611225f3a3 - United States Department of State (2024)

Policies Towards Foreign Direct Investment

Although the GRA demonstrated political will to significantly increase foreign direct investment (FDI), Angola remains a difficult operating environment for investment to thrive. FDI remains low, volatile, and largely concentrated in the extractives sector. The GRA continues to pursue an ambitious plan to reform the business and investment environment. The Private Investment Law (“PIL”) introduced in 2018 has proven to be slow to promote FDI and retain investment. At the end of May 2020, the Economic Committee of the Council of Ministers gathered to discuss some changes to the PIL, with a particular focus on attracting foreign investment through a mechanism to negotiate benefits and special conditions depending on the specific project. There have been, however, no legislative changes related to foreign direct investment since the enactment of the 2018 PIL and the Competition Law of 2018.

President João Lourenço implemented economic reform policies that provide a level playing field for domestic and foreign investors and leveraged efforts to combat and deter corruption and money laundering. Foreign investors were also encouraged to participate in the ongoing Privatization Program designed to privatize over 195 State-Owned Enterprises (SOES) by 2022. AIPEX, the country’s Private Investment and Export Promotion Agency is billed as the investors ‘one stop shop’ for business establishment. AIPEX is tasked with facilitating investment and is also supposed to manage the state’s investment portfolio to ensure the equitable implementation of the PIL and distribution of private investment, especially foreign investment. Theoretically the country prioritizes investment retention, but it does not appear to have institutional capacity to pursue and advocate for investment retention.

Limits on Foreign Control and Right to Private Ownership and Establishment

The 2018 PIL establishes the general principles and basis of private investment in Angola, determining the benefits and concessions that the GRA grants private investors and the criteria for accessing them, as well as establishing rights, duties and guarantees of private investors. The PIL is applied to private investments of any value, whether it is carried out by domestic or foreign investors, although waivers may exist under a bilateral agreement framework. Companies incorporated in conformity with the Angolan law, even with capital from abroad are, for all legal purposes, subject to the existing Angolan legislation. After the completion of a private investment project, foreign investors have the right, after approval by the GRA and settlement of taxes, to transfer abroad:

1. Values corresponding to dividends;
2. Values corresponding to the proceeds of the liquidation of their enterprises;
3. Values corresponding to due compensations;
4. Values corresponding to royalties or other earnings of remuneration from indirect investments, associated with the transfer of technology.

These processes are very bureaucratic and tedious. Foreign investors and companies with majority foreign ownership are only eligible for domestic credit after having fully implemented their respective investment projects.

On October 20, 2020 Presidential Decree No. 271/20, revoking Order No. 127/03, of 25 November 2003, was published, approving the new Legal Framework on Local Content in the Oil Sector. The statute aims to promote economic diversification, the participation of local businesses in the oil sector, the increase of domestic production and reduction of imports of goods for the sector, as well as the creation of employment and increased training of Angolans in the oil industry workforce. The statute establishes new rules on ‘Angolanization’ and procurement of goods and services for the sector, which will have a significant impact on company activities. For example, priority will be given to procurement of nationally produced goods and services, especially the obligation to contract Angolan companies included in the database approved by the National Oil, Gas and Biofuels Agency (ANPG). In addition, all companies operating in any segment of the petroleum-sector value chain will be required to present an annual local content plan to the ANPG. Failure to comply with the rules established in the new statute will result in fines in local currency to the equivalent of between USD 50,000 and USD 300,000. Additional penalties may also be applied, such as barring companies from entering new contracts or operating altogether.

Although the GRA eliminated the 35 percent local content requirement in foreign investment and encourages foreign companies to invest in the domestic economy, some FDI screening processes continue. Foreign ownership remains limited to 49 percent in the oil and gas sector, 50 percent in insurance, and 10 percent in the banking and telecommunications sectors, though there have been some exceptions recently in which the foreign investment goes beyond the limit. There are several objectives that the GRA seeks to accomplish through its FDI screening processes: 1) create jobs for Angolans or transfer expertise to Angolan companies as part of an “Angolanization” plan; 2) protect sensitive industries such as defense and finance; 3) prevent capital flight or other behavior that could threaten the stability of the Angolan economy; and 4) diversify the economy and increase competitiveness of local industries.

Other Investment Policy Reviews

Angola has been a member of the World Trade Organization (WTO) since 1996. The WTO performed a policy review of Angola in September 2015. At the government’s request, the last Investment Policy Review (IPR) of Angola’s business and economic environments was completed on September 30, 2019 by the United Nations Conference on Trade and Development (UNCTAD of Angola’s The IPR was part of a broader EU funded technical assistance project aimed to assist Angola in attracting and benefitting from FDI beyond the extractives industry and to support the GRA’s objective of increasing economic diversification and sustainable development. The full report and policy recommendations are accessible at: https://unctad.org/en/PublicationsLibrary/diaepcb2019d4_en.pdf

The review identified remaining policy gaps and bottlenecks, including the complex system for FDI entry and establishment, burdensome operational regulations, the persistence of restrictive business practices and a lack of institutional capacity and coordination. These affect the country’s ability to fully take advantage of its strategic location, abundant natural resources, and preferential access to external markets.

The Review also devoted special attention to investment in agribusiness and its contribution to sustainable development. It calls for measures to foster responsible investment and promote inclusive modes of production in agriculture. The recommendations emphasize the need to strike a policy balance between food security and export development objectives, improve access to land and infrastructure, and promote entrepreneurship and skills development.

Business Facilitation

The World Bank Doing Business 2020 report ranked Angola 177 out of 190 countries and recorded an improvement in Angola’s monitoring and regulation of power outages, and in facilitating trade through the implementation of an automated customs data management system, ASYCUDA (Automated System for Customs Data) World, and by upgrading its port community system to allow for electronic information exchange between different parties involved in the import/export process. To commence a business, investors typically register with the General Tax Administration (AGT) Social Security Institute (INSS), National Press, and a local bank Launching a business typically requires 36 days, compared with a regional average of 27 days, with Angola ranked 146 out of the 190 economies evaluated.

The Covid-19 pandemic highlighted the urgency of trade facilitation reform to improve competitiveness in non-oil business sectors. With this, export procedures in the country cost USD 240 and take 98 hours, compared to an average of USD 173 and 72 hours for sub-Saharan Africa. Many of the reforms necessary to improve conditions for Angolan businesses, such as automating customs procedures or creating a single window, are addressed by the World Trade Organization’s Trade Facilitation Agreement, which Angola ratified in April 2019. To facilitate opening, changing, or closing a company, the Guiche Único de Empresas one stop shop for investors (GUE) was folded into the Private Investment and Export Promotion Agency (AIPEX) in 2019. It combines the main public services for constitution of companies, GUE and AIPEX, allowing the investor to open and register companies and be able to access the tax benefits and other incentives resulting from the Private Investment Law.

On October 19, 2020, to facilitate the establishment of businesses and as a COVID-19 imposed biosafety measure, the GRA simplified procedures by creating an online registration portal for companies (www.gue.gov.ao). The online portal will allow for faster registry of companies (taking only 30-60 minutes) and replace the publication of the company registry in the Gazette (Diário da República), a procedure that took more than five days. There is still the option to set up a company in person, which is estimated to also take as little as 30 minutes to an hour. The cost to establish a sole proprietorship is USD 16 dollars and USD 54 for partnerships, corporations, and other entities. Payments are also made electronically.

In April 2020, to simplify bureaucracy and in anticipation of the economic slowdown eventually caused by COVID-19, the GRA proposed revoking the procedure for issuing business licenses for all economic activities and requiring companies to carry out statistical registration in the act of incorporation. With the abolition of the Company License Document (a commercial permit) and Statistical Registration, to begin business activities, companies need to register their activity with the local administration office. The office will issue an electronic operating license. Some exclusions from this regime are foreseen, such as those related to the trade in foodstuffs, live plant species, animals, birds and fisheries, medicines, car sales, lubricants and chemicals. For these sectors, a physical license is still required as they are considered high risk economic activities which may affect human, animal, environmental and state safety.

The state-run private investment and export promotion agency’s website is http://www.aipex.gov.ao/PortalAIPEX/#!/ . Contact Information: Departamento de Promoção e Captação do Investimento; Agencia de Investimento Privado e Promoção de Investimentos e Exportações de Angola (AIPEX). Rua Kwamme Nkrumah No.8, Maianga, Luanda, Angola Tel: (+244) 995 28 95 92| 222 33 12 52 Fax: (+244) 222 39 33 81.

Outward Investment

The Angolan Government does not promote or incentivize outward investment, nor does it restrict Angolans from investing abroad. Investors are free to invest in any foreign jurisdiction. According to data from the BNA, in 2018, the government did not invest abroad but received returns on previous investments abroad.

Domestic investors prefer to invest in Portuguese-speaking countries, with few investing in neighboring countries in Sub-Saharan Africa. The bulk of investment is in real estate, fashion, fashion accessories, and domestic goods. Due to foreign exchange constraints, there has been very little or no investment abroad by domestic investors. Although investing in real estate is cheaper abroad, a few invest in real estate domestically. The average Angolan invests in affordable investments with quick returns.

Real Property

Transparency and land property rights are critical for Angolan economic development, given that two thirds of Angolans work in agriculture and are directly dependent on land property rights. However, the Land Act (Lei de Terras de Angola) has not been revised since its approval in December 2004. While the Land Act is a crucial step toward addressing issues of land tenure, normalization of land ownership in Angola persists with problems such as difficulties in completing land claims, land grabbing, lack of reliable government records, and unresolved status of traditional land tenure. Among other provisions, the law included a formal mechanism for transforming traditional land property rights into legal land property rights (clean titles). During the civil war, a transparent system of land property rights did not exist, so it was crucial to re-establish one shortly after the end of hostilities in 2002.

According to the “Land Act,” the State may transfer or constitute, for the benefit of Angolan natural or legal persons, a multiplicity of land rights on land forming part of its private domain. Although, it is possible to transfer ownership over some categories of land, the transfer of State land almost never implies the transfer of its ownership, but only the formation of minor land rights with leasehold being the most common form in Angola. The recipient of private property rights from the State can only transfer those rights with consent of the local authority and after a period of five years of effective use of the land according to the Land Act. Weak land tenure legislation and lack of secure legal guarantees (clean titles) are the reasons given by most commercial banks for their greater than 80 percent refusal rate for loans since land is used as collateral. Foreign real-estate developers therefore seek out public-private partnership (PPP) arrangements with State actors who can provide protection against land disputes and financial risks involved in projects that require significant cash outlays to get started.

Registering parcels of land over 10,000 hectares must be approved by the Council of Ministers. Registering property takes 190 days on average, ranking 167 out of 173 according to the World Bank’s Doing Business 2020 survey, with fees averaging three percent of property value. Owners must also wait five years after purchasing before reselling land. There are no written regulations setting out guidelines defining different forms of land occupation, including commercial use, traditional communal use, leasing, and private use. Over the years, the government has given out large parcels of land to individuals in order to support the development of commercial agriculture. However, this process has largely proceeded in an unsystematic way and does not follow any formal rule change on land tenure by the State.

Before obtaining proof of title nationwide, an Angolan citizen or an Angolan legal entity must also obtain the Real or Leasing Rights (“Usufruct”) of the Land from the Institute of Planning and Urban Management of Luanda (IPGUL), an often-time-consuming procedure that can take up to a year or more. However, if a company already owns the land, it must secure a land property title deed from the Real Estate Registry in Luanda. An updated property certificate (“certidão predial”) is obtained from the relevant Real Estate Registry, with the complete description of the property including owner(s) information and any charges, liens, and/or encumbrances pending on the property. The complex administration of property laws and regulations that govern land ownership and transfer of real property as well as its tedious registration process may reduce investor appetite for real estate investments in Angola. Dispatch no. 174/11 of March 11, 2011 mandates the total fees for the “certidão predial” include stamp duty (calculated according to the Law on Stamp Duty); justice fees (calculated according to the Law on Justice Fees); fees to justice officers (according to the set contributions for the Justice budget); along with notary and other fees. The total fee is also dependent on the current value of the fiscal unit (UCF).

Intellectual Property Rights

Angola is a member of the World Intellectual Property Organization (WIPO) and follows international patent classifications of patents, products, and services to identify and codify requests for patents and trademark registration. Angola is also member of the Paris Convention where each contracting state must grant the same IP protection to nationals of other contracting states and provides for the right of priority in the case of patents, trademarks and designs. It also recognizes the goods and services classes from the Nice Classification and allows for multi-class filing. The Nice Classification, established by the Nice Agreement, is an international classification for the registration of trademarks.

Trademark registration is mandatory to be granted rights over a mark. Angolan trademarks are valid for 10 years from the filing date and renewable for further periods of 10 years.

The Instituto Angolano de Propriedade Intelectual (IAPI) is the governmental body within the Ministry of Industry & Commerce charged with implementing patent and trademark law. The Ministry of Culture, Tourism & Environment oversees copyright law.

Implemented by the Presidential Decree No. 62/20 of March 4, the new official fees related to Industrial Property procedures in Angola, were published in the Official Gazette of the Angola Republic. The new fees came into force on March 20, 2020 and reflect an increase of values in all Industrial Property procedures practiced in this jurisdiction, updating rates that have remained unchanged for more than 20 years. The most significant alteration with respect to trademarks, consists of joining in a single fee, paid at the time of the registration application, the filing fees, the first and second publication fees, and the granting and registration certificate fees.

With regard to patents, additional fees are due for each claim after the 15th. Additionally, the request for the anticipation or postponement of the publication of a patent is now provided by the new applicable fees.

Angola is not listed in United States Trade Representative’s (USTR) Special 301 report nor the notorious market report.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ . The U.S. Embassy point of contact for IPR related issues is Logan Council ( CouncilLR@state.gov). For legal counsel, refer to Angola’s Country Commercial Guide Local Professional Services List ( http://export.gov/ccg/angola090710.asp

Capital Markets and Portfolio Investment

There is a visible effort by the government to create more attractive conditions for foreign investment as reflected in the attempt to create a more favorable social and political climate, the new legislation on private investment and in a greater liberalization of capital movements. The dangers of absorption by the local partner or the impossibility of transferring profits are thus mitigated. The BNA abolished the licensing previously required on importing capital from foreign investors allocated to the private sector and exporting income associated with such investments. This measure compliments the need to improve the capture of FDI and portfolio investment and it is in line with the privatization program for public companies (PROPRIV) announced through Presidential Decree No. 250/19 of August 5, 2019 which encourages foreign companies to participate. In addition to the operations, BNA is also exempt from licensing, the export of capital resulting from the sale of investments in securities traded on a regulated market and the sale of any investment, in which the buyer is also not – foreign exchange resident, pursuant to Notice No. 15/2019.

BODIVA is Angola’s Debt and Securities Stock Exchange. The Stock Exchange (BODIVA) allows through a platform the trading of different types of financial instruments available to investors with rules (self-regulation), systems (platforms) and procedures that assure market fairness and integrity to facilitate portfolio investment. However, there is no effective regulatory system to encourage and facilitate portfolio investment which is poorly explored. At the moment, only local commercial banks have the ability to potentially list on the nascent stock exchange.

The central bank (BNA) partially observes IMF Article VIII on refraining from restrictions on payments and transfers for current international transactions. Foreign exchange crises and the loss of correspondent banking relationships since 2015 have prompted the BNA to adopt restrictive monetary policies that negatively affect Angola’s payment system, seen in the delay in foreign exchange denominated international transfers.

Credit is not allocated on market terms. Foreign investors do not normally access credit locally. For Angolan investors, credit access is very limited, and if available, comes with a collateral requirement of 125 percent, so most either self-finance, or seek financing from non-Angolan banks and investment funds such as the “Angola Invest” government-subsidized funding program for micro, small and medium private enterprises (SMEs). The fund, sourced from the Annual State Budget, ended on September 25, 2018, further reducing funding opportunities for many SMEs. Banks credit issue appetite also lies more on government than the private sector as credit to government is more profitable for these commercial banks.

Money and Banking System

Angola is over-banked. Although four banks have been closed since 2018, 26 banks still operate in Angola. The top seven banks control nearly 80% of sector deposits, but the rest of the sector includes a large number of banks with minimal scale and weak franchises. 47% of income-earners utilize banking services, with 80% being from the urban areas. Angolan banks focus on profit generating activities including transactional banking, short-term trade financing, foreign exchange, and investments in high-interest government bonds.

The banking sector largely depends on monetary policies established by Angola’s central bank, the Banco Nacional de Angola (BNA). Thanks to the ongoing IMF economic and financial reform agenda, the BNA is adopting international best practices and slowly becoming autonomous. On February 13, 2021 President Joao Lourenco issued an edict granting autonomy to the BNA, a decision taken after IMF recommendations. The reforms taken under the Lourenco administration have lessened the political influence over the BNA and allowed it to more freely adopt strategies to build resilience from external shocks on the economy. As Angola’s economy depends heavily on oil to fuel its economy, so does the banking sector. The BNA periodically monitors minimum capital requirements for all banks and orders the closure of non-compliant banks.

Although the RECREDIT Agency purchased non-performing loans (NPLs) of the state’s parastatal BPC bank, NPLs remain high at 32%, a decrease of 5% since 2016. Credit availability is minimal and often supports government-supported programs. The GRA obliged banks to grant credit more liberally in the economy, notably by implementing a Credit Support Program (PAC). For instance, the BNA has issued a notice obliging Angolan commercial banks to grant credit to national production in the minimum amount equivalent to 2.5% of their net assets until the end of 2020.

The country has not lost any additional correspondent banking relationships since 2015. The BNA is currently working on reforms to convince international banks to reestablish correspondent banking relationships. The majority of transactions go via third party correspondent banking services in Portugal banks, a costly option for all commercial banks. At the time of issuing this report no correspondent banking relationships were at jeopardy.

Foreign banking institutions are allowed to operate in Angola and are subject to BNA oversight.

The Monetary Policy Committee (MPC) of the BNA met in March 2020, to consider recent changes to the main economic indicators, and taking into account the COVID-19 pandemic and its impact on the domestic economy. The MPC paid particular attention to the external accounts, and their implications for the conduct of monetary and exchange rate policies. The MPC has accordingly decided to:

• Maintain the base interest rate, BNA rate, at 15.5%;
• Maintain the interest rate on the liquidity absorption facility with an overnight maturity, at 0%;
• Reduce the interest rate on the liquidity absorption facility with a seven-day maturity, from 10% to 7%;
• Maintain reserve requirement coefficients for national and foreign currencies at 22% and 15%, respectively;
• Establish a liquidity facility with a maximum value of Kz 100 billion for the acquisition of government securities held by non-financial corporations:
• Extend to the 54 products defined in PRODESI the credit granted with recourse to the reserve requirements, and establish a minimum number of loans to be granted per bank;
• Exempt from the limits established per type of payment instrument, the import of products included in the basic food basket, and of and these continue to cripple lending appetite of commercial banks to the private sector medicines;
• Set April 1 as the start date for the use of the Bloomberg platform by the oil companies and by the National Agency of Petroleum, Gas and Biofuels, for the sale of foreign currency to commercial banks.

Foreign Exchange and Remittances

Foreign Exchange

The Angolan National Bank (Banco Nacional de Angola –BNA) published Notice no. 15/2019, of December 30, 2019, which establishes the rules and procedures applicable to foreign exchange operations conducted by non-resident entities related to: (a) foreign direct investment; (b) investment in securities (portfolio investment); (c) divestment operations; and (d) income earned by non-residents from direct investment or portfolio investment (the “Notice”). The notice also applies to all foreign exchange transactions relating to “foreign investment projects that were registered with BNA prior to its publication.” Investments made by non-resident foreign exchange entities in the oil sector are excluded from the scope of the Notice.

The notice distinguishes foreign direct investment and portfolio investment. Direct investment is investment made in the “creation of new companies or other legal entities” or through the acquisition of shareholdings in non-listed Angolan companies or, if listed in a regulated market when the investment gives the external investor a right of control equal to 10% or more. In turn, portfolio investment represents the investment in securities. In the case of the purchase of securities representing the capital of a listed company, portfolio investment will be considered only when the voting rights associated with the investment are less than 10% of the listed company’s capital stock.

Since dropping the peg on the dollar in 2018, the local currency fluctuates freely. In October 2019, the BNA fully liberalized the foreign exchange regime, abandoning the trading band that had been in place since January 2018. Its previous policy of controlled exchange rate adjustment prevented the kwanza from depreciating by more than 2.0% at currency auctions. The BNA also has allowed oil companies to directly sell foreign currency to commercial banks. The BNA said the move is expected to normalize the foreign exchange market through the reduction of its direct intervention with oil firms, increase the number of foreign currency suppliers, and revive the country’s foreign exchange market. The exchange rate is determined by the rate on the day of sale of forex to commercial banks. On June 22, 2020, the BNA adopted Bloomberg’s foreign exchange electronic trading system (FXGO) and its electronic auction system to bring greater efficiency and transparency to Angola’s forex market.

Remittance Policies

Based on the notice issued on December 23, 2019 as per above, as long as adequate supporting documentation is submitted to the commercial bank, foreign investors can freely transfer within 5 days abroad:

1. dividends, interest and other income resulting from their investments;
2. shareholder loan repayments;
3. proceeds of the sale of securities listed on the stock exchange;
4. when the participated entity is not listed on the stock exchange, the proceeds of the sale, when the purchaser is also a foreign investor and the amount to be transferred abroad by the seller is equal to the amount to be transferred from abroad by the purchaser, in foreign currency;

The transfer abroad of capital, requiring the purchase of foreign currency, when the participated entity is not listed on the stock exchange, requires prior exchange control approval when it relates to the following:

1. The sale of the whole or a part of an investment;
2. The dissolution of the participated entity;
3. Any other corporate action that would reduce the capital of the participated entity.

There may be delays greater than 60 days if the documentation submitted to the BNA is not complete such as a tax due statement from the General Tax Agency and companies’ balance sheet statements.

The BNA has facilitated remittances of international supplies by introducing payment by letters of credit. Also, the 2018 NPIL grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of their investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all taxes due. The government continues to prioritize foreign exchange for essential goods and services including the food, health, defense, and petroleum industries.

Sovereign Wealth Funds

In October 2012, former President Eduardo dos Santos established a petroleum funded USD 5 billion sovereign wealth fund called the Fundo Soberano de Angola (FSDEA). The FSDEA was established in accordance with international governance standards and best practices as outlined in the Santiago Principles.

In February 2015, the FSDEA was recognized as transparent by the Sovereign Wealth Fund Institute (SWFI), receiving a score of 8 out of 10. The FSDEA has the express purpose of profit maximization with a special emphasis on investing in domestic projects that have a social component ( http://www.fundosoberano.ao/investments/ ). Jose Filomeno dos Santos (Zenu), son of former President Jose Eduardo dos Santos, was appointed chairman of FSDEA in June 2013, but was removed by President Lourenco in 2017, and is appealing a five-year jail term pronounced in August 2020, following his trial for money laundering, embezzlement and fraud. Former Minister Carlos Alberto Lopes was named new head of the FSDEA that same year.

Half of the initial endowment of FSDEA was invested in agriculture, mining, infrastructure, and real estate in Angola and other African markets, and the other half was supposedly allocated to cash and fixed-income instruments, global and emerging-market equities, and other alternative investments. The FSDEA is in possession of approximately USD 3.35 billion of its private equity assets previously under the control of QG and given to economic and financial hardship, the fund’s equity was reduced by USD 2 billion to finance the Program for Intervention in the Municipalities in 2019 and USD 1.5 billion for the fight against the Covid-19 pandemic in 2020. The FSDEA also announced that the government will use the remainder, USD 1.5 billion of the fund’s assets to support social programs on condition of future repayment through increased tax on the BNA’s rolling debts.

The government has few initiatives to promote responsible business conduct. On March 26, 2019, the UNDP launched the National Network of Corporate Social Responsibility, called “RARSE,” to promote the creation of a platform to reconcile responsible business conduct with the needs of the population. The government, through the Ministry of Education, also held a campaign under the theme, “Countries that have a good education, that enforce laws, condemn corruption, privilege and practice citizenship, have as a consequence successful social and economic development.” The government has enacted laws to prevent labor by children under 14 and forced labor, although resource limitations hinder adequate enforcement. In June 2018, the government passed a National Action Plan (2018-2022) to eradicate the worst forms of child labor (the PANETI). With limitations, the laws protect the rights to form unions, collectively bargain, and strike. Government interference in some strikes has been reported. The Ministry of Public Administration, Employment, and Social Security has a hotline for workers who believe their rights have been infringed. Angola’s Chamber of Commerce and Industry established the Principles of Ethical Business in Angola.

The GRA does not fully meet the minimum standards for the elimination of trafficking in persons but is making significant efforts to do so. Those efforts to Angola being led to Angola being upgraded to Tier 2 in 2020. A National Action Plan to Combat and Prevent Trafficking in Persons in 2019 included measures to improve the capacities of coordination agencies, investigating more potential trafficking cases, convicting more traffickers, training front-line responders, conducting some awareness-raising activities, and improving data collection on trafficking crimes through use of the Southern African Development Community (SADC) regional data collection tool.

The government continues to strengthen its bilateral efforts on anti-corruption and improved governance. On July 1, 2019, the government signed a Memorandum of Understanding (MOU) on Security and Public Order with the United States. The MOU enables the two governments to cooperate in the fields of information exchange related to the prevention, investigation, and combatting of criminal activity, including the collection and processing of evidence. The MOU encourages the exchange of information on criminal investigation techniques, the implementation of professional training programs, and exchange of delegations.

To support increasing fiscal transparency and sustainable debt management, the U.S. Government offers ongoing technical assistance to the Financial Intelligence Unit on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT). The United States also provides periodic technical assistance to the Ministry of Finance and communicates with the Angolan banking sector to adopt international best practices that will help Angola prepare for the Financial Action Taskforce review starting in 2021.

In 2015, Angola organized an interagency technical working group to explore Angola’s possible membership in the Voluntary Principles on Security and Human Rights (VPs) and the Extractive Industries Transparency Initiative (EITI). Angola formally announced its intention to join the EITI in September 2020. Angola has been a member of the Kimberley Process (KP) since 2003 and chaired the KP in 2015.

Angola is not a party to the WTO’s GPA, and does not adhere to the OECD guidelines on corporate for SOEs.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

Angola maintains a politically stable environment. Politically motivated violence is not a high risk, and incidents are rare. The last significant incident of political violence happened in 2010 during an attack against the Togolese national soccer team by FLEC-PM (Front for the Liberation of the Enclave of Cabinda—Military Position) in the northern province of Cabinda. FLEC threatened Chinese workers in Cabinda in 2015 and claimed in 2016 that they would return to active armed struggle against the Angolan government forces. No attacks have since ensued and the FLEC has remained relatively inactive.

President Lourenco has pledged to govern for all Angolans and to combat two of the country’s major problems: corruption and mismanagement of public funds. President Lourenco’s government seeks reform of the state and national cohesion. Local elections – “Autarquias” –were anticipated to take place in 2020 but have not yet occurred due to the COVID-19 pandemic and the lack of key legislation governing the elections.

Angola is also becoming more assertive and demonstrating a more steadfast commitment to peace and stability in Africa, particularly in the Great Lakes region. In 2019 and 2020 it facilitated an agreement to end mounting tensions between the Rwanda and Uganda. Angola maintains the rotating presidency of the International Conference on the Great Lakes Region (ICGLR) and has played an important convening role on the situation in the Central African Republic.

With Angola’s economy continuing to struggle, social dissatisfaction is on the rise and is triggering reactions particularly among Angolan young adults who take to the streets occasionally to protest against overall economic hardship and unrealized political pledges. Large pockets of the population live in poverty without adequate access to basic services, and the country could benefit from more inclusive development policies. According to the 2018/2019 Expenditure and Income Survey from the National Institute of Statistics, the poverty index was at 40.6%. A social protection scheme program has been launched with a pilot cash transfer project which will benefit over 1.6 million vulnerable families until 2022 around the country.

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

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

The GoB publicly emphasizes the importance of attracting (FDI) and drafted an investment facilitation law recommended by the 2014 Organization for Economic Co-operation and Development (OECD) Investment Review. While the draft was completed in 2016 with technical assistance from UNCTAD, it was never enacted. The draft is still under review and will be presented to Parliament for approval. The GoB has launched initiatives to promote economic activity and foreign investment in specific areas, such as establishing a diamond hub which brought more value-added businesses (i.e., cutting and polishing) into the country. Additional investment opportunities in Botswana include large water, electricity, transportation, and telecommunication infrastructure projects.Economists have also noted Botswana’s considerable potential in the mining, mineral processing, beef, tourism, solar energy, and financial services sectors. BITC assists foreign investors with projects intended to diversify export revenue, create employment, and transfer skills to Botswana citizens. The High Level Consultative Council (HLCC), chaired by the President, and an Exporter Roundtable organized by BITC and Botswana’s Exporters and Manufacturers Association (BEMA), are mechanisms employed by the GoB to focus on a healthy business environment for FDI.

Limits on Foreign Control and Right to Private Ownership and Establishment

Botswana’s 2003 Trade Act reserves licenses for citizens in 35 sectors, including butcheries, general trading establishments, gas stations, liquor stores, supermarkets (excluding chain stores), bars (other than those associated with hotels), certain types of restaurants, boutiques, auctioneers, car washes, domestic cleaning services, curio shops, fresh produce vendors, funeral homes, hairdressers, various types of rental/hire services, laundromats, specific types of government construction projects under a certain dollar amount, certain activities related to road and railway construction and maintenance, and certain types of manufacturing activities including the production of furniture for schools, welding, and bricklaying.The law allows foreigners to participate in these sectors as minority joint venture partners in medium-sized businesses.Foreigners can hold the majority share if they obtain written approval from the trade minister.

The Ministry of Investment, Trade, and Industry (MITI) administers the citizen participation initiative and takes an expansive interpretation of the term chain stores, so that it encompasses any store with more than one outlet.This broad interpretation has resulted in the need to apply exemptions to certain supermarkets, simple specialty operations, and general trading stores.These exceptions were generally granted prior to 2015 and many large general merchandise markets, restaurants, and grocery networks are owned by foreigners as a result. Since 2015, the GoB has denied some exception requests, but reports they have approved some based on localization agreements directly negotiated between the ministry and the applying company.These agreements reportedly include commitments to purchase supplies locally and capacity building for local workers and industry.BITC conducts due diligence on companies that are looking to invest in the country and the Directorate of Intelligence Services (DIS) handles background checks for national security.

Other Investment Policy Reviews

In December of 2014, the OECD released an Investment Policy Review on Botswana. ( http://www.oecd-ilibrary.org/finance-and-investment/oecd-investment-policy-reviews-botswana-2014_9789264203365-en).

Botswana has been a World Trade Organization (WTO) member since 1995. In 2016, the WTO conducted a trade policy review of the Southern African Customs Union to which Botswana belongs ( https://www.wto.org/english/tratop_e/tpr_e/tp322_e.htm).

Business Facilitation

To operate a business in Botswana, one needs to register a company with the GoB’s CIPA through the OBRS at: https://www.cipa.co.bw/types-of-entities

CIPA asserts that the company registration process can be completed in a day and is integrated with BURS which allows for a fast-tracked tax registration in 30 days. Additional work is required to open bank accounts and obtain necessary licenses and permits.The World Bank ranked Botswana 159 out of 190 in its ease of starting a business category.

BITC ( www.bitc.co.bw), the GoB’s investment promotion agency, was designed to serve as a one-stop shop to assist investors in setting up a business and finding a location for operation.BITC’s ability to streamline procedures varies based on GoB entity and bureaucratic requirements.BITC assesses investment projects on their ability to diversify the economy away from its continued dependence on diamond mining, contribute towards export-led growth, and job creation for and skills transfer to Batswana citizens. BITC also hosts the Botswana Trade Portal ( https://www.botswanatradeportal.org.bw) that is designed to ease trade across borders. It is a single point of contact for all information relating to import and export to and from Botswana and represents a number of ministries and parastatals.

Botswana has several incentives and preferences for both citizen-owned and locally based companies.Foreign-owned companies can benefit from local procurement preferences which are usually required for government tenders.MITI instituted a program in 2015 to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving a 10 percent margin, and large companies a five percent margin.Under this policy, MITI defines small companies as having less than five million pula in annual revenue reflected in their financial statements, medium companies with five to 20 million pula in revenue, and large companies with revenues exceeding 20 million pula. The directive applies to 27 categories of goods and services ranging from textiles, chemicals, and food, as well as a broad range of consultancy services. The government can also offer up to 50 million pula in funding through Citizen Entrepreneurial Development Agency (CEDA) to joint ventures between foreign and citizen owned companies.

For Companies Act registration purposes, enterprises are classified as: Micro Enterprises – fewer than six employees including the owner and an annual revenue below 60 thousand pula; Small Enterprises – fewer than 25 employees and an annual revenue between 60 thousand and 1.5 million pula; Medium Enterprises – fewer than 100 employees and annual revenue between 1.5 and 5 million pula; Large Enterprises – over 100 employees and an annual revenue of at least 5 million pula.This classification system permits foreigners to participate as minority shareholders in medium-sized enterprises in the 35 business sectors reserved for citizens.

Outward Investment

The GoB neither promotes nor restricts outward investment.

Real Property

Property rights are enforced in Botswana.The World Bank ranks Botswana 82 out of 190 in the Registering Property category.There are three main categories of land in Botswana: freehold, state land, and tribal land.Tribal and state land cannot be sold to foreigners.There are no restrictions on the sale of freehold land, but only an approximate five percent of land in Botswana is freehold. All minerals in Botswana, even those on private lands, are viewed as property of the State. In the capital city of Gaborone, the number of freehold plots is limited. In 2019, the GoB increased the rate of Transfer Duty on the sale and transfer of property to non-citizens (both individuals and companies) from five percent to 30 percent.

State land represents about 25 percent of land in Botswana.On application to the Department of Lands, both foreign-owned and local enterprises registered in Botswana may lease state land for industrial or residential use.Commercial use leases are for 50 years and residential leases are for 99 years.Waiting periods tend to be long for leasehold applications, but subleases from current leaseholders are available.In 2014, the GoB changed its implementing regulation to allow companies with fewer than five employees to operate in residential areas if their operations do not pose a health or safety risk to residents.

Tribal land represents 70 percent of land in Botswana.To obtain a lease for tribal land, the investor must approach the relevant local Land Board. Processes are unlikely to be streamlined or consistent across Land Boards.

Since independence, the trend in Botswana has been to increase the area of tribal land at the expense of both state and freehold land.Landlord-tenant law in Botswana tends to be moderately pro-landlord.

In addition to helping investors who meet its criteria obtain appropriate land leaseholds, BITC has also built factory units for lease to industrialists with the option to purchase at market value.

Intellectual Property Rights

Botswana’s legal intellectual property rights (IPR) structure is adequate, although some improvements are needed.The key challenge facing the GoB is effective implementation. CIPA was established in 2014 and is comprised of three offices: the Companies and Business Office, the Industrial Property Office, and the Copyright Office.Intellectual property is registered through CIPA. CIPA’s priorities are to strengthen and implement Botswana’s IPR regime and to improve interagency cooperation. IPR infringement occurs in Botswana primarily through the sale of counterfeit items in low-end sales outlets.According to CIPA, targeted raids by local law enforcement have reduced the availability of counterfeit goods across the country. In 2019, CIPA and the Botswana PoliceService seized 3,888 counterfeit CDs and DVDs valued at USD 30,000 compared to nearly 13,000 counterfeits valued at over USD 107,000 seized in 2017.The U.S. government continues to work with the GoB to modernize and improve enforcement of IPR.

IPR is protected under the Industrial Property Act of 2010, which provides protections on patents, trademarks, utility designs, handicrafts, traditional knowledge, and geographic indicators.The 2000 Copyright and Neighboring Rights Act also protects art and literary works, and the 1975 Registration of Business Names Act oversees corporate name and registration procedures.Other IPR-related laws include the Competition Act, the Value Added Tax Act, the Botswana Penal Code, the Customs and Excise Duty Act, the Monuments and Relics Act, the Broadcasting Act, and the Societies Act.

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

Botswana is a signatory to the Beijing Treaty on Audiovisual Performances, the Hague Agreement Concerning the International Deposit of Industrial Designs, the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks, the Convention establishing the World Intellectual Property Organization (WIPO), the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty, the Patent Cooperation Treaty, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property.

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

Resources for Rights Holders

Goitseone Montsho
Economic/Commercial Specialist
MontshoG@state.gov
+267 373-2431

Local lawyers’ list: https://bw.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/attorneys/

Capital Markets and Portfolio Investment

The government encourages foreign portfolio investment, although there are limits on foreign ownership in certain sectors. It also embraces the establishment of new and diverse financial institutions to support increased foreign and domestic investment and to fill existing gaps where finance is not commercially available. There are nine commercial banks, one merchant bank, one offshore bank, two statutory deposit-taking institutions, and one credit union operating in Botswana.All have corresponding relationships with U.S. banks. Additional financial institutions include various pension funds, insurance companies, microfinance institutions, stock brokerage companies, asset management companies, statutory finance institutions, collective investment undertakings, and statutory funds. Historically, commercial banks have accounted for 92 percent of total deposits and 98 percent of total loans in Botswana.A large portion of the population does not participate in the formal banking sector.

Money and Banking System

The central bank, the Bank of Botswana, acts as banker and financial advisor to the GoB and is responsible for the management of the country’s foreign exchange reserves, the administration of monetary and exchange rate policies, and the regulation and supervision of financial institutions in the country.Monetary policy in Botswana is widely regarded as prudent, and the GoB has successfully managed to maintain a sensible exchange rate and a stable inflation rate, generally within the target of three to six percent.

Banks may lend to non-resident-controlled companies without seeking approval from the Bank of Botswana.Foreign investors usually enjoy better access to credit than local firms. In July 2014, USAID’s Development Credit Authority (now DFC – U.S. International Development Finance Corporation), in collaboration with ABSA (formerly Barclays Bank of Botswana), implemented a program to allow small and medium-sized enterprises (SME) to access up to USD 15 million in loans in an effort to diversify the economy.

At the end of 2019, there were 25 companies on the Domestic Board and eight companies on the Foreign Equities Board of the Botswana Stock Exchange (BSE). In addition, there were 46 listed bonds and three exchange traded funds listed on the Exchange.The total market capitalization for listed companies at year-end 2019 was USD 37 billion, though one company constitutes the majority of that figure, Anglo-American plc, which has a market capitalization of approximately USD 30 billion. The BSE is still highly illiquid compared to larger African markets and is dominated by mining companies which adds to index volatility.Laws prohibiting insider trading and securities fraud are clearly stipulated under Section 35 – 37 of the Securities Act, 2014 and charges for contravening these laws are listed under Section 54 of the same Act.

The government has legitimized offshore capital investments and allows foreign investors, individuals and corporate bodies, and companies incorporated in Botswana, to open foreign currency accounts in specified currencies.The designated currencies are U.S. Dollar, British Pound sterling, Euro, and the South African Rand.There are no known practices by private firms to restrict foreign investment participation or control in domestic enterprises.Private firms are not permitted to adopt articles of incorporation or association which limit or prohibit foreign investment, participation, or control.

In general, Botswana exercises careful control over credit expansion, the pula exchange rate, interest rates, and foreign and domestic borrowing.Banking legislation is largely in line with industry norms for regulation, supervision, and payments. However, Botswana failed to meet the compliance requirements of the Financial Action Task Force (FATF), resulting in a grey listing in October 2018.Botswana is implementing an action plan to remedy the situation. In February 2021, FATF listed Botswana among the countries that had made significant progress toward combating money laundering and terrorist financing despite the challenges posed by COVID-19. FATF encouraged the GoB to continue to address the strategic deficiencies. The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) was established in 2008 and provides regulatory oversight for the non-banking sector.It extends know-your-customer practices to non-banking financial institutions to help deter money laundering and terrorist financing. NBFIRA is also responsible for regulating the International Financial Services Centre, a hub charged with promoting the financial services industry in Botswana.

Foreign Exchange and Remittances

Foreign Exchange

There are no foreign exchange controls in Botswana or restrictions on capital outflows through financial institutions.Commercial banks are required to ensure customers complete basic forms indicating name, address, purpose, and other details prior to processing funds transfer requests or loan applications.The finance ministry monitors data collected on the forms for statistical information on capital flows, but the form does not require government approval prior to processing a transaction and does not delay capital transfers.

To encourage portfolio investment, develop domestic capital markets, and diversify investment instruments, non-residents can trade in and issue Botswana pula-denominated bonds with maturity periods of more than one year, provided such instruments are listed on the Botswana Stock Exchange (BSE).Only Botswana citizens can purchase Botswana’s Letlole National Savings Certificate (equivalent to a U.S. Treasury bond).Foreigners can hold shares in BSE-listed Botswana companies.

Travelers are not restricted to the amount of currency they may carry but are required to declare to customs at the port of departure any cash amount exceeding 10,000 pula (~USD 905). There are no quantitative limits on foreign currency access for current account transactions.

Bank accounts denominated in foreign currency are allowed in Botswana. Commercial banks offer accounts denominated in U.S. Dollars, British Pounds, Euros and South African Rand. Businesses and other bodies incorporated or registered domestically may open accounts without prior approval from the Bank of Botswana.The GoB also permits the issuance of foreign currency denominated loans.

Upon disinvestment by a non-resident, the non-resident is allowed immediate repatriation of all proceeds including profits, rents, and fees.

The Botswana Pula has a crawling peg exchange rate and is tied to a basket of currencies of major trading partner countries.In 2018 the weights of the pula basket currencies were maintained at 45 percent for the South African Rand and 55 percent for the Special Drawing Rights (consisting of the U.S. Dollar, the Euro, British Pound, Japanese Yen, and Chinese Renminbi) respectively.Government maintained these exchange rate parameters for 2021. However, the downward rate of crawl of the pula exchange was adjusted from 1.51 percent to 2.87 percent per annum in May 2020. Movements of the South African Rand against the U.S. Dollar heavily influence the Pula. There is no difficulty in obtaining foreign exchange.Shortages of foreign exchange that would lead banks to block transactions are highly unlikely.

Remittance Policies

There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment.

Sovereign Wealth Funds

The Bank of Botswana maintains a long-term sovereign wealth fund, known as the Pula Fund, in addition to a regular foreign reserve account providing basic import cover. The Pula Fund was established under the Bank of Botswana Act and forms part of the country’s foreign exchange reserves, which are primarily funded by diamond revenues.The Pula Fund is wholly invested in foreign currency-denominated assets and is managed by the Bank of Botswana Board with input from recognized international financial management and investment firms.All realized market currency gains or losses are reported in the Bank of Botswana’s income statement.The Fund has been affected severely by the COVID-19 pandemic, with the GoB making withdrawals to address significant COVID-19-related revenue shortfalls. As a result, the Pula Fund, long a fiscal cushion against economic shocks, is significantly depleted from 20 percent of GDP in 2011 to 7 percent of GDP as of mid-2020 – from $1.69 billion to $510 million – a decline of more than 70 percent. Botswana is a founding member of the International Forum of Sovereign Wealth Fund and was one of the architects of the Santiago Principles in 2008.More information is available at: https://www.bankofbotswana.bw/sites/default/files/BOTSWANA-PULA-FUND-SANTIAGO-PRINCIPLES.pdf

The GoB, some foreign and local firms, and customers, recognized and embraced Responsible Business Conduct (RBC), although Botswana is not an adherent of the OECD’s RBC Guidelines for Multinational Enterprises and has not specified its definition of RBC. Large companies in the mining, communications technology, food supply, and financial services sectors have established RBC programs, sponsor projects, and support local nonprofit concerns. However, the ethos has not taken hold in many smaller firms. The U.S. Embassy worked with the local chamber of commerce, Business Botswana, on the issue of corporate social responsibility and ethical compliance to help enlist companies to sign onto a Corporate Code of Conduct that covers, among other things, conflicts of interest, bribery, political interference, political party funding, procurement and bidding, and issues surrounding residence and work permits. To date more than 300 firms have signed the Code of Conduct.

The Companies Act also sets out the expectations of business conduct and governance for directors and shareholders for both private and public companies. Botswana is not a member of the Extractive Industries Transparency Initiative. Botswana’s Mines and Minerals Act and associated regulations govern mineral contracts and licenses. Botswana’s laws and procedures for awarding mining contracts are fairly well developed. Mining licenses are required to undergo a public comment period before they are awarded, and that rule is followed.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

The threat of political violence is low in Botswana. Public demonstrations are rare and seldom turn violent. The last large-scale strikes which involved public sector employees occurred April-June 2011 and were not violent. In September 2015, roughly 200 people participated in a peaceful march organized by an opposition political party to protest water shortages in the capital. In August 2016, police forcefully dispersed a small demonstration protesting unemployment outside the National Assembly. In February and March 2017, some student-led protests occurred at tertiary institutions necessitating police deployment but were not overtly political. There were multiple reports of police brutality, including the use of rubber whips and rubber bullets. Another peaceful march against corruption was held in March 2018. This followed allegations of embezzlement of the National Petroleum Fund by a company charged with the management of the funds together with some GoB officials. In late 2019, following general election, the Umbrella for Democratic Change (UDC) held a peaceful march of no more than 200 people protesting the election results.

* Source for Host Country Data: Bank of Botswana 2019 Annual Report

Table 3: Sources and Destination of FDI

According to the Bank of Botswana, investment in Botswana totaled 86.3 billion Pula in 2018, of which 30.8 billion Pula were non-FDI investments.Africa (36 percent) and Europe (54 percent) accounted for most of the 55.5 billion Pula influx of FDI.Within these regions, South Africa and the United Kingdom were the predominant players, accounting for 10.9 and 27.4 billion Pula respectively. Little data on FDI sources is available for countries and regions with limited investments in Botswana.Mining accounted for 38.6 percent of Foreign Investment inflows in 2018.

Table 4: Sources of Portfolio Investment
IMF Coordinated Direct Investment Survey data are not available for Botswana. 2019 estimates for Botswana’s net international investments increased by 9.1 percent from 57.8 billion Pula in 2018 to 62.6 billion Pula in 2019.On the assets side, direct investments, portfolio investments increased by 9.3 percent, 20.7 percent respectively, while foreign exchange reserves and other investments decreased by 8.7 percent and 4.5 percent respectively.Portfolio investment increased due to the rise in equity and debt securities invested abroad.

Policies Towards Foreign Direct Investment

The Government of Lesotho (GOL) is generally open to FDI and successive governments have tried to attract FDI as a key component of national development. However, recent years have seen increasing critiques in Lesotho’s press and politics of foreign investors who repatriate their profits rather than reinvesting in Lesotho. This has resulted in a series of populist polices and policy proposals intended to protect opportunities for local investors and entrepreneurs, but which may inadvertently dampen Lesotho’s attractiveness as a destination for foreign investment. Lesotho follows World Trade Organization (WTO) laws and regulations, but the law makes some distinctions between local and foreign investors in some industries (see “Limits on Foreign Control and Right to Private Ownership and Establishment”).

Lesotho’s investment promotion agency, the Lesotho National Development Corporation (LNDC), is responsible for the initiation, facilitation, and promotion of Lesotho as an attractive investment destination. LNDC also undertakes investment project appraisals, provides pre-investment and after-care services, risk management, trade and investment research, and strategic planning. It also ensures investors’ compliance with the country’s legal frameworks. Through LNDC, the government actively encourages investment in manufacturing and agriculture sectors. LNDC also implements the country’s industrial development policies.

LNDC provides the support services described above to foreign investorsand regularly publishes information on investment opportunities and the services it offers to foreign investors. Furthermore, LNCDC offers incentives such as long-term loans, tax incentives, factory space at discounted rental rates, assistance with work permits and licenses, and logistical support for relocation. LNDC maintains an ongoing dialogue with foreign and domestic investors by attending annual trade and investment forums both locally and internationally. For more information on LNDC, please visit: http://www.lndc.org.ls .

Limits on Foreign Control and Right to Private Ownership and Establishment

Lesotho is open to foreign investment and there are no economy-wide restrictions applied to foreign ownership and control. However, GOL has passed laws and regulations intended to limit foreign ownership to large scale businesses in complex sectors while reserving small scale businesses in designated sectors exclusively for the indigenous citizens of Lesotho (“Basotho”). The Trading Enterprises Regulations of 2011 (TER 2011) and the Business Licensing and Registration Regulations of 2020 (BLRR 2020) reserve certain businesses for Basotho and limit foreign investors to operating these businesses as minority shareholders with a maximum of 49 percent shareholding. The reserved 47 businesses include acting as an agent of a foreign firm, barber, butcher, snack-bar operator, domestic fuel dealer, dairy shop proprietor, general café or dealer, greengrocer, broker, mini supermarket (floor area < 250m2), and hair and beauty salon. Most businesses affected by these regulations are micro or small enterprises, but some mid-sized foreign owned firms will be affected.

The Business Licensing and Registration Act 2019 (BLRA 2019) requires foreign investors to provide a capital of $123,152 or provide proof of investment of $123,152 during registration or renewal of their traders’ licenses or to have deposited $123,152 with a local institution. However, theCentral Bank of Lesotho Act of 2000 stipulates a foreign investment minimum threshold of $250,000. While pleased that the new law indicates a reduction in the minimum sum that they must invest, many foreign investors are concerned that this discrepancy was not clarified in the BLRA 2019 legislation.

BLRA 2019 requires foreign investors to renew their business identification card annually while locals are only required to renew their business identification cards after three years. Some foreign entrepreneurs operating in Lesotho have complained that the process of renewing their business identification cards annually is extremely onerous. BLRA 2019 also requires foreign investors to transfer technology and business expertise to local investors. Many foreign entrepreneurs operating in Lesotho complain that this requirement is poorly articulated and arbitrarily enforced.

The Mines and Minerals Act No.4 of 2005 restricts mineral permits for small-scale mining operations on less than 100m2to local ownership. Diamond mining, regardless of the size of the operation, is subject to the large-scale mines licensing regime, which has no restrictions on foreign ownership; however, GOL reserves the right to acquire at least 20-35 percent ownership in any large-scale mine.By law, the Ministry of Trade and Industry is instructed to screen foreign investments in a routine,nondiscriminatorymanner to ensure consistency with national interests.

Other Investment Policy Reviews

Lesotho’s investment policy was approved by Cabinet and became law in early2016. The policy was developed with assistance from the United NationsConference on Trade and Development (UNCTAD) http://unctad.org/en/pages/PublicationArchive.aspx?publicationid=503 ).The government has not undertaken any third-partyinvestment policy reviews in the past three years.

Business Facilitation

In 2016, the government launched a “One Stop Business Facilitation Centre” (OBFC), to make it easier to do business and facilitate FDI. OBFC places all services required for the issuance of licenses, permits, and imports and exports clearances under one roof. The portal provides transparency and predictability to trade transactions and reduces the time and cost of trading across borders. The OBFC web siteis http://www.obfc.org.ls/business/default.php .

The process of company registration includes: a work permit application with theMinistry ofLaborand Employment, a visa application and resident permit with the Ministry of Home Affairs, a trader’s license with the Ministry of Trade and Industry, tax clearance with Lesotho Revenue Authority, a police clearance with the Ministry of Police and Public Safety,and a medical clearance with the Ministry ofHealth.

In November 2020, the OBFC held a twin launch of e-Regulations and e-Licensing. The e-Regulations provides a clear step by step process to register a business. This also stipulates requirements, costs, time and contact details for registering a business. The e-Licensing allows foreign investors to apply online for obtaining a business license. This initiative has reduced instances of fraud and manipulation. It takes a maximum of 5 days to issue both industrial and traders licenses. For more information on e -licenses, please visit: www.Lesotho.elicenses.org . For more information on e-regulations please visit: http://www.lesotho.eregulations.org .

Outward Investment

Lesotho provides incentives to investors who export outside the country. Export manufacturers obtain a full rebate of customs duty paid on their inputs imported to produce for markets outside Southern African Customs Union (SACU). The government does not restrict domestic investors from investing abroad.

The government facilitates quality standard processes and export permits for outward investment. For AGOA exports, the Ministry of Trade and Industry, LNDC, andLesotho Revenue Authority provide support including on export requirements. Other agencies such as the U.S. Agency for International Development Southern Africa Trade Hub provide capacity to the government for the implementation of AGOA. The government has assigned Lesotho Standards Authority to assist investors who export to the Republic of South Africa (RSA).

Real Property

The right to private property is protected under the law.Property rights and interests are enforced, and owners of property enjoy protection underthe LesothoConstitutionof 1993. All foreign and domestic private entities may freely establish, acquire, and dispose of interests in business enterprises. Under the Land Act of 2010, foreign nationals are permitted to buy and hold land provided they have a local partner with at least 20 percent ownership. Foreign Investors are eligible to hold rights under sublease agreements, which should not exceed duration of parent land leases being 90 years for residential leases, 60 years for commercial leases and 30 years for petroleum products respectively (section 32 of the Land Act).

Secured interests in property, both movable and real, are recognized and enforced under the Land Act of 2010. The concept of a mortgage exists; and mortgages are protected under the Deeds Registry Act of 1967. Secured interests, including mortgages, are recorded and filed by the Deeds Registry.

Land titles (leases) as well as secondary land transactions can be enforced in the Land Courts, Magistrate Courts, and the High Court. For more information, please visit www.laa.org.ls .

Through the support of the U.S. Millennium Challenge Corporation, the government of Lesotho significantly improved the process of registering land titles, peaking at 88 under the“Registering Property” index of the World Bank’s Doing Business Report in 2014. The Land Administration Authority (LAA) has commenced preparations to implement a digital platform whereby, customers would be able to apply for land leases and register deeds online. This new system would help issue leases within three weeks as opposed to a period of over 12 months current turn around. The initiative is expected to improve Lesotho’s position in World Bank’s Ease of Doing Business list, of which, Lesotho is currently ranked 114 out of 190 economies in terms of registering property.

Intellectual Property Rights

Legal structures to protect intellectual property rights (IPR) in Lesotho are relatively strong. Investors complain that enforcement is somewhat weak, but infringements and theft are not common. Lesotho respects international IPR laws and is a member of the World Intellectual Property Organization (WIPO) as well as the African Intellectual Property Organization.

Protection of IPR is regulated by the Industrial Property Order of 1989 and theCopyright Act of 1989, which conform to the standards set out in the Paris and Berne Conventions, respectively. The laws protect patents, industrial designs, trademarks, and grants of copyright, but they do not protect trade secrets or semiconductor chip lay-out design. The Law Office is responsible for enforcement of the Industrial Property Order, while the Ministry of Tourism, Sports and Culture is responsible for enforcement of copyright (reflecting the law’s focus on protection of artistic works).

Two bills with IP related regulations are yet to be passed in Lesotho Parliament. The Ministry of Communications, Science and Technology in liaison with the Lesotho Communications Authority (LCA) have finalized the drafting of theComputer Crime and Cyber Security bill and the Electronic Transactions and Commerce bill. If enacted, the bills will improve the protection of IPR by addressing cyber-crime and protecting electronic transactions. Lesotho is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

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

Capital Markets and Portfolio Investment

Through theCentral Bank of Lesotho (CBL), the GOL promotes the development of financial markets in Lesotho. Lesotho’s capital market is relatively underdeveloped, with no secondary market for capital market transactions. The Maseru Securities Market launched in 2016 under the wing of the CBL will soon list the first company on its stock exchange. The trading of government bonds; corporate bonds and company shares is strictly electronic— there is no physical building. For now, bond trading is operated by the Central Bank of Lesotho. For the 2020/21 fiscal year, the government financed a fiscal deficit of approximately USD 85.7 million through external borrowing.

The government accepted the obligations of IMF Article VIII in 1997 and continues to refrain from imposing restrictions on the making of payments and transfers for current international transactions. Foreign participation in government securities is allowed as long as foreign investors can open accounts with local banks through which funds can be collected. Lesotho is part of the Common Monetary Area (CMA). The current account has been fully liberalized for all inward and outward cross-border transactions. However, some transactions still need approval from the Central Bank. A Central Bank Report reflected that Private Sector credit from the banking sector declined by 0.7 percent in February 2020 while a decline of 0.2 percent was registered in January 2020.

Credit is allocated on market terms, and foreign investors are able to get credit on the local market. Interest rates are quite high by global standards. LNDC does not provide credit to foreign investors but can acquire equity in foreign companies investing in strategic economic sectors. The private sector has access to a limited number of creditinstruments, such as credit cards, loans, overdrafts, checks, and letters of credit. In January 2016, Lesotho’s first credit bureau was launched and has been functional. In July 2020, the parliament passed the Secured Interest in Movable Property Act to allow movable property to be considered as collateral in requesting for credit from commercial banks.

Money and Banking System

Lesotho has a central bank and four commercial banks, including subsidiaries of

South African banks (subject to measures and regulations under the Institutions Act of 2012) and the government-owned Lesotho Post Bank. Commercial banks in Lesotho are well-capitalized, liquid, and compliant with international banking standards; however, interest rates are high by global standards. Three South African banks account for almost92.5 percentof the country’s banking assets, whichtotaledover M17.07 billion (USD 1.1 billion) by December 2019. The share of bank nonperforming loans to total gross loans wasapproximately 3.3percent in December 2019.Foreigners are allowed to establish a bank account and may hold foreign currency accounts in local banks; however, they are required to provide a residence permit as a precondition for opening a bank account to comply with the “know your customer” requirements. The country lost one correspondent banking relationships in the past three years. Currently there are no banking relationships in jeopardy.

Foreign Exchange and Remittances

Foreign Exchange

There are restrictions on converting or transferring funds associated with an investment into a freely usable currency and at a legal market-clearing rate. Funds can only be converted into the world’s widely recognized currencies such as the U.S. dollar, British Pound, andtheEuro. Incoming funds can be converted into the local currency if the investor does not have the Customer ForeignCurrency (CFC) account. If the investor has a CFC account, such funds can remain foreign in that account without any obligation to convert to Maloti.

Remittance Policies

According to the CBL, there are no plans to change remittance policies. The current average delay period for remitting investment returns such as dividends, return of capital, interest and principal on private foreign debt, lease payments, royalties, and management fees through normal legal channels is two days, provided the investor has submitted all the necessary documentation related to the remittance. There has never been a case of blockage of such transfers, and shortages of forex that could lead to blockage are unlikely given that the CBL maintains net international reserves at a target of 4.3 months of import cover.

Payments of royalties should seek approval from the Central Bank. Export proceeds should be repatriated into the country within the period of six months (180 days).

Sovereign Wealth Funds

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

There is a general awareness of responsible business conduct (RBC) and corporate social responsibility among both producers and consumers. The government maintains and enforces domestic laws with respect tolaborand employment rights, consumer protections, and environmental protections.Laborlaws and regulations are rarely waived in order to attract investment, and the government does not compromise on environmental laws.

The Government of Lesotho through the LNDC (which is the Government of Lesotho’s Investment Promotion Agency) subscribes and implements globally accepted due diligence standards as prescribed by the OECD as well as UNCTAD. The government through the assistance of UNCTAD reviewed Lesotho Investment Policy of 2003 and has developed the Investment Policy of 2016. Foreign and local enterprises tend to follow generally accepted corporate social responsibility principles such as those contained in OECD Guidelines for Multinational Enterprises and the United Nations’ Guiding Principles on Business and Human Rights. Firms that pursue CSR are viewedfavorablyby society, but CSR does not necessarily provide any advantages in dealing with the government.

The country has limited tools to protect human rights, labor rights, consumer rights and the environment. The Labor Court has been established to address labor issues. The Consumer Protection Unit is established under the Ministry of Trade and Industry. However, the offices of this unit are only available in one district. The country is yet to establish Human Rights Commission and the Tribunal on Environment matters.

The Lesotho Companies Act of 2011 provides for standard and adaptable requirements for incorporation, organization, operation, and liquidation of companies to encourage efficient and responsible management of companies to protect shareholders and other key stakeholders. Furthermore, the government has assisted the Lesotho Institute of Directors in the development of the Mohlomi Corporate Governance Code sponsored by the African Development Bank (ADB). It is envisaged that the code will be launched in April/May 2021. This code will provide universal best practices guidance for good corporate governance for Lesotho.

There are no Non-Governmental Organizations (NGOs) specifically mandated with promoting and monitoring responsible business conduct. However, local NGO, the Transformation Resource Centre (TRC), monitors and advocates for responsible business conduct.

Although Lesotho has an extractive/mining industry, it does not participate in the Extractive Industries Transparency Initiative (EITI), since it does not extract/produce any of the minerals supported through the initiative.

Additional Resources

Department of State

• Country Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);
• Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-report/);
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;
• North Korea Sanctions & Enforcement Actions Advisory (https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf).

Department of Labor

• Findings on the Worst forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings );
• List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods);
• Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab) and;
• Comply Chain (https://www.dol.gov/ilab/complychain/).

Since 2012, Lesotho has been governed through coalition governments which have not lasted beyond three years.  (Note:the constitution states that elections should be held every five years and the next elections are scheduled for September / October 2022.) The nation has been increasingly polarized, and the political environment is very unpredictable.

In August 2018, factory workers staged violent protests demanding a minimum wage increase.  Workers blocked roads with stones and other debris, set fires, and broke windows of local businesses.  Throughout 2020, informal economy workers staged recurring protests against COVID-19 lockdown measures.

* Source for Host Country Data: Central Bank of Lesotho

Table 3: Sources and Destination of FDI
Data not available.
Table 4
Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

Malawi is open to foreign and domestic investment and grants national treatment to all investors. Foreign investors may invest in almost any sector of the economy and may access government investment incentives. There are no restrictions on ownership, size of investment, source of funds, investment sector, or whether the products are destined for export or for domestic markets. Furthermore, an investor can disinvest 100%, make international payments, and cannot be forced into local partnerships. However, the Malawi Stock Exchange limits an individual foreign investor to 10% of any company’s initial public offering (IPO) and the stake of all foreign investors in an IPO is limited to 49% of total shares of the company.

The GOM prioritizes investment retention and maintains an ongoing dialogue with investors through the Malawi Investment and Trade Center (MITC), Ministry of Trade, Ministry of Industry, Public Private Partnership Commission, and other government agencies. The Malawi Confederation of Chambers of Commerce and Industry ( MCCCI) represents all sectors of the economy and has been successful in lobbying the GOM on issues affecting the private sector. In recent years, the government has hosted Malawi Investment Forums to present a platform for marketing the country, fostering partnerships, and bringing in foreign direct investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

The GOM does not impose restrictions on the ownership or location of investments. It permits FDI in all sectors of the economy except for those sectors or activities that may pose a danger to health, the environment or national security. Restrictions are not imposed on fund source, destination, or final product. There is, however, a requirement for companies registered in Malawi to appoint at least two Malawian residents as directors.

There are some limitations on foreign ownership of land. Under the Land Act of 2016, neither Malawians nor foreigners can acquire freehold land. Foreigners can secure lease-hold land for terms up to 50 years, after which the lease may be renewed. In addition, foreigners can only secure private land when no citizen has made an equal offer for the same land.

During the privatization of government assets, Malawian nationals are offered preferential treatment including discounted share prices and subsidized credit. A 2017 amendment to the Public Procurement and Disposal of Assets (PPDA) Bill includes an indigenization clause that calls for “the prioritization of all bids submitted to give preference to sixty percent indigenous black Malawians.” In 2020, GOM gazetted the Micro Small and Medium Enterprises (MSMEs) Participation Order, which empowers government ministries, departments and agencies (MDAs) to allocate procurements below certain thresholds to MSMEs. GOM is also in the process of gazetting Indigenous Black Malawian (IBM) Preference regulations, which orders MDAs to offer 60% of national competitive bidding procurements to IBM ( PPDA Legal Instruments).

There is no government policy to screen foreign direct investment but minimum investment capital for foreign investors is $50,000. Such investors must register with MITC and RBM. Registration of borrowed invested funds allows investors to externalize profits to pay back loans contracted abroad and repatriate funds when disinvesting. MITC has revised the threshold for capital requirements but is waiting for gazetting to make the threshold official. The new thresholds will depend on the sector and will be revised upwards ( MITC Malawi).

Other Investment Policy Reviews

WTO last performed a periodic Trade Policy Review of Malawi in April 2016. The full report can be accessed at WTO TPR . OECD and UNCTAD have not conducted reviews for Malawi.

Business Facilitation

MITC assists foreign and domestic investors of all sizes to navigate relevant regulations and procedures of starting a business. It operates a One Stop Center where representatives from the Registrar General, the Malawi Revenue Authority, the Department of Immigration, and Ministry of Lands, Housing and Urban Development are available to help potential investors. MITC’s main website, the iGuides and its online trade portal ( www.trade.mitc.mw) ( http://www.malawitradeportal.gov.mw/) provide further information.

In addition to MITC’s One Stop Center, businesses can register online at Registrar General, although the process may take longer and the website is sometimes inaccessible. To operate in Malawi, a business must register with the Registrar General, the Malawi Revenue Authority and often the Ministry or regulatory body overseeing their sector of activity. For example, construction companies need to register with the National Construction Industry Council. Businesses are also supposed to obtain business licenses from the city assembly, register the workplace with Ministry of Labor, and allow health officials to carry out an inspection of the company premises ( HYPERLINK “https://mitc.mw/invest/index.php” https://mitc.mw/invest/index.php ).

Outward Investment

Domestic investors are not restricted to invest abroad except in the case of the Pension Act of 2010 and accompanying regulations which do not allow for the investment of pension funds or umbrella funds abroad.

Real Property

Malawi has laws that govern the acquisition, disposition, recording, and protection of all property rights (land, buildings, etc.) as well as intellectual property rights (copyrights, patents, trademarks, etc.). Currently record keeping for registering land ownership is centralized and inefficient. Efforts are underway to computerize and decentralize recordkeeping. Malawi has a limited housing finance sector. As mortgage availability does not yet meet demand, most households still finance housing through savings or non-mortgage credit. Interest rates on mortgage may vary from a low of 18.1 percent depending on banks’ interest structure and Central Bank’s reference rate, with 10 percent down, the balance payable over 10-20 years. The lowest size of mortgage in Malawi is estimated at $21, 813 ( Housing Finance Africa).

In 2016, Parliament passed a revised Land Act, which converted customary land tenure to leasehold title so that those currently using that land enjoy legal rights to it. The new law prohibits freehold title and lease terms can be for up to 99 years, but the law generally restricts foreigners to 50 years but renewable. The new Land Act prohibits granting of freehold to a person but allows those that are already holding such land titles to continue. The Office of Commissioner of Lands administers and manages land issues such as making grants, leases, and other dispositions. There is no reliable data on the proportion of land without clear titles, but it is likely much higher than 10%. The Millennium Challenge Corporation second compact for Malawi (potentially scheduled to start in 2022/23) may emphasize land reforms.

The Land Act of 2016 gives provision to repossess private land under freehold title if the land sits idle for more than two years since registration. However, GOM has not repossessed land from a developer in recent memory. In 2019 GOM warned all investors that it will begin repossessing all land that is not being developed as required by law. Malawi ranks 90 on “registering property” under the 2020 World Bank’s ranking of ease of doing business down from 83 in the 2019 report. Land has become a hot topic in recent times as some locals feel some foreigners are getting all prime land through bribery and corrupt tendencies by GOM officials.

Intellectual Property Rights

Malawi recognizes the importance of intellectual property protection and but lacks enforcement capacity. The Registrar General administers the Patent and Trademarks Act, which protects industrial intellectual property rights (IPR) in Malawi. The Registrar General maintains a public registry of patents and patent licenses. Patents must be registered. Trademarks are registered publicly following advertisem*nt and a period of no objection. Enforcement of IPR is inadequate. However, general awareness of importance of protecting intellectual property in all forms has improved. The Copyright Society of Malawi (COSOMA) administers the Copyright Act of 2016, which protects copyrights and “neighboring” rights in Malawi.

The GOM approved the Copyright (Levy on Storage Devices) Regulations in February 2018. Following the approval, COSOMA and the Malawi Revenue Authority began enforcement of a 5% levy on media storage devices to ultimately compensate rights holders. Malawi also has a new Trademarks act of 2018 which is a repeal of the trademarks act of 1957 and came into force on October 1, 2018. Malawi launched the National Intellectual Property Policy in May 2019 which acknowledges challenges with intellectual property in the country and provides a framework to foster the generation, protection, and exploitation of intellectual property.

While enforcement officials routinely seize counterfeit goods, Malawi does not have a systematic approach to track and report on such seizures, so statistics are not available. Malawi is not listed in USTR’s Special 301 Report or the 2018 Notorious Market Report. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=MW.

Capital Markets and Portfolio Investment

The Malawi government recognizes the importance of foreign portfolio investment and has made efforts to provide a platform for such investment through the establishment of a Malawi Stock Exchange ( MSE). The MSE hosts 16 listed companies (of which two listed in 2020) with a total market capitalization of $2,320.28 million as of end January 2021 up from $2,062.89 million in February 2020. The demand and supply of shares for existing listed companies is limited. The stock exchange is licensed under the Financial Services Act 2010 and operates under the Securities Act 2010 and the Companies Act 2013. Other regulations include the Capital Market Development Act 1990, and Capital Market Development Regulations 1992 as amended in 2013.

Foreign investors can buy and sell shares at the stock market without any restrictions. Trading in shares can either be direct or through any one of four established brokers. There is a secondary market in government securities, and both local and foreign investors have equal access to purchase these securities. Malawi respects obligations under IMF article VIII and, therefore, refrains from imposing restrictions on making payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval. Liquidity for stock market participation is not a major problem with a variety of credit instruments on hand. Credit is generally allocated on market terms. The cost of credit is high but may fall in the medium term subject to continued moderate inflation, near stable exchange rate and policy rate downward adjustments. Foreign investors may utilize domestic credit but proceeds from investments made using local resources are not remittable.

Money and Banking System

According to the Institute of Bankers in Malawi, only 25 percent of the adult population in Malawi use banking services. Access to credit remains one of the biggest challenges for businesses and particularly SMEs, mostly due to the cost of credit. For instance, the base-lending rate in March 2021 was 11.9 percent, lowest in over a decade. The potential for using mobile banking technology to increase financial access in Malawi is emerging and official RBM Reports have provided evidence of increasing usage of electronic transactions.

Malawi has a generally sound banking sector, overseen and regulated by the central bank. In 2021, there were eight full-service commercial banks with over 150 branches across the country. The banking sector remained profitable and stable with adequate liquidity and capital positions throughout 2020. Prudential regulations have limited net foreign exchange exposure and non-performing loan rates continue to fall, though spreads continue to be high. The sector, however, is highly concentrated and heavily invested in domestic government debt, which is a possible systemic risk. The banking sector continues to perform though in 2019 some banks underwent rationalization processes where voluntary retirement and other initiatives reduced operational expenses. Total bank assets (eight banks) as of December 2020 were at MK2,242.2 billion roughly 46% of which fell under two largest banks: National Bank and Standard Bank.

The Reserve Bank of Malawi (RBM) is Malawi’s central bank, and it plays a critical role in ensuring efficiency, reliability, and integrity of the payment system in Malawi. It is also a supervisory authority over commercial banks and other financial institutions including insurance companies. There are no restrictions on foreign banks in Malawi. The Banking Act provides the regulations applicable to commercial banks and other financial institutions and provides a supervisory mandate to the Reserve Bank. As of December 2020, four of eight banks were foreign owned. The RBM maintains correspondent banking relationships with almost all central banks across the world and 14 major banks in Asia, Europe, Africa, and the United States. Major commercial banks in Malawi also maintain correspondent banking relationships with banks from Africa, Europe, Asia, and US. For local business, banks require that a foreigner possess a Temporary Employment Permit or business residency permit before opening a bank account.

Foreign Exchange and Remittances

Foreign Exchange

Government policy seeks to ensure the availability of foreign exchange for business transactions and remittances to attract investors and spur economic growth. Commercial banks may operate as forex dealers. Investors have access to forex with no legal limitation, both to pay for imports and to transfer financial payments abroad. Specifically, there are no licensing requirements to import forex and full repatriation of profits, dividends, investment capital, and interest and principal payments for international loans is permitted once the loan and/or investment is registered with the RBM. Malawian investors seeking foreign financing must seek permission from the RBM before acquiring an international loan. RBM Website has several laws and regulations regarding foreign exchange transactions.

The Malawi Kwacha (K) is convertible into major world currencies such as the U.S. Dollar, British Pound, Euro, Japanese Yen, Chinese Yuan, and South African Rand, as well as key regional and trading partners’ currencies. Since May 7, 2012, the value of the local currency has floated freely against major world currencies though the RBM intervenes to avoid sharp depreciation or appreciation. Float aside, the MWK/USD rate remained remarkably stable since 2016 but has faced sustained depreciation since June 2020 losing over 5% by end December 2020. Foreign exchange is available throughout the year but RBM sets rules on the requirements to obtain forex from commercial banks and authorized dealers. Malawi’s official foreign exchange reserves, as of February 2021, are sufficient to cover 2.31 months of imports. Antidotally, since 2019 periodic forex scarcity has delayed some USD remittances.

Remittance Policies

Investment remittance policies in Malawi have not changed in the past year. There are no restrictions on remittance of foreign investment funds (including capital, profits, loan repayments, and lease repayments) if the capital and loans were obtained from foreign sources and registered with the RBM. The terms and conditions of international loans, management contracts, licensing and royalty arrangements, and similar transfers require initial RBM approval. The RBM grants approval according to prevailing international standards; subsequent remittances do not require further approval. All commercial banks are authorized by the RBM to approve remittances, and approvals are automatic if the applicant’s accounts have been audited and sufficient forex is available. There are no time limitations on remittances.

Sovereign Wealth Funds

Malawi does not have a Sovereign Wealth Fund or similar entity.

There is a well-developed sense of Corporate Social Responsibility (CSR) or responsible business conduct (RBC) in Malawi and most corporate entities make a point to publicize such activities in the local media. There are no established laws or regulations governing RBC, nor does the Government (GOM) formally direct RBC to particular sectors. However, as part of its candidacy for the Extractives Industry Transparency Initiative, the GOM promotes RBC in the mining sector. There are laws governing protection of the environment and waste disposal for producers and consumers. GOM expects all enterprises to follow all laws of Malawi regarding employment and compensation. Malawi has several labor laws governing employment, work environment, industrial safety, age limits, hours of work, and minimum wages. However, the GOM through Environmental Affairs Department ( EAD) and other MDAs lacks the resources to meaningfully enforce environmental, consumer, and labor laws and regulations. There is no history of provisions of environmental, social, or labor laws being waived to attract investment and there is no history of the government factoring responsible business conduct policies or practices into its procurement decisions. There have been no verified reports of high profile, controversial instances of private sector impact on human rights or resolutions in recent past. GOM lacks resources to meaningfully enforce human rights, labor rights, consumer protection, environment protections and other laws/regulations intended to protect individuals.

The GOM has enacted accounting standards applicable to the private sector that conform to international standards. Executive compensations are not defined. The law requires all MSE-listed companies to publish their annual audited accounts in local newspapers. Listed companies are also required to publicly declare their profits, dividends to be paid out, planned takeovers (or major portfolio investments), and all relevant information for shareholders to make informed decisions. They are also required to announce their annual shareholders meetings in newspapers.

Several civil society organizations monitor and advocate freely for corporate social responsibility and responsible business conduct in Malawi, including the Institute for Policy Interaction (IPI), the Catholic Commission for Justice and Peace (CCJP), the Centre for Environmental Policy and Advocacy, Institute for Sustainable Development, Malawi Economic Justice Network (MEJN), and Natural Resources Justice Network. On mining, Malawi does not adhere to OECD Guidelines for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas or any domestic measures requiring supply chain due diligence for companies that source minerals that may originate from conflict-affected areas. The Extractive Industries Transparency Initiative (EITI) Board approved Malawi as a candidate country in 2015. Following the conclusion of Malawi’s Validation in 2018, the EITI Board concluded that Malawi has made meaningful progress overall in implementing the EITI Standard. The Board also determined that Malawi has 18 months (until 27 August 2020) to carry out corrective actions regarding the findings of the initial assessment. Due to COVID19, Malawi requested extension of the assessment period to mid-2021 since the pandemic affected implementation of activities. Failure to achieve meaningful progress across several individual requirements in the second validation will result in suspension in accordance with the EITI Standard.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

Malawi continues to enjoy a stable and democratic government. Since the end of one-party rule in 1994, it has organized seven peaceful presidential and 6 parliamentary elections. International observers have characterized past elections, with the exception of 2019, as generally “peaceful, free, transparent, and credible.” In 2020, Malawians voted for a new government in a court sanctioned presidential re-run ousting the then ruling party. Although divisions exist, Malawi has no significant tribal, religious, regional, ethnic, or racial tensions that could lead widespread violence. Incidents of labor unrest occasionally occur, but these are usually non-violent and despite instances of political uncertainty there are no nascent insurrections or other politically motivated activities of major concern to investors. Democratic processes in Malawi are well established, and destabilizing unrest is unlikely.

* Source for Host Country Data: RBM Malawi. Note that Malawi Government rebased GDP in 2020 which resulted into upward adjustment of GDP figures ( GDP Rebasing Malawi) .

Table 3: Sources and Destination of FDI
Data not available.
Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

The Government of the Republic of Mozambique (GRM) welcomes foreign investment and sees it as a key driver of economic growth and job creation. With the exception of a few sectors related to national security, all business sectors are open to foreign investment.Mozambique’s 1993 Law on Investment, No. 3/93, and its related regulations, govern foreign investment. In 2009, Decree No. 43/2009 replaced earlier amendments from 1993 and 1995, providing new regulations to the Investment Law.

In general, large investors receive more support from the government than small and medium-sized investors. Government authorities must approve all foreign and domestic investment requiring guarantees and incentives. Regulations for the 2009 Code of Fiscal Benefits, Law No. 4/2009, were established in 2009 under Decree No. 56/2009.

The Agency for Promotion of Investments and Exports (APIEX, Agencia para a Promocao de Investimentos e Exportacoes) is the primary investor contact within the GRM, operating under the Ministry of Industry and Commerce. Its objective is to promote and facilitate private and public investment. It also oversees the promotion of national exports. APIEX can assist with administrative, financial, and property issues. Through APIEX, investors can receive exemptions from some customs and value-added tax (VAT) duties when importing “Class K” equipment, which includes capital investments.

Contact information for APIEX is:

Agency for Promotion of Investments and Exports
http://www.apiex.gov.mz/
Rua da Imprensa, 332 (ground floor)
Tel: (+258) 21313310
Ahmed Sekou Toure Ave., 2539
Telephone: (+258) 21 321291
Mobile: (+258 ) 823056432

Government dialogue with the private sector is primarily coordinated by Mozambique’s Ministry of Industry and Commerce. Most businesses in Mozambique interact with the government via the country’s largest business association, the Confederation of Economic Associations (CTA, Confederação das Associações Económicas de Moçambique). CTA was formed in 1996 and continues to be the dominant and most influential business association in Mozambique.

Limits on Foreign Control and Right to Private Ownership and Establishment

Mozambique investment law and its regulations generally do not distinguish between investor origin or limit foreign ownership or control of companies. With the exception of security, safety, media, entertainment, and certain game hunting concessions, there were no legal requirements that Mozambican citizens own shares of foreign investments until 2011, when the government adopted Law No. 15/2011, otherwise known as the “Mega-Projects Law.” This law governs public-private partnerships, large scale ventures, and major business concessions and states that Mozambican persons must hold between 5 percent to 20 percent of the equity capital of the project company. Implementing regulations were approved by the Council of Ministers in 2012.

Article 4.1 of Law 14/2014, often referred to as the “Petroleum Law,” states that the GRM regulates the exploration, research, production, transportation, trade, refinery, and transformation of liquid hydrocarbons and their by-products, including petrochemical activities. Article 4.6 established the state-owned oil company, the National Hydrocarbon Company (ENH, Empresa National das Hidorcorbonetos) as the government’s exclusive representative for investment and participation in oil and gas projects. ENH typically owns up to 15 percent of shares in oil and gas projects in the country.

Depending on the size of the investment, the government approves both domestic and foreign investments at the provincial or national level, but there is no other formal investment screening process.

Other Investment Policy Reviews

Mozambique has not undergone a third-party investment policy review in the last three years.

Business Facilitation

Starting a business in Mozambique is a lengthy and bureaucratically complex process which has led to Mozambique’s relatively low score on the World Bank’s 2020 Doing Business Report. In the 2020 report, Mozambique ranked 176 out of 190 economies worldwide in terms of starting a new business, scoring well below the regional average for sub-Saharan Africa, in particular due to the relatively high cost of registering a business and number of procedures required to complete the process.

Registering a business typically involves reserving a name, signing an incorporation contract, payment of registration fees, publishing the company’s name and statutes in the national gazette, registering with the tax authority, and then notifying relevant agencies of the start of activity including the municipality’s one-stop-shop, the municipality’s labor office, national tax authority, and social security institute. According to the World Bank’s estimates, this process takes approximately 17 days. There is no single business registration website.

In May 2020, the Maputo City “one stop shop” known as the balcão de atendimento unico (BAU) introduced reforms that effectively reduced the number of procedures required to set up a new company from 11 to four by consolidating several steps required to register a new business.

Outward Investment

The government does not promote or incentivize outward investment. It also does not restrict domestic investors from investing abroad. However, Mozambique does require domestic investors to remit investment income from overseas, except for amounts required to pay debts, taxes, or other expenses abroad.

Real Property

The legal system recognizes and protects property rights to buildings and movable property. Private ownership of land, however, is not allowed in Mozambique. Land is owned by the State. The government grants land-use concessions called Direitos de Uso e Aproveitamento de Terra (DUAT) for periods of up to 50 years, with options to renew for an additional 50 years. Essentially, land-use concessions serve as proxies for land titles. There is no robust market in land use rights and land use titles are not easily transferable. The process to award land concessions is not transparent and the government at times has granted overlapping land concessions that often require lengthy negotiation to resolve. It takes an average of 90 days to issue a land title for most of the concessions. Banks in Mozambique rely on property other than land – cars, private houses, and infrastructure – as collateral, as it is not currently possible to securitize property for lending purposes.

In urban areas, the DUAT of a plot passes automatically to the purchaser following the sale of a house or building. In rural areas, the purchaser of physical infrastructure or improvements and crops must request authorization from the government for the DUAT to be transferred. This requirement is often cited as a barrier for loans in the agricultural sector and is seen as a potential barrier to investment and the transition to more intensive, commercial forms of agriculture.

Investors should be aware of the requirement to obtain endorsem*nt of their projects in terms of land use and allocation at a local level from the affected communities. APIEX assists investors in finding land for development and obtaining appropriate documentation, including agricultural land. The government advises companies on relocating individuals currently occupying land designated for development; however, companies are ultimately responsible for planning and executing resettlement programs.

According to data from the 2020 World Bank Doing Business Report, Mozambique ranked 136 out of 190 countries on Registering Property, with the country achieving more or less the average continent-wide score. While Mozambique scored relatively well in terms of the time and cost of the property registration process, Mozambique lost points for number of procedures involved in registering property and the quality of the country’s land administration index.

Intellectual Property Rights

Despite enforceable laws and regulations protecting Intellectual property rights (IPR) and a relatively simple registration process, it remains difficult for investors to protect their IPR in Mozambique. Private sector organizations work with various government entities on an IPR taskforce to combat IPR infringement and related public safety issues stemming from the use of counterfeit products, but enforcement in Mozambique remains sporadic and inconsistent. Mozambique’s National Inspectorate of Economic Activities (INAE) has increased seizures, confiscating fake Hewlett-Packard (HP) toner cartridges, Nike, Adidas, Ralph Lauren, and other falsely branded merchandise in several raids in 2019. However, in general, enforcement and prosecutions are limited. Pirated DVDs and other counterfeit goods are commonly sold in Mozambique.

The Parliament passed a copyright and related rights bill in 2000, which, when combined with the 1999 Industrial Property Act, brought Mozambique into compliance with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The law provides for the security and legal protection of industrial property rights, copyrights, and other related rights. In addition, Mozambique is a signatory to the Bern Convention, as well as the New York and Paris Conventions.

Mozambique joined the African Regional Intellectual Property Organization (ARIPO) in February 2020. Joining ARIPO paved the way for Mozambique to implement the Banjul Protocol and the government deposited its instrument of accession to the protocol at ARIPO in May 2020. Mozambique’s adhesion to ARIPO should facilitate filing trademarks as ARIPO processes are standardized across all member states and valid across all jurisdictions.

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

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=MZ .

Capital Markets and Portfolio Investment

The Mozambique Stock Exchange (Bolsa de Valores de Mocambique, BVM) is a public institution under the guardianship of the Minister of Economy and Finance and the supervision of the Central Bank of Mozambique. In general, the BVM is underutilized as a means of financing and investment. However, the government has expressed interest in reforming market rules in an effort to increase capitalization and potentially prepare the ground for new rules that would require foreign companies active in Mozambique to be listed on the local stock exchange. Corporate and government bonds are traded on the BVM and there is only one dealer that operates in the country, with all other brokers incorporated into commercial banks, which act as the primary dealers for treasury bills. The secondary market in Mozambique remains underdeveloped. Available credit instruments include medium and short-term loans, syndicated loans, foreign exchange derivatives, and trade finance instruments, such as letters of credit and credit guarantees. The BVM remains illiquid, in the sense that very limited activity occurs outside the issuing time. Investors tend to hold their instruments until maturity. The market also lacks a bond yield curve as government issuances use a floating price regime for the coupons with no price discovery for tenures above 12 months.

The GRM notified the IMF that it has accepted the obligations of Article VIII sections 2, 3, and 4 of the IMF Articles of Agreement, effective May 20, 2011.

Money and Banking System

According to the Mozambican Bank Association December 2020 bank survey, there are 19 commercial banks operating in Mozambique. The top three banks – Banco Comercial e de Investimentos (BCI), Banco Internacional de Mocambique SA (BIM), and Standard Bank – account for 69 percent of the total assets, total loans and advances, and total deposits held by commercial banks in Mozambique.

Between 2018-2019, the value of non-performing loans (NPL) decreased by 2 percent, but the NPL ratio worsened from 8.5 percent to 9.1 percent over the same period. Banking sector profits have dropped by 2 percent due to the reduction of prime lending rates, costs of rehabilitation of branches and property damage from cyclones Idai and Kenneth, and reduced commission income following new Central Bank legislation limiting charges for certain services to promote financial inclusion.

In 2016, Mozambique launched a six-year National Financial Inclusion Strategy which has led to limited improvements in access to formal financial services. According to 2019 FinScope data, 21 percent of the population has access to a bank account, still well below the country’s 2022 target of 60 percent. As of March 2020, Mozambique had 706 bank agencies, 1,755 ATMs and 36,701 point of sale devices. Most banking locations are concentrated in provincial capitals and rural districts often have no banks at all.  Thanks to the partnership between mobile communications companies and banks for electronic or mobile-money transactions, access to financial services is improving. The number of services available from ATMs is also increasing. There are also 1,697 banking agents in the country that provide basic banking services to customers without access to a bank branch.

Credit is allocated on market terms, but eligibility requirements exclude much of the population from obtaining credit. Banks request collateral, but since land cannot be used as collateral, the majority of individuals do not qualify for loans. Foreign investor export activities in critical areas related to food, fuel, and health markets have access to credit in foreign and local currencies. All other sectors have access to credit only in the local currency.

Foreign Exchange and Remittances

Foreign Exchange

In 2017 Mozambique approved new foreign exchange control rules in Law No. 49/2017. Under the terms of the new law, Mozambican residents are now required to deposit export earnings into an export earnings account in foreign currency, which can only be used for specifically defined purposes. Under the new decree, foreign exchange operations will now be processed electronically in real time by the commercial banks. Applications for capital operations are now processed by commercial banks and forwarded to the Central Bank. Foreign direct investment (FDI) up to USD 250,000 no longer requires prior authorization from the Bank of Mozambique and only needs to be registered with the commercial bank handling the transactions. Shareholder and intercompany loans made by foreign entities up to USD 5 million require no authorization from the Central Bank, provided the loans are interest free or lower than the base lending rate for the relevant currency, the repayment period is at least three years, and no other fees or charges apply.

A special foreign exchange regime for oil, gas, and mining sectors allows for greater flexibility in foreign exchange and financing operations. The law, which went into force in January 2018, stipulates that profits from petroleum rights are entirely taxed at an autonomous tax rate of 32 percent. The law also guarantees tax stabilization for up to 10 years, starting from the beginning of commercial production with an investment amount of USD 100 million. The Ministry of Economy and Finance can also approve the use of U.S. dollars, if the company has invested at least USD 500 million and more than 90 percent of its transactions are in U.S. dollars. The law also revoked a 50 percent tax rate reduction related to the production tax that was available when extracted products were used locally.

Remittance Policies

The2021Central Bank’sAviso 6/GBM/2020 requires at least30percent of export proceeds to be converted into local currency.  However, per the Central Bank Circular issued in February 2021,this conversion rule does not apply for rent paid in a foreign currency by non-resident entitles to a Mozambican landlord.

Sovereign Wealth Funds

In October 2020, Mozambique’s Central Bank published an initial proposal for a Sovereign Wealth Fund (SWF) to manage the expected increase in government revenues from the natural gas projects in northern Mozambique. As of April 2021, the government is currently revising the proposal and aims to put forward a formal legislative proposal by the end of the year for review and approval by Mozambique’s National Assembly.

The initial draft from the Central Bank calls for 50 percent of government revenue from the natural gas sector as well as other extractive industries to be used to fund the SWF for a period of 20 years and sets up strict payout criteria for any withdrawals from the SWF before it reaches maturity. In general, the government’s proposal follows the Santiago Principles and the government is working with the International Forum of Sovereign Wealth Funds to refine its proposal. In total, the government estimates it will receive USD 96 billion from the Rovuma Basin natural gas projects over the lifetime of the projects. Delays in construction and evolving international energy prices, however, could lead to lower-than-expected returns from the natural gas projects.

Larger companies and foreign investors in Mozambique tend to follow their own responsible business conduct (RBC) standards. For some large investment projects, RBC-related issues are negotiated directly with the GRM. RBC is an increasingly high-profile issue in Mozambique, especially in the extractive industries, with some projects requiring resettlement of communities.

The Government of Mozambique (GRM) joined the Extractive Industries Transparency Initiative (EITI) in May 2009. The EITI Governing Board labeled Mozambique as a compliant country in 2012.

Following the emergence of a violent extremist group in northern Mozambique in 2017, the government turned to private military companies (PMCs) to provide logistical and tactical support to Mozambican military and police forces. In March 2021, one PMC operating in Mozambique was accused of carrying out indiscriminate attacks on civilians by Amnesty International. The government’s contract with this PMC ended on April 6, 2021. Mozambique is not a signatory of the Montreaux Document on Private Military and Security Companies, does not support of the International Code of Conduct or Private Security Service Providers, nor does it participate as a government in the International Code of Conduct for Private Security Service Providers’ Association. In March 2021, officials from the Ministries of Defense, Justice, and the semi-independent Human Rights Commission participated in a series of workshops organized by the Center for Democracy and Development on the the Voluntary Principles of Security and Human Rights in Cabo Delgado Province.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

Terrorism in northern Mozambique poses a significant threat to investment, in particular in Cabo Delgado Province. A March 24 attack on Palma town, where many expatriate LNG workers stayed, in the vicinity of the Total camp, led Total to suspend operations and temporarily evacuate all personnel from Cabo Delgado Province (CDP) in April 2021.

The United States designated the Islamic State in Mozambique (ISIS-M) as a Foreign Terrorist Organization and Specially Designated Global Terrorists in March 2021. ISIS provides support to the combatants in northern Mozambique and occasionally claims credit for their attacks. The violence has resulted in an estimated 2,500 deaths and nearly 700,000 internally displaced persons. Since 2017, the ISIS affiliate carried out more than 500 deliberate attacks against unarmed civilians.

ISIS-M operates in CDP, which is also the site of the two onshore LNG projects led by Total and ENI/ExxonMobil.The March 24 attack on the district capital of Palma in the vicinity of the LNG project site in March 2021marked a significant escalation in the level of violence in close proximity to the project and several expatriates were killed. However, to date, the insurgents’ primary target remains villages and government forces and institutions.

Following the ceasefire and peace agreement signed in August 2019, Mozambique continues to make strong progress in the disarmament, demobilization, and re-integration (DDR) of ex-combatants from Renamo. Although a violent splinter group’s leader remains at large, a significant drop in the number of attacks on road transport along major highways in Manica and Sofala provinces has occurred in early 2021.

* Source for Host Country Data: National Statistical Institute (INE, Instituto National de Estatistica), 2019 Annual Statistics published November 2020. http://www.ine.gov.mz/estatisticas/estatisticas-economicas/contas-nacionais/anuais-1 ; APIEX

The IMF’s Coordinated Direct Investment Survey results for 2019 track loosely with the FDI reported by APIEX—with both sources listing South Africa, Mauritius, Portugal, and the United Arab Emirates (UAE) among Mozambique’s top five foreign investors. However, local data from APIEX diverges significantly in terms of the value of FDI as well as the relative share of each country. According to APIEX, in 2019 FDI in Mozambique totaled USD 637 million, with South Africa accounting for 58 percent of total foreign investment in Mozambique, followed by China, Mauritius, Portugal, and the UAE.

The large share of investment listed from UAE and Mauritius likely is linked to the fact that the Exxon Mobil/ENI and Total led natural gas projects have set up special purpose vehicles for their natural gas projects in these countries.

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

The Namibian government welcomes increased foreign investment to help develop the national economy and benefit its population. The Foreign Investment Act of 1993 (FIA) currently governs FDI in Namibia and guarantees equal treatment for foreign investors and Namibian firms, including the possibility of fair compensation in the event of expropriation, international arbitration of disputes between investors and the government, the right to remit profits, and access to foreign exchange. Investment and tax incentives are also available for the manufacturing sector. The government prioritizes investment retention and maintains ongoing dialogue with investors including through investment conferences. The government is cognizant that some of its bureaucratic processes (such as the time it takes to get a business visa) impede the ease of doing business and is working to address outstanding challenges. The Namibian Investment Promotion Act has been under review since 2016 to replace the FIA.

The new Namibia Investment Promotion and Development Board (NIPDB) housed in the Office of the President, serves as Namibia’s official investment promotion and facilitation office. The NIPDB is headed by a highly regarded chartered accountant, and analysts are optimistic that this new entity will better facilitate investment in Namibia. The NIPDB is the first point of contact for potential investors, and it offers comprehensive services from the initial inquiry stage through to operational stages. NIPDB Facebook page: https://www.facebook.com/NIPDB; NIPDB Contact: andreas.andjene@nipdb.com. The NIPDB also provides general information packages, coordinates trade delegations, and assists with advice on investment opportunities, incentives, and procedures. The NIPDB is tasked with assisting investors in minimizing bureaucratic red tape, including obtaining work visas for foreign investors, by coordinating with government ministries as well as regulatory bodies.

Limits on Foreign Control and Right to Private Ownership and Establishment

Under the Foreign Investment Act (FIA), foreign and domestic entities may establish and own business enterprises and engage in all forms of remunerative activities. The Ministry of Home Affairs, Immigration, Safety, and Security grants renewable and non-renewable temporary employment permits for a period of up to 12 months for skills not locally or readily available. However, work permits and long-term residence permits are subject to bureaucratic hurdles and are hard to obtain for jobs that could be performed by a Namibian. Complaints about delays in renewing visas and work permits are common.

Foreigners must pay a 10 percent non-resident shareholder tax on dividends. There are no capital gains or marketable securities taxes, although certain capital gains are taxed as normal income. As a member of the Common Monetary Area, the Namibian dollar (NAD) is pegged at parity with the South African rand.

There are no general mandatory limits on foreign ownership, but some sectors have a mandatory joint ownership between a local firm and foreign firm, such as in the natural resources sector. Government procurements usually also require a variable percentage of local ownership.

Other Investment Policy Reviews

Namibia has not undergone any third party investment policy reviews in the last three years by the OECD, WTO, or UNCTAD. The Southern Africa Customs Union (SACU), of which Namibia is a member, was last reviewed by the WTO in 2015.

Business Facilitation

Foreign and domestic investors may conduct business in the form of a public or private company, branch of a foreign company, closed corporation, partnership, joint venture, or sole trader. Companies are regulated under the 2004 Companies Act, which covers both domestic companies and those incorporated outside Namibia but traded through local branches. To operate in Namibia, businesses must also register with the relevant local authorities, the Workmen’s Compensation Commission, and the Social Security Commission.

Most investors find it helpful to have a local presence or a local partner in order to do business in Namibia, although this is not currently a legal requirement, except in sectors that require a joint venture partner. Companies usually establish business relationships before tender opportunities are announced. The World Bank’s Doing Business 2020 report notes that it takes ten steps and an average of 54 days to start a business in Namibia. Some accounting and law firms provide business registration services.

The Business and Intellectual Property Authority (BIPA) is the primary institution which serves the business community and ensures effective administration of business and intellectual property rights (IPRs) registration. BIPA serves as a one-stop-center for all business and IPR registrations and related matters. It also provides general advisory services and information on business registration and IPRs. Website: http://www.bipa.gov.na/.

Outward Investment

Namibia provides incentives for outward investment mainly aimed at stimulating manufacturing, attracting foreign investment to Namibia, and promoting exports. To take advantage of the incentives, companies must be registered with MIT and the Ministry of Finance. Tax and non-tax incentives are accessible to both existing and new manufacturers. Here is the list of the investment incentives: https://www.namibweb.com/tin.htm. Namibia is in the process of creating Special Economic Zones, which will replace the old Export Processing Zone regime, to offer favorable conditions for companies wishing to manufacture and export products.

Real Property

The Namibian Constitution guarantees all persons the right to acquire, own, and dispose of all forms of property throughout Namibia, but also allows Parliament to make laws concerning expropriation of property (see Expropriation and Compensation Section) and to regulate the right of foreign nationals to own or buy property in Namibia. There are no restrictions on the establishment of private businesses, size of investment, sources of funds, marketing of products, source of technology, or training in Namibia. All deeds of sales are registered with the Deeds Office. Property is usually purchased through real estate agents and most banks provide credit through mortgages. The Namibian Constitution prohibits expropriation without just compensation. In 2020, the World Bank’s Doing Business Report ranked Namibia 173 out of 190 for the ease of registering property.

Intellectual Property Rights

Namibia is a party to the World Intellectual Property Organization (WIPO) Convention, the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property. Namibia is also a party to the Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks and the Patent Cooperation Treaty (PCT). Namibia is a signatory to the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT).

The responsibility for intellectual property rights (IPR) protection is divided among three government ministries. The MIT oversees industrial property and is responsible for the registration of companies, private corporations, patents, trademarks, and designs through its Business and Intellectual Property Authority (BIPA). The Ministry of Information and Communication Technology (MICT) manages copyright protection, while the Ministry of Environment, Forestry and Tourism (MEFT) protects indigenous plant varieties and any associated traditional knowledge of these plants.

Two copyright organizations, the Namibian Society of Composers and Authors of Music (NASCAM) and the Namibian Reproduction Rights Organization (NAMRRO), are the driving forces behind the government’s anti-piracy campaigns. NASCAM administers IPR for authors, composers, and publishers of music. NAMRRO protects all other IPR, including literary, artistic, broadcasting, satellite, traditional knowledge, and folklore.

Namibia is in the process of finalizing its intellectual property legislation, which BIPA will administer.

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

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

Capital Markets and Portfolio Investment

There is a free flow of financial resources within Namibia and throughout the Common Monetary Area (CMA) countries of the South African Customs Union (SACU), which include Namibia, Botswana, eSwatini, South Africa, and Lesotho. Capital flows with the rest of the world are relatively free, subject to the South African currency exchange rate. The Namibia Financial Institutions Supervisory Authority (NAMFISA) registers portfolio managers and supervises the actions of the Namibian Stock Exchange (NSX) and other non-banking financial institutions.

Although the NSX is the second-largest stock exchange in Africa, this ranking is largely because many South African firms listed on the Johannesburg exchange are also listed (dual listed) on the NSX. By law, Namibia’s government pension fund and other Namibian funds are required to allocate a certain percentage of their holdings to Namibian investments. Namibia has a world-class banking system that offers all the services needed by a large company. Foreign investors are able to get credit on local market terms.

There are no laws or practices by private firms in Namibia to prohibit foreign investment, participation, or control; nor are there any laws or practices by private firms or government precluding foreign participation in industry standards-setting consortia.

Money and Banking System

Namibia’s central bank, the Bank of Namibia (BON), regulates the banking sector. Namibia has a highly sophisticated and developed commercial banking sector that is comparable with the best in Africa. There are eight commercial banks: Standard Bank, Nedbank Namibia, Bank Windhoek, FNB Namibia, Trustco Bank, Letshego Bank Limited, Banco BIC, and Banco Atlantico. Bank Windhoek and Trustco Bank are the only locally-owned banks, and Trustco Bank specializes in micro-finance. Standard Bank, Nedbank, and FNB are South African subsidiaries, Banco BIC and Banco Atlantico are Angolan. A significant proportion of bank loans come in the form of bonds or mortgages to individuals. There is little or no investment banking activity.

The Development Bank of Namibia (DBN) and Agribank are Namibian government-owned banks with a mandate for development project financing. Agribank’s mandate is specifically in the agriculture sector.

While there are no restrictions on foreigners’ ability to open bank accounts, a non-resident must open a “non-resident” account at a Namibian commercial bank to facilitate loan repayments. This account would normally be funded from abroad or from rentals received on the property purchased, subject to the bank holding the account being provided with a copy of any rental. Non-residents who are in possession of a valid Namibian work permit/permanent residency are considered to be residents for the duration of their work permit and are therefore not subject to borrowing restrictions placed on non-residents without the necessary permits.

The BON does not recognize cryptocurrencies, such as Bitcoin, as legal tender in Namibia. The BON is reluctant to allow the implementation of blockchain technologies in banking transactions.

Foreign Exchange and Remittances

Foreign Exchange

The Namibian dollar is pegged at parity to the South African rand, and rand are accepted as legal tender in Namibia. The FIA offers investors meeting certain eligibility criteria the opportunity to obtain a Certificate of Status Investment (CSI). A “status investor” is entitled to:

• Preferential access to foreign exchange to repay foreign debt, pay royalties and similar charges, and remit branch profits and dividends;
• Preferential access to foreign currency in order to repatriate proceeds from the sale of an enterprise to a Namibian resident;
• Exemption from regulations which might restrict certain business or categories of business to Namibian participation;
• Right to international arbitration in the event of a dispute with the government; and
• Payment of just compensation without undue delay and in freely convertible currency in the event of expropriation.

Remittance Policies

According to World Bank Development Indicators, remittances to Namibia have been consistently less than 0.15 percent of GDP for at least the last decade. The majority of remittances are processed through commercial banks. There have been no plans to change investment remittance policies in recent times.

Sovereign Wealth Funds

Namibia does not have a Sovereign Wealth Fund (SWF), but the government has publicly stated its intention to create one. The Government Institution Pension Fund (GIPF) provides retirement and benefits for employees in the service of the Namibian government as well as institutions established by an act of the Namibian Parliament.

Most large firms, including SOEs, have well defined (and publicized) social responsibility programs that provide assistance in areas such as education, health, environmental management, sports, and SME development. Many firms include Black Economic Empowerment (BEE) programs within their larger Corporate Social Responsibility (CSR) programs. Firms operating in the mining sector – Namibia’s most important industry – generally have visible CSR programs that focus on education, community resource management, environmental sustainability, health, and BEE. Many Namibian firms have HIV/AIDS workplace programs to educate their employees about how to prevent contracting and spreading the virus/disease. Some firms also provide anti-retroviral treatment programs beyond what may be covered through government and private insurance systems.

Namibia’s mining sector is considered a leader in the region for its sound mining policy and responsible business conduct. Namibia ranked as the best jurisdiction in Africa on its mining policy in a 2019 Fraser Institute survey. Namibia is also a member of the U.S. Department of State’s Energy Resource Governance Initiative that seeks to promote sound mining governance and resilient energy mineral supply chains. Namibia is not a member of the Extractive Industries Transparency Initiative (EITI).

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

Namibia is a stable multiparty and multiracial democracy. The protection of human rights is enshrined in the Namibian Constitution, and the government generally respects those rights. Political violence is rare and damage to commercial projects and/or installations as a result of political violence is unlikely. The State Department’s Country Report on Human Rights for Namibia provides additional information.

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below. Foreign Direct Investment (FDI) continues to play an important role in Zambia’s economy. The Zambia Development Agency (ZDA) is charged with attracting more FDI to Zambia, in addition to promoting trade and investment and coordinating the country’s private sector-led economic development strategy.

Zambia has undertaken certain institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses the cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses issues relating to transparency and good governance ( https://data.mcc.gov/evaluations/index.php/catalog/72/study-description). However, frequent government policy changes have created uncertainty for foreign investors. Recent examples include a rapid transition from a value-added tax regime to a sales tax that was slated to take effect in July 2019, but ultimately scrapped in September 2019 after multiple last minute delays and stakeholder backlash; taxes and royalty increases in the mining sector that took effect in January 2019 and marked the tenth significant change to mining taxes and regulations in 16 years; a labor law update with insufficient public consultation that significantly increased hiring costs for formal businesses; and unpredictable changes to limits on various crop exports.

Limits on Foreign Control and Right to Private Ownership and Establishment

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

Currently, all land in Zambia is considered state land and ownership is vested in the president. Land titles held are for renewable 99-year leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities. The government began reviewing the current land policy in earnest in March 2017; though shorter terms continue to be suggested, no changes have been adopted to date.

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

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

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

1. At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company. At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
2. There must be at least one documentary agent (a firm, corporate body registered in Zambia, or an individual who is a resident in Zambia).
3. A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
4. The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
5. The Registration Fee of K5,448.50 (~ USD 250.00) must be paid.
6. The issuance and sealing of the Certificate of Registration marks the end of the process for registration.

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

Other Investment Policy Reviews

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

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

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

Business Facilitation

The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support more transparent policymaking and to encourage competition. The impact of these progressive policies, however, has been undermined by persistent fiscal deficits, struggling economy, high cost of doing business and widespread corruption. Business surveys, including TRACE International, generally indicate that corruption in Zambia is a major obstacle for conducting business in the country.

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

The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:

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

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

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

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

Outward Investment

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

Real Property

Property rights and the regulation of property are well defined in principle, but face problems in implementation. Contractual and property rights are weak. Courts are often inexperienced in commercial litigation and are frequently slow in reaching their decisions. The ZDA Act ensures investors’ property rights are respected. Secured interests in property, both movable and real, are recognized and enforced. Property can be owned individually, jointly in undivided shares, or by an entity such as a company, close corporation or trust, or similar entity registered outside Zambia. The ZDA Act provides for legal protection and facilitates acquisition and disposition of all property rights such as land, buildings, and mortgages. The Lands and Deeds Registry Act of Zambia states that a mortgage is only to operate as security and not a transfer or lease of the estate or interest mortgaged. There are two types of mortgages in Zambia, a legal and an equitable mortgage. A legal mortgage is created in respect to a legal estate by deed. An equitable mortgage does not convey legal title to the mortgage, and no power of sale vests in the mortgagee.

The president holds all land on behalf of the people of Zambia, which he may give to any Zambian, but the process is set in law. The Lands Act, Chapter 184, places a number of restrictions on the president’s allocation of land to foreigners. The ZDA Act makes provision for leasehold tenure of land by investors. The ZDA, in consultation with the Ministry of Lands, assists an investor in identifying suitable land for investment, as well as assisting the investor to apply through the Ministry of Lands. While land is technically owned by the president, it is worth noting that traditional chiefs have jurisdiction over traditional, or customary, land, which makes up roughly 70 percent of Zambia.

The Commissioner of Lands verifies that properties can be transferred after checking if ground rent has been paid and by conducting due diligence on the purchaser. As all land in Zambia belongs to the state, Zambians, Zambian companies, established residents, or investors can only lease it under terms established by law. Land held under customary tenure has no title, but where a sketch plan of the area exists, the chief can give written consent to an investor and a 14-year lease can be obtained for traditional land. In March 2017, the president expressed concern that land was being given to foreigners at an alarming rate by traditional chiefs and called for an inquiry into this by the Ministry of Lands, which had the lead in forming a new land policy. The current draft of the new land policy would assert more central government control over traditional lands and seeks to reduce the lease tenure on foreign-owned land from 99 years to renewable periods of 25 years. Both traditional chiefs and foreign investors have objected to terms in the draft bill for fear of loss of custodianship as land is seen to confer power, which has since stalled with Ministry of Lands and has not been presented to Parliament.

Despite Zambia’s abundant land for agriculture and other purposes, the process of land acquisition and registration is a major obstacle for investors in part due to extensive traditional ownership. Its acquisition involves negotiations with traditional leaders who have to balance the demands of their subjects against the pressure to convert land for commercial purposes. Most available land has not been surveyed or mapped and, where this has been done, records are often outdated or difficult to retrieve from the Ministry of Lands.

The Ministry of Lands is centralized in Lusaka and faces problems with poor record keeping and slow processing of title deeds. To address these challenges the government, with the support of donor partners, has been working to reform land policy, including modernization of the Lands Department at Ministry of Lands, establishment of Land Banks, establishment of a Land Development Fund, demarcation of MFEZs and industrial parks, and development of farming blocks.

Many of Zambia’s urban poor who live on statutory land are not aware of the ways in which they can secure their rights to land. Some civic leaders, cadres (political party supporters), and traditional leaders allocate and sell land without following required procedures. As such, many urban poor find refuge in unplanned settlements, which in some cases are not approved in accordance with Zambian law. This has led to the continued proliferation of informal and unplanned settlements, illegal land allocations, land grabbing, and misplacement of resources, all of which slow development.

People living on both customary land and in unplanned settlements therefore do so with a sense of insecurity of land tenure due to the absence of documentation to support land ownership coupled with a poor land administration system. Civil and traditional leaders have demonstrated little transparency and accountability in land governance. Most often, community members have little knowledge about either their land rights or how they can protect themselves.

Intellectual Property Rights

Intellectual property laws in Zambia cover such areas as domain names, traditional knowledge, transfer of technology, patents, and copyrights, etc. Zambia is also party to several international intellectual property agreements. The legal framework for trademark protection in Zambia is adequate; however, enforcement of intellectual property rights (IPR) is weak, and courts have little experience with commercial litigation. Copyright protection is limited and does not cover computer applications. Of the many pirated and counterfeit goods in Zambia, the main ones are DVDs, CDs, audio-visual software, infant milk, pharmaceuticals, body lotions, motor vehicle spare parts (such as tires and brake pads), beverages, cigarettes, toothpaste, electrical appliances, fertilizer, pesticides, and corn seed. Small-scale trademark infringement occurs in connection with some packaged goods utilizing copied or deceptive packaging. In 2016, the government enacted the Industrial Designs Act and the Protection of Traditional Knowledge, Genetic Resources, and Expressions of Folklore Act. The Industrial Designs Act encourages the creation of designs and development of creative industries through enhanced protection and utilization of designs, and it provides for the registration and protection of designs and the rights of proprietors of registered designs. The Protection of Traditional Knowledge, Genetic Resources, and Expressions of Folklore Act provides a transparent legal framework for the protection of, access to, and use of, traditional knowledge, genetic resources, and expressions of folklore and guarantees equitable sharing of benefits and effective participation of holders.

The Zambia Police Service Intellectual Property Unit (IPU) carries out raids in shops and markets to confiscate counterfeit and pirated materials. The IPU tracks and reports on seizures of counterfeit goods but no consolidated record is available. There are fines for revealing proprietary business information, but they are not large enough to adequately penalize possible disclosures. Zambia’s patent laws conform to the requirements of the Paris Convention for the Protection of Industrial Property, to which Zambia is a signatory. It takes a minimum of four months to patent an item or process. Duplicative patent searches are not performed, but patent awards may be appealed on grounds of infringement.

Zambia is a signatory to a number of international agreements on patents and intellectual property, including the World Intellectual Property Organization (WIPO) Paris Convention and Bern Convention, as well as the Universal Copyright Convention of UNESCO. Zambia is also a member of the African Regional Industrial Property Organization (ARIPO). The country is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which is an international legal agreement between all the member nations of the World Trade Organization.

The Ministry of Commerce, Trade, and Industry and the Patents and Companies Registration Agency (PACRA) are the leading institutions responsible for the implementation of IPR laws in Zambia. The industrial property registration system at PACRA underwent an upgrade that linked its electronic documentation management system to WIPO’s WIPOScan, which provides for digitization of IPR records.

Zambia is not included in USTR’s Special 301 Report nor its Notorious Markets List. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Capital Markets and Portfolio Investment

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

The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations. There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds. Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas. As of the beginning of 2021, there were 25 companies listed on the LuSE with a portfolio worth about K24 billion (USD 1.2 billion).

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

Money and Banking System

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

The BoZ’s current policy rate, as of February 2021, was 8.5 percent. Commercial lending rates range between 23 and 30 percent, among the highest in the region. The persistence of high interest rates led the government to urge commercial banks to reduce their lending rates in order to stimulate private sector growth and the economy as a whole. One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) remain elevated, with some estimates as high as 15 percent. The government contributes to this problem, as it has arrears of about USD 1.3 billion to government contractors who reportedly hold a high percentage of the NPLs.

Banking officials acknowledge the need to upgrade the risk assessment and credit management skills of their institutions to better serve borrowers, but note widespread financial illiteracy limits borrowers’ ability to access credit. Banks provide credit denominated in foreign currencies only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.

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

Generally, all regulatory agencies that issue operating licenses have statutory reporting requirements that businesses operating under their laws and regulations must meet. For example, the Banking and Financial Services Act has stringent reporting provisions that require all commercial banks to submit weekly returns indicating their liquidity position. Late submission of the weekly returns or failure to meet the minimum core liquidity and statutory reserves incur punitive penalty interest, and may lead to the placement of non-compliant commercial banks under direct supervision of BoZ, closure of the undertaking, or the prosecution of directors.

All companies listed under the Lusaka Stock Exchange (LuSE) are obliged to publish interim and annual financial statements within three months after the close of the financial year. Listed companies are also required to disclose in national print media any information that can affect the value of the price of their securities. According to the Companies Act, Chapter 388, company directors need to generate annual account reports after the end of each financial year. The annual account, auditor’s report or reports on the accounts, and directors’ report should be sent to each person entitled to receive notice of the annual general meeting and to each registered debenture holder of the company. A foreign company is required to submit annual accounts and an auditor’s report to the Registrar.

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

Private firms are open to foreign investment through mergers and acquisitions. The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission. Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.

Foreign Exchange and Remittances

Foreign Exchange

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

In March 2014, the government announced the revocation of SI Number 33 (mandating use of the kwacha for domestic transactions) and SI Number 55 (monitoring foreign exchange transactions). The government experienced challenges implementing these statutory instruments and – along with problems of fiscal management and weakening global copper prices – the SIs were perceived as undermining confidence in Zambia’s economy and currency, leading to sharp depreciation of the kwacha. The decision to revoke the SIs was widely praised in the business community. The kwacha, however, has remained weak in historical terms and continues to depreciate against the dollar. As of early April 2021, the kwacha was trading at more than 22 to the dollar.

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

Remittance Policies

There are no recent changes or plans to change investment remittance policies that tighten or relax access to foreign exchange for investment remittances. There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into freely usable currency at the legal market clearing rate. Foreign investors can remit through a legal parallel market, including one utilizing convertible, negotiable instruments such as dollar-denominated government bonds issued in lieu of immediate payment in dollars. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue and there is no evidence to show that Zambia manipulates the currency. Zambia is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which in 2018, conducted an on-site assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CTF) measures in Zambia. ESAAMLG coordinates with other international organizations concerned with combating money laundering, studying emerging regional typologies, developing institutional and human resource capacities to deal with these issues, and coordinating technical assistance where necessary. In June 2019, Zambia adopted the recommendations. Zambia has demonstrated commitment to establish an AML/CTF framework. The enactment of the Prohibition and Prevention of Money Laundering Act and the Anti-Terrorism Act, establishment of the Anti-Money Laundering Investigations Unit and the Financial Intelligence Center as the sole designated national agencies mandated to handle AML/CTF and other serious offences, and its September 2018 accession to the Egmont Group reflect this commitment.

Sovereign Wealth Funds

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

The government in theory limits its direct involvement in business to strategic investments deemed critical for the delivery of public goods and services, and seeks to maintain high standards of consumer protection. While Zambia is a high performer among low-income countries in terms of Responsible Business Conduct (RBC), it lacks clearly formulated or well-implemented RBC policies. Zambia ranked 120 among 138 countries on the 2018-2019 Global Competitiveness Report.

The government has sought to improve implementation of legislative and regulatory reforms that impact RBC. As an example, most investment ventures are required to create and submit environmental impact assessments as a prerequisite to the approval process. The government requires many investment sectors, such as insurance, banking, and financial services, to submit annual audited financial statements as a licensing condition. In the case of financial services, quarterly publication of financial statements is compulsory and rigidly enforced by the BoZ.

Zambia has ratified a number of international human rights conventions, such as the Convention against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment; the Convention on the Rights of the Child; and the Convention on the Rights of Persons with Disabilities. At the national level, the lead authority for upholding human rights norms is the Human Rights Commission (HRC), while the Industrial and Labor Relations Act addresses labor issues. The Act provides the legal framework for trade unions, employers’ organizations and their federations, the Tripartite Consultative Labor Council, and the Industrial Relations Court. The Employment Act, Chapter 268, is the basic employment law, while the Minimum Wages and Conditions of Employment Act makes provisions for the regulation of minimum wage levels and minimum conditions of employment. Currently, the average minimum wage per month for employees, starting with general or domestic workers, stands at 1,132 kwacha (~USD 52), to include food and transportation.

The government supports measures that encourage responsible business conduct and has recognized the importance of adopting international practices. The main challenges include domesticating international practices and strengthening regulatory capacities. In many cases, the business sector is encouraged by the government to adopt practices that promote responsible business conduct on a “voluntary basis.” For example, the Institute of Directors Zambia (IODZ) actively advocated the introduction of “Board Charters” that set out good corporate standards (such as ethical conduct) with which business enterprises will be associated and will implement. The Citizens Economic Empowerment Commission (CEEC) is also promoting the adoption of “Sector Codes” by the business sectors that commit themselves to supporting citizens’ economic empowerment. In addition, a number of public institutions have established Integrity Committees that address the strengthening of internal policies and procedures for combating corruption, in compliance with the Anti-Corruption Act of 2012. The private sector is also encouraged to either establish similar Integrity Committees or to strengthen their corporate governance standards to effectively address corruption.

The Zambian government seeks to maintain high standards of consumer protection by, for example, following the United Nations Guidelines for Consumer Protection. The Competition and Fair Trading Act of 1994 and superseding Competition and Consumer Protection Act of 2010 seek to encourage competition in the economy, protect consumer welfare, strengthen the efficiency of production and distribution of goods and services, secure the best possible conditions for the freedom of trade, expand the base of entrepreneurship, and regulate monopolies and concentrations of economic power. The 2010 Act includes specific consumer protection provisions. The Board of Commissioners is composed of representatives from different ministries and professional associations. Statutory agencies are encouraged by the government to regularly engage in stakeholder consultations whenever new laws and regulations are being considered; this does not always occur in practice or may occur in ways that are not universally transparent. Most local manufacturers of consumer products have submitted to voluntary product testing and certification by the Zambia Bureau of Standards (ZABS); ZABS certification is then embossed on the product labels as a “mark of quality” indicating the product’s suitability for consumption. Legislative measures have also been agreed with food processors and drug manufacturers that indicate product manufacturing and expiry dates.

Most mining companies have acceded to the Extractive Industries Transparency Initiative (EITI), adapted in February 2009 for Zambian conditions, and allow independent audits of their operations and financial reporting. EITI audit results are available to the general public. Zambia has been an EITI compliant country since September 2012. The government receives revenue in the form of taxes and royalties from all extractive industries, including mining. The mining sector accounts for about 12 percent of GDP and around 70 percent of export revenue. All exploration and mining activities are governed by the Mines and Minerals Act of 2008 and other mining related regulations that include: The Mineral Royalty Tax (Repeal) Act, the Petroleum Exploration and Production Act, the Explosives Act, and the Environmental Protection and Pollution Control Act. The GRZ, through the Ministry of Mines and Minerals, conducts open bidding and grants mining licenses to qualified bidders. The Zambian Revenue Authority collects all payments from mining companies and remits them to the Ministry of Finance. The Zambian Revenue Authority regularly publishes production volumes for copper, cobalt, and gold, and the names of companies operating in the country.

Additional Resources

Department of State

• Country Reports on Human Rights Practices;
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

Zambia has benefited from almost 30 years of largely peaceful multi-party politics, with two peaceful transfers of power, and does not have a history of large-scale political violence. More recently, however, political tensions have been on the rise. Before and during the 2016 elections, there were numerous clashes of supporters of different political parties, resulting in some injuries and arrests. The leading opposition party contested the election results, leading to a heightened state of political tension that continues to flare up whenever by-elections are held. The same dynamic is expected to persist in the runup to the August 2021 general election. Freedoms of assembly, speech, and media freedoms have increasingly been curtailed or threatened, and opposition parties, media outlets and civil society organizations that are critical of the government face increasingly narrow space to operate

In early 2020, there were pockets of civil unrest throughout the country triggered by a spate of “gassing” incidents, in which an unidentified gas was sprayed on people in their homes, schools, and/or in public, which sickened and injured people, and by rumors of witchcraft and ritual killings. Community protests and patrolling at times spawned protests, riots, and vigilante justice that led to extra-judicial personal harm or property damage.

* Host country statistical data released is almost non-existent. If it exists, there is not a central source for retrieving the data, and at most times it does not match international sources.

**Results published 03/2020

Table 4: Sources of Portfolio Investment
Data not available.

Policies Towards Foreign Direct Investment

To attract FDI and improve the country’s competitiveness, the government has encouraged public-private partnerships and emphasized the need to improve the investment climate by lowering the cost of doing business as well as restoring the rule of law and sanctity of contracts. Implementation, however, has been limited.

The government amended the Indigenization Act by removing diamonds and platinum from minerals subject to indigenization (requiring majority ownership by indigenous Zimbabweans), although the new legislation appeared to grant broad discretion to the GOZ to designate minerals as subject to indigenization in the future. Subsequently, the GOZ reassured investors that no minerals will be subject to indigenization, including diamonds and platinum. However, there are smaller sectors “reserved” for Zimbabweans (see below).

To improve the ease of doing business, the government enacted legislation that led to the formation of the Zimbabwe Investment and Development Agency (ZIDA) in 2020. ZIDA replaced the Zimbabwe Investment Authority and describes itself as a one-stop-shop center in promoting and facilitating both domestic and foreign investment in Zimbabwe.

While the government has committed to prioritizing investment retention, there are still no mechanisms or formal structures to maintain ongoing dialogue with investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activity, but foreign ownership of businesses in certain reserved sectors is limited, as outlined below.

Foreign investors are free to invest in most sectors without any restrictions as the government aims to bring in new technologies, generate employment, and value-added manufacturing. According to the ZIDA Act, “foreign investors may invest in, and reinvest profits of such investments into, any and all sectors of the economy of Zimbabwe, and in the same form and under the same conditions as defined for Zimbabweans under the applicable laws and regulations of Zimbabwe.” However, the government reserves certain sectors for Zimbabweans such as passenger buses, taxis and car hire services, employment agencies, grain milling, bakeries, advertising, dairy processing, and estate agencies.

The country screens FDI through the ZIDA in liaison with relevant line ministries to confirm compliance with the country’s laws.

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

Other Investment Policy Reviews

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

Business Facilitation

Policy inconsistency, administrative delays and costs, and corruption hinder business facilitation. Zimbabwe does not have a fully online business registration process, though one can begin the process and conduct a name search online via the ZimConnect web portal. The government created the Zimbabwe Investment Development Agency (ZIDA, https://www.zidainvest.com/) which replaced the Zimbabwe Investment Authority (ZIA), the Special Economic Zones Authority, and the Joint Venture Unit to oversee the licensing and implementation of investment projects in the country. The Agency has established a one-stop investment services center (OSISC) which houses several agencies that play a role in the licensing, establishment, and implementation of investment projects including the Zimbabwe Revenue Authority (ZIMRA), Environmental Management Agency (EMA), Reserve Bank of Zimbabwe (RBZ), National Social Security Authority (NSSA), Zimbabwe Energy Regulatory Authority (ZERA), Zimbabwe Tourism Authority, the State Enterprises Restructuring Agency, and specialized investment units within relevant line ministries. The business registration process currently takes 27 days.

Outward Investment

Zimbabwe does not promote or incentivize outward investment due to the country’s tight foreign exchange reserves. Although the government does not restrict domestic investors from investing abroad, any outward investment requires approval by exchange control authorities. Firms interested in outward investment would face difficulty accessing the limited foreign currency at the more favorable official exchange rate.

Real Property

The government enforces property rights in residential and commercial properties in cities although this is not the case with agricultural land, as discussed above. Mortgages and liens do exist for urban properties although liquidity constraints have led to a fall in the number of mortgage loans. According to the World Bank’s 2020 Doing Business Report, Zimbabwe is ranked 109 out of 190 countries in terms of registering property. The recording of mortgages is generally reliable. With regard to agricultural land, the government generally provides and protects the usage rights of indigenous people, i.e., black Zimbabweans. The government retains ownership of all agricultural land with 99-year leases guaranteeing use. These leases remain too weak to serve as collateral for bank loans.

Intellectual Property Rights

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

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

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

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

Capital Markets and Portfolio Investment

Zimbabwe has two stock exchanges in Harare and Victoria Falls. The Zimbabwe Stock Exchange (ZSE) in Harare currently has 56 publicly listed companies with a total market capitalization of USD 5.2 billion on March 19, 2021. Stock and money markets are open to foreign portfolio investment. Foreign investors can take up to a maximum of 49 percent of any locally listed company with any single investor limited to a maximum of 15 percent of the outstanding shares. With regard to the money market, foreign investors may buy up to 100 percent of the primary issues of bonds and stocks and there is no limit on the level of individual participation.

There is a 1.48 percent withholding tax on the sale of marketable securities, while the tax on purchasing stands at 1.73 percent. Totaling 3.21 percent, the rates are comparable with the average of 3.5 percent for the region. As a way of raising funds for the state, the government mandated that insurance companies and pension funds invest between 25 and 35 percent of their portfolios in prescribed government bonds. Zimbabwe’s high inflation has greatly eroded the value of domestic debt instruments and resulted in negative real interest rates on government bonds.

Zimbabwe launched the Victoria Falls Stock Exchange (VFEX) in September 2020 after the government suddenly suspended trading on the ZSE for five weeks between June and August following a rapid depreciation of the Zimbabwe dollar. The government blamed instability of the Zimbabwe dollar and rising inflation on the behavior of stock trading counters dual-listed on foreign exchanges, and suspended trading on the ZSE from late June to early August. When trading resumed, the authorities suspended trading of dual-listed counters on the ZSE, advising them to list on the VFEX where they trade in foreign currency and benefit from generous incentives meant to attract foreign investment. To date, only one company is listed on the VFEX.

The country respects IMF’s Article VIII and refrains from restrictions on payments and transfers for current international transactions provided there is sufficient foreign exchange to finance the transactions. Depending on foreign currency availability, foreign companies with investments in Zimbabwe can borrow locally on market terms.

Money and Banking System

Three major international commercial banks and several regional and domestic banks operate in Zimbabwe, but they have reduced their branch network substantially in line with declining business opportunities. The central bank (Reserve Bank of Zimbabwe (RBZ) maintains that the banking sector is generally stable despite a harsh operating environment characterized by high credit risk, high inflation, and foreign exchange constraints. Most Zimbabwean correspondent banking relationships are in jeopardy or have already been severed due to international bank efforts to reduce risk (de-risking) connected to the high penalties for non-compliance with prudential anti-money laundering/counter-terrorism finance guidelines in developed countries. As of December 31, 2020, the sector had 19 operating institutions, comprising 13 commercial banks, five building societies, and one savings bank. According to the RBZ, as of December 2020, all operating banking institutions complied with the prescribed minimum core capital requirements. The level of non-performing loans fell from 1.75 percent in December 2019 to 0.31 percent by December 2020 largely reflecting the banks’ low appetite to lend to high-risk clients. The RBZ reports that the total loans to deposits ratio rose from 36.6 percent in December 2019 to 39.5 percent as of December 31, 2020.

According to the central bank, the total deposits (including interbank deposits), rose from ZWL$34.5 billion in December 2019 to ZWL$208.9 billion by December 2020, an increase of 19 percent in US dollar terms.

Foreign Exchange and Remittances

Foreign Exchange

A large share of the economy operates using U.S. dollars for day-to-day transactions. The RBZ takes 40 percent of foreign currency earned from exports at the official exchange rate while exporters retain the other 60 percent in foreign exchange. The authorities change these levels periodically without notice depending on the severity of the foreign exchange constraint. Additionally, businesses selling domestically in foreign currency must surrender 20 percent of the receipts to the central bank in exchange for local currency.

Weak investment inflows and poor export growth have resulted in a perennial shortage of foreign exchange. Consequently, investors cannot freely convert funds associated with any form of investment into foreign currency. Although the situation improved after authorities adopted an auction system to allocate foreign exchange, businesses still rely on a black market for foreign exchange to make external payments.

Remittance Policies

Foreigners can remit capital appreciation, dividend income, and after-tax profits provided the foreign exchange is available. Firms may find difficulty in accessing foreign exchange at the auction rate.

Sovereign Wealth Funds

The government set aside USD 1 million toward administrative costs related to the setting up of a SWF in its 2016 Budget. Although the government proposed to capitalize the SWF through a charge of up to 25 percent on royalty collections on mineral sales, as well as through a special dividend on the sale of diamond, gas, granite and other minerals, it has not done so. In 2021, state media listed the SWF as a shareholder of a new major mining company in Zimbabwe.

Since 2009, awareness of standards for responsible business conduct (RBC) has increased, driven by the private sector through the Standards Association of Zimbabwe.

The Zimbabwean government has not taken any measures to encourage RBC and it does not take RBC policies or practices into its procurement decisions.

The private sector developed the National Corporate Governance Code of Zimbabwe (ZimCode), which is a framework designed to guide Zimbabwean companies on RBC. An industrial advocacy group, the Confederation of Zimbabwe Industries, has a standing committee on business ethics and standards that drives ethical conduct within the Zimbabwean private sector. The organization has developed its own charter according to OECD guidelines, highlighting good corporate governance and ethical behavior. Firms that demonstrate corporate social responsibility do not automatically garner favorable treatment from consumers, employees, or the government.

The U.S Department of Labor’s (DOL) report https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods published in September 2020 reports that children work in Zimbabwe’s sugarcane and tobacco industries. The DOL’s report https://www.dol.gov/agencies/ilab/resources/reports/child-labor/zimbabwe found children in Zimbabwe engage in the worst forms of child labor, including in mining, agriculture, and tobacco production. Law enforcement agencies lack resources to enforce child labor laws. The COVID-19 crisis severely limited the government’s ability to combat the worst forms of child labor. The country’s continuing economic decline and school closures due to COVID-19 lockdown restrictions likely increased the number of children working in informal labor sectors, including those that harbor the worst forms of child labor, to support family incomes.

The government regularly thwart union efforts to demonstrate with violence and excessive force and harasses labor leaders. Police and state intelligence services regularly attend and monitor trade union activities, sometimes preventing unions from holding meetings with their members and carrying out organizational activities. Although unions are not required by law to notify police of public gatherings, police require such notification in practice. Those unions engaging in strikes deemed illegal risk fines and imprisonment.

The government ordered the eviction of 13,000 members of the Chilonga community in the southeastern part of the country in March 2021, but eventually backed down after a court ruled the move unconstitutional amid a public outcry.

Although the Zimbabwean government has expressed its intention to implement the Extractive Industries Transparency Initiative (EITI) principles to strengthen accountability, good governance, and transparency in the mining sector, it has yet to launch an EITI program. A domestic initiative called the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) has produced limited results.

Zimbabwe is not signatory to the Montreux Document on Private Military and Security Companies.

U.S. Customs and Border Patrol issued a withhold release order on Zimbabwean rough diamonds from Marange in 2019 after having conducted an investigation and concluding that forced labor contributed to the mining activity. Widespread artisanal and small-scale gold mining presents a threat to the environment, and informal miners have little to no safety and labor protections.

Additional Resources

Department of State

• Country Reports on Human Rights Practices
• Trafficking in Persons Report;
• Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities and;
• North Korea Sanctions & Enforcement Actions Advisory

Department of Labor

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

Political parties, labor organizations, and civil society groups sometimes encounter state-sponsored intimidation and repression from government security forces and Zimbabwe African National Union – Patriotic Front (ZANU-PF) – slinked activists. Disagreements between and within political parties occasionally results in violence targeting political party members. Political tensions and civil unrest persist since the end of Robert Mugabe’s rule in November 2017. On August 1, 2018, the army fired upon people demonstrating against the delay in announcing official presidential election results, killing six civilians. In response to January 2019 demonstrations against rising fuel prices, security forces killed 17, raped 16, injured hundreds, and arrested more than 800 people over the course of several weeks. The crackdown targeted members of the opposition political party, civil society groups, and labor leaders. In 2020 and 2021, the government arrested and detained journalists, several leaders of opposition parties, and trade union activists for organizing demonstrations against corruption and allegedly violating bail conditions. Police also arrested three women members of the opposition party, MDC Alliance, including a member of parliament for violating lockdown measures when they demonstrated against corruption and food shortages during the first of several lockdowns imposed on the country to fight COVID-19. They were subsequently abducted from police custody and tortured by alleged security agents. Since then, the government routinely arrests and detains the three leaders whenever they speak out against the government. Political uncertainty remains high. Violent crime, such as assault, smash and grabs, and home invasion, is common. Local police lack the resources to respond effectively to serious criminal incidents. Incidents of violence have typically not targeted investment projects.

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

* Zimbabwe Statistical Agency (Zimstat).

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

Table 4: Sources of Portfolio Investment
Data not available.