Investment Climate in Central African Republic (CAR)
Subsistence agriculture, forestry and mining are the backbone of the economy of the Central African Republic (CAR). The agricultural sector generates more than half of GDP and employs almost 75% of the population. Timber and diamonds account for most export earnings, followed by cotton. Other exports include gold, coffee and tobacco. A uranium exploration project just started in the east of the country was suspended in October 2011 for two years as result of Japan’s Fukushima accident and the resulting drop in world uranium prices. The economic upturn that began in 2014 continued in 2015, but was then interrupted by the resurgence of the security and political crisis, resulting in economic growth of 4.1% of real GDP compared with an initial forecast of 5.5%. Growth is expected to increase in 2017 with a gradual upturn in exports, following the lifting of the embargo on diamond sales, and in foreign investments. However, these are not likely to return to their levels prior to the 2013 conflict because of the enduring insecurity which is acting to dampen economic activity.
Domestic demand is likely to remain flat given the exile of almost a quarter of the population (1 million people have left the country since the start of the conflict and have yet to return). The arrival in power of a stable government in 2016 could mark the start of a period of transition and could see an increase in agriculture and mining operations.
Inflation is falling but is expected to continue above the 3% target of the Central African Economic and Monetary Community. The slight reduction will probably be due to lower domestic agricultural product prices. The CAR is heavily dependent upon multilateral foreign aid and the presence of numerous NGO’s which provide numerous services which the government fails to provide.
Why invest in Central African Republic?
- Availability of numerous natural resources ;
- New stable government that is trying to encourage investment;
- Availability of electricity network and water supply;
- Modern means of communication include roads , railway and airports;
The Central African Republic (CAR) has gone through internal conflicts that resulted in the government overthrow in March 2013. The nationwide reconciliation process aiming at addressing longstanding grievances resulted in the May 2015 Bangui National Forum that defined the country’s peacebuilding priorities and the way forward for elections. The elections of February 2016 that resulted in the victory of President Faustin Archange Touadéra and members of the national assembly were described by the monitors as peaceful and credible elections. The successful elections mark the end of a three-year political transition. The international community has continued giving support to the country and political stability is gradually being restored. The Sangaris force and the 12,000-strong United Nations Multidimensional Integrated Stabilization Mission in the Central African Republic (MINUSCA) have facilitated the implementation of stabilization activities which have proved essential for the new government. The current state of relative stability and the progressive restoration of democratic institutions have created high hopes that the country will at long last break free from the cycle of fragility and crisis it has experienced since independence
The current population of the Central African Republic is 5million as of Tuesday, March 21, 2017, based on the latest United Nations estimates, compared to 4.9 million in 2015/16 according to World Bank report. By 2030 it is estimated the population will be 6.4 million. The country has a youthful population with the median age being 20.2 years. The country is sparsely populated with just 8 people per square kilometre (103/square mile). The population growth rate is estimated at 2% per year.
39.8 % of the population of Central African Republic live in urban areas i.e. (2,029,616 people in 2017). The urban population is increasing at the rate of 1.03 % per year.
Doing business in Central African Republic
The highlights of World Bank score of doing business in Central African Republic is summarised as follows;
|Topics||World Bank 2017 Rank||World Bank 2016 Rank||Change in Rank|
|Starting a Business||190||190||–|
|Dealing with Construction Permits||154||151||
|Protecting Minority Investors||145||145||–|
|Trading across Borders||138||136||
The score was affected by the internal conflicts that have just been resolved.
Central African Republic is not rated
Before the global financial crisis, the Central African Republic (CAR) had experienced a rise in investment projects in the mining sector. However, the crisis caused a major economic setback. In 2013, the civil war interrupted nearly all economic activity and drove away investors. As a result, FDI inflows have been almost non-existent. The country will likely struggle to attract foreign investors for the next decade. Moreover, certain external events have also hindered international investments in the country. Foreign direct investments are primarily in diamonds, gold, uranium, telecommunications and more recently in the hotel industry. According to statistics from the Ministry of Economy and Planning, the foreign direct investment percentages of GDP represented 10, 12.6 and 14.8 respectively in 2007, 2008 and 2009. FDI figures have not been released for the past few years.
The CAR has benefited from international aid, including an FCFA 4 billion grant from the European Union to rebuild administrative buildings destroyed during the conflict. Also, the IMF has provided a USD 11.8 million grant to help the Government address urgent needs, including resolving the balance of payments and implementing its economic stimulus plan. Finally, the CAR received an FCFA 39 billion from the Saudi Fund to rebuild and rehabilitate infrastructure.
There is no restriction on converting or transferring funds associated with an investment. The Investment Charter provides that the investment capital, earnings or loan payments are freely transferable. The Ministry of Finance must be notified of transfer processes, but to date have not interfered with any transfers. There has been no change in remittance policies and expatriates can transfer as much as they would like to bank accounts in the CAR.
The government handles investment disputes by taking dispute cases to court when attempts to reach a “gentlemen’s agreement” with involved investors fail. The constitution provides for an independent judiciary. The legal system in the Central African Republic is comprised of regular courts (civil, commercial, administrative, criminal and financial) and a military court. At the top of the judiciary is the Constitutional Court. The government has signed judicial treaties with France and most francophone countries. It has also ratified the treaty related to the African Organization for Harmonizing Business Law (Organization pour l’Harmonisation en Afrique des Droits des Affaires.)
Key development challenges
- Political instability
- High unemployment rates
- Lack of skilled manpower
- Weak governance, which affects the country’s development and ability to attract investments.
Central African Republic is the 159 least corrupt nation out of 176 countries, according to the 2016 Corruption Perceptions Index reported by Transparency International.
Central African Republic has had a peaceful political transition and with the support of the international community, stability is gradually being restored as such the country is now secure for business and normal work operations
Unemployment and skilled labour
There are shortfalls of skilled personnel in some technical fields. However untrained labor is readily available in most sectors. Labor-management relations are regulated by the labor Code. Depending on the economic sector, labor-management relations are regulated through specific agreements. The CAR adheres to the ILO convention protecting workers rights.
Attitude to Foreign Direct Investment
The Central African Investment Charter was created in 2001 to stimulate private sector development by attracting domestic and international private investment. The charter, common to the six member-states of the Central African Economic and Monetary Community or CEMAC (Cameroon, Central African Republic, Congo Brazzaville, Gabon, Equatorial Guinea and Chad) focuses on export-generating activities and is designed to open up the country to foreign investors, while still complying with the CEMAC treaty. The investment Charter provides a package of incentives to the investors. The Investment Charter is not applicable to the mining, forestry and tourism sectors, which have their own investment code, or to the usual trading activities that do not generate value added, such as retail. However, the charter gives the National Commission for Investments, located at the Ministry of Commerce and Industry, the responsibility of facilitating the bureaucratic process of establishing new businesses in CAR by working with and on behalf of potential investors.
Restrictions on Foreign investment
There are no restrictions that will negatively impact on foreign-owned investments in the Central African Republic. There are no circumstances where foreign investors have been denied equal treatment in the country. Foreign investors can acquire real estate in the country.
Intellectual Property (IP) Rights
There is a legal system that protects and facilitates acquisition and disposition of all property rights, such as land, buildings and mortgages. CAR became a member of the African Intellectual Property Organization on March 27, 1997.
In 1983, the government established an office in the Ministry of Commerce to deal with industrial and intellectual property rights. In principle, there are legal provisions protecting the authors’ rights, but implementation is still a challenge. The Bangui Agreement on Intellectual Property, signed by 17 African countries in February 1999, harmonizes all aspects of both intellectual and industrial property rights in the signatory nations. This agreement was reviewed by the Council of Ministers and ratified by the National Assembly of CAR in 2001. In 1990, the government established the National Office for the Protection of Copyrights (BUCADA). In principle, patents, trademarks, copyrights and related rights are monitored and protected by this entity.
Central Africa Republic’s major National parks include Andre Felix National Park, Bamingui-Bangoran National Park and Biosphere Reserve, Dzanga-Ndoki National Park, Manovo-Gounda St. Floris National Park and Mbaéré Bodingué National Park
The country’s unexploited natural resources include diamonds, gold, uranium, and other minerals. There may be petroleum deposits along the country’s northern border with Chad (Two billion barrels of oil are present in private estimates).
Information on Central African Republic has been summarised to include the following
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