commissioner. The task force ordered multiple arrests, including of high-profile officials, in what appears to be a crackdown on political killings. Criminal threats and labor-related unrest have impacted U.S. companies in the past. In July 2021 the country experienced wide-spread rioting in Gauteng and KwaZulu-Natal provinces sparked by the imprisonment of former President Jacob Zuma for contempt of court during the deliberations of the “Zondo Commission” established to review claims of state-sponsored corruption during Zuma’s presidency. Looting and violence led to over USD 1.5 billion in damage to these province’s economies and thousands of lost jobs. U.S. companies were amongst those impacted. Foreign investors continue to raise concern about the government’s reaction to the economic impacts, citing these riots and deteriorating security in some sectors such as mining to be deterrents to new investments and the expansion of existing ones.

11. Labor Policies and Practices

The unemployment rate in the third quarter of 2021 was 34.9 percent. The results of the Quarterly Labour Force Survey (QLFS) for the third quarter of 2021 show that the number of employed persons decreased by 660,000 in the third quarter of 2021 to 14.3 million. The number of unemployed persons decreased by 183,000 to 7.6 million compared to the second quarter of 2021. The youth unemployment (ages 15-24) rate was 66.5 percent in the third quarter of 2021.

The GoSA has replaced apartheid-era labor legislation with policies that emphasize employment security, fair wages, and decent working conditions. Under the aegis of the National Economic Development and Labor Council (NEDLAC), government, business, and organized labor negotiate all labor laws, apart from laws pertaining to occupational health and safety. Workers may form or join trade unions without previous authorization or excessive requirements. Labor unions that meet a locally negotiated minimum threshold of representation (often, 50 percent plus one union member) are entitled to represent the entire workplace in negotiations with management. As the majority union or representative union, they may also extract agency fees from non-union members present in the workplace. In some workplaces and job sectors, this financial incentive has encouraged inter-union rivalries, including intimidation and violence.

There are 205 trade unions registered with the Department of Labor as of February 2019 (latest published figures), up from 190 the prior year, but down from the 2002 high of 504. According to the 2019 Fourth QLFS report from StatsSA, 4.071 million workers belonged to a union, an increase of 30,000 from the fourth quarter of 2018. Department of Labor statistics indicate union density declined from 45.2 percent in 1997 to 24.7 percent in 2014, the most recent data available. Using StatsSA data, however, union density can be calculated: The February 2020 QLFS reported 4.071 million union members and 13.868 million employees, for a union density of 29.4 percent.

The right to strike is protected on issues such as wages, benefits, organizational rights disputes, and socioeconomic interests of workers. Workers may not strike because of disputes where other legal recourse exists, such as through arbitration. South Africa has robust labor dispute resolution institutions, including the CCMA, the bargaining councils, and specialized labor courts of both first instance and appellate jurisdiction. The GoSA does not waive labor laws for foreign direct investment. The number of working days lost to strike action fell to 55,000 in 2020, compared with 1.2 million in 2019. The sharp decrease is attributable to the GoSA’s imposition of the National State of Disaster at the onset of the COVID-19 pandemic, and the accompanying lockdown that commenced on March 26, which forced many businesses either to close or lay off workers and implement wage cuts or shorten time of work. The fact that many wage negotiations were put on hold also led to a reduction in strike figures.

Collective bargaining is a cornerstone of the current labor relations framework. As of February 2019, the South Africa Department of Labor listed 39 private sector bargaining councils through which parties negotiate wages and conditions of employment. Per the Labor Relations Act, the Minister of Labor must extend agreements reached in bargaining councils to non-parties of the agreement operating in the same sector. Employer federations, particularly those representing small and medium enterprises (SMEs) argue the extension of these agreements – often reached between unions and big business – negatively impacts SMEs. In 2019, the average wage settlement resulted in a 7.1 percent wage increase, on average 2.9 percent above the increase in South Africa’s consumer price index (latest information available).

In his 2022 state of the nation address President Ramaphosa spoke of tax incentives for companies that employ youth in efforts to curb youth unemployment. In addition, President Ramaphosa announced measures to move funds in the national budget to address youth unemployment.

South Africa’s current national minimum wage is USD 1.45/hour (R21.69/hour), with lower rates for domestic workers being USD 1.27/hour (R19.09/hour). The rate is subject to annual increases by the National Minimum Wage Commission as approved by parliament and signed by President Ramaphosa. Employers and employees are each required to pay one percent of wages to the national unemployment fund, which will pay benefits based on reverse sliding scale of the prior salary, up to 58 percent of the prior wage, for up to 34 weeks. The Labor Relations Act (LRA) outlines dismissal guidelines, dispute resolution mechanisms, and retrenchment guideline. The Act enshrines the right of workers to strike and of management to lock out striking workers. It created the CCMA, which mediates and arbitrates labor disputes as well as certifies bargaining council impasses for strikes to be called legally.

The Basic Conditions of Employment Act (BCEA) establishes a 45-hour workweek, standardizes time-and-a-half pay for overtime, and authorizes four months of maternity leave for women. Overtime work must be conducted through an agreement between employees and employers and may not be more than 10 hours a week. The law stipulates rest periods of 12 consecutive hours daily and 36 hours weekly and must include Sunday. The law allows adjustments to rest periods by mutual agreement. A ministerial determination exempted businesses employing fewer than 10 persons from certain provisions of the law concerning overtime and leave. Farmers and other employers may apply for variances. The law applies to all workers, including foreign nationals and migrant workers, but the GoSA did not prioritize labor protections for workers in the informal economy. The law prohibits employment of children under age 15, except for work in the performing arts with appropriate permission from the Department of Labor.

The EEA, amended in 2014, protects workers against unfair discrimination on the grounds of race, age, gender, religion, marital status, pregnancy, family responsibility, ethnic or social origin, color, sexual orientation, disability, conscience, belief, political, opinion, culture, language, HIV status, birth, or any other arbitrary ground. The EEA further requires large- and medium-sized companies to prepare employment equity plans to ensure that historically disadvantaged South Africans, as well as women and disabled persons, are adequately represented in the workforce. More information regarding South African labor legislation may be found at: www.labour.gov.za/legislation 

14. Contact for More Information

Shelbie Legg
Trade and Investment Officer
877 Pretorius Street
Arcadia, Pretoria 0083
+27 (0)12-431-4343
LeggSC@state.gov 

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