financial services

Africa Banking Survey kpmg.co.za

This survey is slightly unusual, in that we decided not to simply reproduce a whole host of banking facts and figures, most of which are freely available off the internet. We decided, instead, to set out a number of important factors that one might require information on, if considering investment into Africa, particularly in the banking sector. Contributing countries had to answer a number of relatively simple questions, and the answers to these form the bulk of the content of the survey. It is very important to note that these replies are only ‘dipstick’ responses, providing cautionary guidance to the reader – it should be clear from every country’s response that detailed professional advice is required in almost every aspect of investment in any African country. This is true anywhere else in the world, but the array of responses in this survey should demonstrate to users that Africa is definitely ‘open for business’ and not as intimidating an investment destination as many may think. We strove to edit each country’s responses as little as possible. This provides, even if only slightly, a ‘flavour’ of each in terms of linguistic subtleties, applicable laws and culture. To add an objective measure of the investor-friendliness of each country we have, with grateful permission, added the 2011 “Ease of Doing Business” ranking compiled by the World Bank and International Finance Corporation. While not all African countries took part in this survey, we believe we have sufficient representation from the core areas of North, West, East, Central and Southern Africa. In future updates, we aim to attract greater participation and hence add greater value. Finally, for those who are interested, we have incorporated the summarised financial information of up to four important banks in each country. We hope you will find this survey a useful starting point for future investment into Africa!

KPMG May 2012

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World Bank Ease of Doing Business Ranking (2011): 183 countries surveyed Population GDP (nominal) USD Exchange rate (17/03/012) Currency

Definitions of Regulatory Approach 1. Institutional Approach A firm’s legal status determines how it operates and who regulates it (e.g. registered banks are regulated by a banking regulator, whereas registered insurers are regulated by an insurance regulator).

2. Functional Approach Regardless of a firm’s legal status, it is regulated by the type of business it conducts. This means that one legal entity could have several different regulators, depending on the type of business it conducts.

3. Single-regulator (integrated) Approach A single (universal) regulator oversees all financial services, both from a prudential and market conduct perspective.

4. Twin Peaks Approach There is a separation of regulatory functions, so that one regulator provides the prudential oversight, whilst another provides market conduct oversight.

5. Hybrid Approach A mixture of the above 4 approaches.

Responses Some countries elected not to answer all survey questions. Where further information is required, please contact the nominated in-country KPMG representative.

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Section 1 Regulatory 1.1 Briefly describe the regulatory regime in your country. For example, who is the principle regulator of the banking sector? What sort of framework is used (eg “Institutional” vs “Functional” vs “Single-Regulator (Integrated)” vs “Twin Peaks” vs “Hybrid” approach). For a description of these, please see Definitions overleaf. 1.2 Does the regulator follow international practice (eg Basel I, II and III), or some other practice? What is the status of implementation of the Basel Accords (if applicable)? 1.3 What is the broad structure of the supervisory body? How is it managed and controlled? In some countries, this would fall under the control of the country’s central bank. Is there a single person responsible for supervision? 1.4 What is the broad process for a banking licence application in your country? Is there any special protocol to be followed? How long would a typical licence approval take? Do non-bank entities in a banking group require regulatory approval? 1.5 What are the bank’s broad reporting requirements in respect of the regulator (eg monthly/quarterly/annual returns)? Are these standard/ automated/manual? 1.6 Please list the most important banking regulatory requirements (e.g capital, liquidity, credit, forex, etc) in your country. What are the regulatory consequences of non-compliance?

2.3 What are the annual mandatory costs associated with owning company (e.g. annual fee / licences, etc). Are external audits compulsory? 2.4 What are the restrictions, if any, on foreign investment and disinvestment in companies and projects in your country? 2.5 Are dividends capable of being remitted abroad? Are there any restrictive foreign currency regulations or laws? 2.6 Are intellectual property rights protected? Briefly describe your IP regime. 2.7 What is the current state of regulation regarding sustainability and the environment? 2.8 Are there restrictive anti-money laundering and similar laws and processes in your country? 2.9 What are the broad types of tax applicable to companies in your country? Please give indicative rates. Consider Value-added and similar taxes, as well as any state or local (non national taxes). 2.10 Are there different treatments for the taxation of branches as opposed to subsidiaries? 2.11 What are the broad tax rates for individuals? What is the process of collection of individual tax? 2.12 What is the broad process for the submission of returns, and how often is this required, including provisional returns?

Section 3

1.7 Is banking supervision conducted on a solo and/or a consolidated process?

People

1.8 Are any specific supervisory responses being considered or implemented in your country in response to the Global Financial Crisis?

3.1 Briefly summarise any skills availability / educational and training issues that your country may have, especially in the banking sector.

1.9 Is there a deposit insurance scheme in your country? If so, what are the key principles underlying the funding of this scheme, and what protection is offered?

3.2 What is your country’s attitude to the use of “ex pats” (i.e. foreign nationals) in the banking sector, and are there specific laws and restrictions applicable to such persons?

Section 2

3.3 At a high level, describe the principles embodied in the applicable labour legislation in your country.

Commercial, Legal and Tax Environment 2.1 At a high level, what is the process for establishing a new company and registering it? 2.2 At a high level, what is the process with regard to foreigners buying local companies?

3.4 Does your country have active/significant trade union presence? 3.5 Are there restrictions on the hiring and firing of employees? 3.6 To what extent is the use of contractors tolerated?

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3.7 Is membership of a retirement and /or medical aid fund compulsory? Briefly describe the requirements.

Section 4

5.8 What are the levels of crime and corruption? 5.9 What is the predominant language used in country? For business? Is English widely spoken and/or understood?

Banking Environment

5.10 Any other relevant information.

4.1 What are the major loan and deposit products offered in your country?

Section 6

4.2 Briefly describe the payments/clearing system and participants in your country. 4.3 Briefly describe the insolvency provisions relating to individuals and companies, and the process of liquidation. 4.4 Provide details of any restrictions on the taking and perfecting of security. 4.5 Provide broad details of the banking branch and IT infrastructure, including the use of distribution channels such as mobile phones, internet, agencies, etc. 4.6 List the relevant active exchanges in operation in your country (e.g. bond, securities, etc). 4.7 Provide a brief overview of the banking sector – approximate number and nature of players, competitive landscape, hindrances and opportunities.

Section 5 Physical Environment 5.1 What are the broad principles relating to property ownership (title, ability to buy, etc).

Governance and Reporting Issues Please provide a summary of your country’s status with regard to: 6.1 IFRS implementation 6.2 Basel II and III 6.3 FATCA (Foreign Account Tax Compliance Act) 6.4 Anti Money Laundering (AML) laws/regulations 6.5 Know Your Customer (KYC) laws/regulations 6.6 Annual financial reporting 6.7 Governance structures such as use of Audit Committees, Boards, etc and adherence to local or global standards 6.8 Prevalence of Government ownership and management 6.9 Use of external auditors 6.10 Any important local Regulatory developments or plans

5.2 Describe the general transport infrastructure, with reference also to the public transport network. 5.3 Describe the general communications infrastructure (telecoms, internet, etc). 5.4 Provide a brief overview of your country’s political environment. 5.5 Provide a brief overview of your country’s economic environment, including GDP and major economic contributors. 5.6 Provide a brief overview of your country’s social environment (access to housing, schooling, medicine, etc). 5.7 Who are your country’s major trading partners? © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

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morocco

mauritania

SÉNÉGAL

nigeria ghana

uganda KENYA

TANZANIA

zambia

zimbabwe

namibia botswana

SOUTH AFRICA

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BOTSWANA 6 GHANA 12 KENYA 16 MAURITANIA 24 MAURITIUS 28 MOROCCO 34 NAMIBIA 40 NIGERIA 46 SENEGAL 50 SOUTH AFRICA

56

TANZANIA 60 UGANDA 64 ZAMBIA 70 ZIMBABWE 76

MAURITIUS

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Section 1 Regulatory 1.1 Regulatory regime

bank is required to seek prior approval from the Central Bank before granting loans and other credit facilities to a single entity or group of related companies which, in aggregate, are in excess of 30% of a bank’s unimpaired capital.

The principle regulator is the Central Bank (Bank of Botswana). The framework used is Institutional.

1.7 Banking supervision

1.2 Basel Accord status

1.8 Global financial crisis response

The regulator has implemented Basel I and is currently implementing Basel II with a deadline of 31 December 2012.

1.3 Structure of supervisory body The Central Bank has responsibility for supervision through its Banking Supervision Department. In Botswana, the primary legislation covering the supervision and regulation of licensed financial institutions is the Banking Act.

1.4 Banking licence application The Central Bank, through the Banking Act, has the power to regulate market entry through the provisioning of licences. The Bank of Botswana has a set of documentation referred to as the ‘Application Package for a Banking License’. This should be furnished as part of the banking license application process.

1.5 Regulatory reporting requirements Reporting requirements include: • Monthly prudential returns, • Quarterly prudential returns, • Annual audited prudential return,

Supervision is conducted on a solo basis.

Other than the regulator holding discussions with financial institutions, and updates from those financial institutions, there has been no specific response.

1.9 Deposit insurance scheme There is no deposit insurance scheme in Botswana.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company The incorporation process has been simplified. To facilitate the incorporation of a company, a completed application form must be accompanied by the various stakeholder consents, and a notice of reservation of the company name. The Companies Act allows foreign companies incorporated outside Botswana to register and continue business as if they had been incorporated in Botswana under the Act.

2.2 Foreign investment in local companies

All returns are currently manual and done on standard forms, however a project is ongoing to have automated reporting.

There is no separate process for foreigners. The Competition Authority (“the Authority”) is responsible for the prevention of, and redress for, anti-competitive practices in the economy, and the removal of constraints on the free play of competition in the market.

1.6 Important banking regulatory requirements

2.3 Annual costs

Capital • Core capital to total unimpaired capital should be at least 50%.

The statutory fee for an annual return under the Companies Act is BWP 300 (USD 41). There are also trading license fees applicable, depending on the type of business activity of the company.

Liquidity

2.4 Restrictions on foreign investment

• The Banking Act stipulates that every bank must maintain in Botswana, on a daily basis, liquid assets as a percentage of its deposit liabilities currently equal to 10% and 3% for commercial banks and credit institutions, respectively.

The Minister may, from time to time, make regulations declaring any trade or business to be a reserved trade or business which will be issued only to citizens of Botswana or companies wholly owned by citizens of Botswana. A joint venture of medium business enterprise between a citizen and a non-citizen may be granted in a reserved trade or business, where the citizen has a minimum beneficial ownership of 51% of the joint venture. Apart from this there is no restriction on foreign investment. There are no restrictions on disinvestment.

• Senior management profiles for new appointments, • Annual directors’ profile.

• Capital adequacy ratio should be at least 15%.

Credit • The Banking Act restricts a bank from granting facilities that are in excess of 10% of a bank’s unimpaired capital to a single or group of related borrowers, without the specific approval of a bank’s entire board of directors. Further, a

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52 2 million (2010 estimate)

BWP 1 = USD 0.13636 BWP: Botswana Pula

$14 billion (2010 estimate)

Gerry Devlin T: +2673912400 E: [email protected]

2.5 Dividend remittance

2.11 Personal tax

There are no restrictions on the remittance of dividends. There are no restrictive foreign exchange regulations or laws.

Resident individuals are subjected to progressive rates ranging from 5% of the first Pula above BWP 36 000 per annum, and peaking at 25% on annual income in excess of BWP 144 000.

2.6 Intellectual property rights The Copyright and Neighbouring Rights Act was passed with the objective to revise and update the law governing copyright in order to encourage the development of creative artistic endeavours in the country. In Botswana patent protection is 20 years from the date of filing of the application. It gives its owner the exclusive right to prevent or stop others from making, using, offering for sale, selling or importing a product or a process, based on the patented invention, without the owner’s prior permission.

2.7 Sustainability and the environment There is currently no general regulation. With respect to the mining/extractive industries there is a requirement for the site to be rehabilitated to its original condition once the operation has ended.

2.8 Anti-money laundering The Financial Intelligence Agency is an autonomous body under the Ministry of Finance that acts as the central agency for requesting, receiving, analysing and disseminating information on financial disclosures relating to suspicious transactions. The Agency is only one of the many stakeholders whose responsibility is to combat financial crimes, in particular money laundering and the financing of terrorism. There are a number of comprehensive acts and legislation in place that seek to address anti-money laundering.

2.9 Tax regime Botswana levies inter alia the following taxes: • Corporate tax – resident company at 22% (15% for certain approved entities). • Corporate tax – non-resident company 30%. • Dividend withholding tax –7.5% (unless varied via a Double Tax Agreement). • Value Added Tax – standard rate 12%. • Various training levy

2.10 Branch taxation Branches are taxed at the corporate tax rate of 30%, and branches are entitled to repatriate after tax profits with no further costs. Subsidiaries are taxed at the corporate tax rate of 22%, and have a 7.5% withholding tax on repatriation of after tax profits as dividends.

Non-resident individuals are subjected to progressive rates commencing at 5% on the first Pula, and peaking at 25% of income in excess of BWP 144 000 per annum. Individuals are required to submit an annual return and are subject to PAYE (Pay-As-You-Earn) regulations.

2.12 Tax returns Companies are on a self-assessment system, where corporate tax returns are due within four months of the financial year end. Corporate tax is paid in quarterly instalments during the relevant financial year.

Section 3 People 3.1 Skills availability There is a general skills shortage, with a resulting high turnover in staff between banks, and especially if a new bank enters the market. There are, as a result, issues around service levels coupled with a generally low productivity.

3.2 Foreign nationals In general companies, including banks, are required to make a commitment to provide employment opportunities for suitably qualified citizens. It is recognised, however, that there may be a need to bring in expert skills from outside, because either the skills are not available in the local market, or not present in sufficient numbers to meet requirements. Any company with ex-pats needs to have a localisation plan lodged with the Ministry of Labour, detailing who is understudying them, and the timelines involved to localise the position.

3.3 Labour legislation There is an employment Act and it entails clauses that regulate the employee-employer relationship including leave, pension and conditions of employment. There is, however, no minimum wage prescribed in the bill.

3.4 Trade union presence The main Trade Unions in Botswana are the Federation of Trade Unions (BFTU) and The Botswana Public Employees Union.

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3.5 Hiring and firing of employees

4.3 Insolvency provisions

There are no prohibitive restrictions on the hiring and firing of employees, provided the processes set out in the labour law and regulations are followed.

The Insolvency Act is the primary legislation governing insolvency processes and procedures in general. The Companies Act includes provisions allowing for winding up by court and judicial management. The Master of the High Court has jurisdiction over these procedures. The Act also includes provisions for members’ voluntary winding up. Comprehensive provisions are included in the Act for removal of companies from the Register of Companies.

3.6 Contractors The use of contractors is tolerated.

3.7 Retirement and Medical Aid Severance pay, as set out in the Labour law, is compulsory, except where the employee is entitled to a contractual gratuity, or is a member of a recognised pension fund, in which case severance pay is not required. Medical fund membership is not mandatory but is generally encouraged by employers. Membership of a pension plan is currently not compulsory under local legislation.

Section 4 Banking Environment

4.4 The taking of security There are no restrictions in place.

4.5 Banking branch and IT infrastructure Within the Botswana bank network there are 94 branches, 12 service centres and 381 ATM’s. As part of improving service delivery, more banks introduced cell-phone/electronic/ internet banking, electronic bank statements, services for utility bill payments, as well as accounts geared towards encouraging savings, by offering competitive interest rates.

4.6 Active exchanges 4.1 Major loan and deposit products Loan Products Personal loans, export/import invoice financing (invoice discounting), auto loans, equipment loans, overdraft, term loan, mortgages, letter of guarantee, letter of credit, short term loans (secured by share deposits) and building society loans. Deposits Current accounts, call accounts, savings, time deposits and foreign currency accounts.

4.2 Payments/clearing system There is a programme in place for the modernisation and reform of the national payments system, including the integration of cross border payments in line with the SADC payments framework and plans. In accordance with the programme, a risk-based oversight framework for on-site inspections was used for the first time in 2010 on the two Systemically Important Payment Systems (SIPS), comprising the Real Time Gross Settlement System [also known as Botswana Inter-bank Settlement System (BISS)] and the Electronic Clearing House (ECH).The Central Bank has inspected these which confirmed the robustness, safety and efficiency of the two components of the SIPS. In addition, the Society for Worldwide Inter-bank Financial Telecommunication (SWIFT), which is a messaging platform for both BISS and cross-border foreign exchange transactions, has been stable in terms of its operations and efficacy for some time now.

The Botswana Stock Exchange is the main exchange.

4.7 Banking sector overview There have been no new entrants in the last two years. However, existing banks continue to increase their footprints in various parts of the country, through expansion of branch networks and additional Automated Teller Machines (ATMs). With the aid of technology, some banks bolstered their competitive advantage through the introduction of new products which included, inter alia, cell phone/internet banking, short messaging services (“sms”) alerts and services aimed at providing banking services to the unbanked sections of the population. The market place itself is one of excessive liquidity, which is channelled through the banks into Bank of Botswana Certificates. The secondary market is not that active, despite encouragement from the Central Bank.

Section 5 Physical Environment 5.1 Property ownership Property can be either leasehold or freehold. Sectional title is also permissible. Property may be purchased without restrictions.

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5.2 Transport infrastructure

5.8 Crime and corruption

Botswana has and continues to invest heavily in its infrastructure. Botswana is freely accessible by air, road and rail. Botswana has five international airports, one of these in Gaborone is able to accommodate long haul flights. Botswana has over 24 000 kilometres of roads and tracks, half of which consist of well-maintained bitumen and gravel roads.

Petty and violent crime is increasing, particularly in the major towns of Gaborone, Francistown and Maun. House burglaries are also increasing. However in the overall context of Africa and the region, crime can be considered to be a low threat. Compared with most African countries, corruption is not a major problem, with high levels of honesty prevalent in most transactions, in both the public and private sectors.

5.3 Communications infrastructure Telecommunications in Botswana consists of a digital exchange telephone system and a microwave ring around the country. Botswana Telecommunications Corporation (BTC), a stateowned enterprise, is the sole provider of fixed network services with two private entities offering mobile phone services. Mobile penetration is estimated at over 70% in Botswana. Internet service is slow due to low carrying capacity of the domestic cable bandwidth. The Government has allocated BWP 50 million to upgrade the local bandwidth which will improve internet speed.

5.4 Political environment The politics of Botswana take place in a framework of a representative democratic republic, whereby the President of Botswana is both head of state and head of government, and of a multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and the Parliament of Botswana. The most recent election, its tenth, was held in 2009.

5.5 Economic overview Botswana has one of the fastest growing economies in the world. The source of this growth has been the country’s rich mineral endowments. Botswana has a high level of economic freedom when compared to other African countries. Botswana holds mineral resources in the form of diamonds. Recently significant quantities of uranium were discovered. GDP is estimated at USD 14 billion in 2010.

5.9 Language English is widely used both spoken and written – mainly in the business circles. Setswana is also widely used both spoken and written.

Section 6 Governance and reporting Issues 6.1 IFRS implementation The Companies Act and the Regulators require compliance with International Financial Reporting Standards (“IFRS”) IFRS.

6.2 Basel II and III Basel II is to be implemented in 2012. No plans have been officially announced in respect of Basel III.

6.3 FATCA There is no evidence of FATCA implementation in Botswana to date.

6.4 Anti Money Laundering (AML) laws/regulations The banking act requires that banks are obliged under this Act to keep financial records that exhibit their financial status and transactions clearly and accurately. The act also imposes a requirement on banks to notify the Central Bank of any suspicious transactions relating to money laundering.

5.6 Social environment

6.5 Know Your Customer (KYC) laws/regulations

Comprehensive healthcare services are available to 90% of the total population of Botswana. The Government of Botswana is currently focusing on the development of primary health care, specifically in the rural areas of the country. Students are guaranteed ten years of basic education. Approximately half of the school population attends a further two years of secondary schooling. Secondary education in Botswana is neither free nor compulsory.

The banking act requires that due diligence and reasonableness must be adhered to when dealing with customer identification, thereby enforcing the ‘know your customer’ principle.

5.7 Trading partners

King III is in the process of being adopted. King II is currently followed as best practice.

South Africa is Botswana’s biggest trading partner. Outside of the Southern African Development Community (SADC), other trading partners include the US, China and UK.

6.6 Annual financial reporting Annual financial reporting is required for all companies.

6.7 Governance structures

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6.8 Government ownership and management The Botswana government has widespread ownership in Botswana companies. This would apply to parastatal organisations, including all the utility service providers [power, water, telecoms], the cattle industry [Botswana Meat Commission], investment [Botswana Development Corporation, Debt Participation Fund Company Limited,] banking [National Development Bank, Botswana Building Society, Botswana Savings Bank] Postal Services and mining, where the government can take a minority stake in the extraction company that holds the mineral licence.

6.9 External auditors Any company that is either a non-exempt private company or a public company requires an audit. In addition, any company that has a company amongst its shareholders requires an audit. It is important to note that the Central Bank requires all institutions regulated by it to have external auditors.

6.10 Local regulatory developments or plans The Budget speech for 2012 announced that: • Review of the Insurance Industry Bill and the Retirement Funds Bill is underway. • Tax and banking laws are currently being reviewed in line with international standards on transparency and exchange of information for tax purposes. • New Immigration Act to substantially reduce time for processing work and residence permits. • The Non-bank Financial Institutions Regulatory Authority and MFDP are reviewing several pieces of legislation to protect customers and ensure stable environment.

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

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Section 1 Regulatory 1.1 Regulatory Regime The Bank of Ghana has an overall supervisory and regulatory authority in all matters relating to banking business. The regulatory regime in Ghana uses the Institutional approach.

1.2 Basel Accord status The Bank of Ghana is at the final stage of preparation to implement Basel II, scheduled for introduction June 2012.

1.3 Structure of supervisory body Bank of Ghana, the Central Bank, has a designated department (Banking Supervision Department) responsible for banking supervision.

1.4 Banking licence application An application for a licence is made in writing to the Bank of Ghana and accompanied with various prescribed documents. The Bank of Ghana may interview the promoter, directors and proposed senior management personnel in the course of an appraisal, and may also inspect their books and records to satisfy itself about the representations made or information furnished by the applicant. The decision on application is generally communicated within three months from the date of the application. However, a provisional licence may be issued to the applicant on terms and conditions that the Central Bank considers appropriate. Non-bank financial institutions require licensing and approval, and are also supervised and regulated by the Central Bank.

1.5 Regulatory reporting requirements Financial institutions are required to submit various prudential reports on a weekly, monthly, quarterly, bi-annually and annually, to the Banking Supervision Department of the Bank of Ghana. The reporting process is not automated.

1.6 Important banking regulatory requirements There are a number of important regulatory requirements: Capital Adequacy Ratio (“CAR”) • Minimum capital adequacy ratio is 10% measured as a percentage of adjusted capital base of the bank to its adjusted asset base, in accordance with Regulations of the Bank of Ghana. Liquidity • There are prescribed requirements for holding liquid assets of a specific amount and composition, of which the amount is either a percentage of all the bank’s deposit liabilities, or in any other manner, and different percentages for different

classes of deposits or assets, as the Bank of Ghana may determine in any particular case. Consequences for non-compliance include, but are not limited to, payment of penalties to the Bank of Ghana, and a prohibition on granting loans or credits, or making investments, or accepting deposits.

1.7 Banking supervision Banking supervision in Ghana is performed on a solo basis.

1.8 Global financial crisis response There was no specific response to the global financial crisis.

1.9 Deposit insurance scheme Presently there is no deposit insurance scheme in Ghana. However, banks are required to have mandatory reserves with the Central Bank at a minimum percentage of 9% of deposits.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company Potential investors must first register with the Registrar General Office. The minimum number of shareholders is one, with at least two directors. One of the directors has to be present in Ghana at all times. Investors must register with the Bank of Ghana (if it is a financial institution), and register with the Ghana Investment Promotion Council (“GIPC”). Upon submission of all required documents, the process can take an average of three to four weeks.

2.2 Foreign investment in local companies There is currently no specific process for foreigners buying local companies. There are no restrictions with regard to acquiring any company. However, there are restrictions for acquisition of listed companies/purchase of listed shares as a foreigner.

2.3 Annual costs Generally, there are no specific costs, annual fees or licences for owning a company in Ghana. There is a requirement for an external audit, for the review of the financial statements that would be used for filing the company’s annual tax returns. Annual filing fees carry a cost, dependent on the legal status of the entity.

2.4 Restrictions on foreign investment The minimum requirement for wholly owned foreign investment is USD 50 000. The minimum requirement for foreigners to enter the retail sector is USD 300 000. There is a proposal to increase this amount to USD 1 million.

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67 24.2 million (2010 estimate)

GHC 1 = USD 0.00006 GHC: Ghanaian Cedi

$45.1 billion (2010 estimate)

2.5 Dividend remittance Dividends can be remitted abroad upon payment of the appropriate tax (withholding) of 8%, and obtaining the appropriate tax clearance from the Ghana Revenue Authority (“GRA”).

2.6 Intellectual property rights Intellectual property rights are protected. The Trade Mark Act governs intellectual property rights.

2.7 Sustainability and the environment Such regulations are not widely known. However an environmental impact assessment certified by Environmental Protection Agency (“EPA”) is required by entities whose activities affect the environment, either directly or indirectly.

Nathaniel Harlley T: +233302770454 E: [email protected]

Section 3 People 3.1 Skills availability There are highly educated people in the job market and there are also many professional bodies active in the fields of banking, accountancy, marketing and management, whose members are largely employed in the banking sector. In addition, the banks continuously assess staff training needs, and provide appropriate training on a regular basis.

3.2 Foreign nationals

There are anti-money laundering laws in Ghana. These are largely contained in the Anti-Money Laundering Act.

Generally the attitude towards “ex pats” is receptive. However the preference is to have local content for positions, where available. There is a quota system for expatriate employment ranging from one to four, depending on the level of equity investment. There are also provisions for short- term expatriate employment, which can be purchased for USD 2 500 for a one year non-renewable quota.

2.9 Tax regime

3.3 Labour legislation

Ghana has a number of applicable taxes including:

The purpose of the Labour Act of 2003 is to codify the rights and responsibilities of the employee and the employer (protection of employment), general conditions of employment, rules relating to the employment of young people, fair and unfair termination of employment, protection of remuneration, special provisions relating to temporary and casual workers, employment of women, trade unions and employers’ organisations, rules and modes of collective agreement, rules on forced labour, occupational health and safety, rules relating to labour inspections and codification of instances of unfair labour practices.

There is a requirement to rehabilitate the land after degrading it.

2.8 Anti-money laundering

• Corporate income taxes (25%). • Value Added Tax (15%). • Import duties and taxes. • Property taxes and business taxes (municipal level).

2.10 Branch taxation Generally, the tax treatments for branches and subsidiaries are the same. However, subsidiaries are charged an 8% tax on dividends, and branches are charged 10% on repatriated profits. Both branch and subsidiaries are taxed at the corporate tax rate of 25%.

2.11 Tax rates Individual income tax is graduated, with 25% being the highest tax rate. Employers are required to withhold the appropriate tax liabilities, and pay these to the Ghana Revenue Authority (“GRA”).

2.12 Tax returns Entities are required to file an annual income tax return not later than four months after the accounting year end. Generally, the GRA issues the provisional assessment (provisional returns) on an annual basis. Other taxpayers are allowed “self assessment”, by issuing their own tax projections to the GRA at the beginning of the tax year. This forms the basis for the quarterly tax payments.

3.4 Trade union presence There is significant trade union presence in the public sector, production, manufacturing and the financial sectors. Within the private sector, entrepreneurial and small to medium scale businesses are largely non-unionised.

3.5 Hiring and Firing of employees There are no particular restrictions on the hiring of employees, as long as the process conforms to the non-discrimination clauses itemised in the labour law. For the process of termination, the Labour Act states the grounds for lawful termination.

3.6 Contractors Where “Contractors” refers to the use of casual or temporary workers, the Labour Act provides rules for the on-boarding and remuneration of casual and temporary workers. A temporary worker employed by the same employer continuously for more than six months, is treated as a permanent worker.

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Where the term “Contractor” refers to the provision of auxiliary services to the business by external agencies, there are no particular restrictions.

3.7 Retirement and Medical Aid There is a national compulsory retirement fund (SSNIT) which requires monthly statutory contributions by the employer (13%) and the employee (5.5%) of the employee’s gross salary. There is no legislative requirement for membership of any kind of medical fund. There is, however, a state-run health insurance scheme (National Health Insurance Scheme) to facilitate easy access to medical aid. It is a general practice for employers to provide a medical fund for employees, in the form of a refund of medical bills paid, designated hospital expenses and medical insurance. Membership of a retirement fund is compulsory.

Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Term loans, mortgage loans, staff loans, overdrafts, leases, and hire purchase. Deposit products Current accounts, time/fixed deposits, savings accounts and cash collateral.

4.2 Payments/clearing system The Ghana Interbank Settlement System is the system in place for cheque clearing. Participants are generally the financial institutions, and all cheques are cleared through the Automatic Clearing House (“ACH”). Cheques generally take two business days to clear through the ACH system.

4.3 Insolvency provisions Insolvency provisions are contained in the Companies’ Code of Ghana and do not apply to individuals. Insolvent companies are required to give notice to the Registrar, together with a statement of the company’s financial position. The Registrar will register both the notice and the statement, and cause a copy of the notice to be published in the Gazette.

4.4 The taking of Security Generally, there are no restrictions in the taking and perfecting of security. However, procedures for taking and enforcing security are protracted, legally complex, costly, and unpredictable. There also exists a high degree of information asymmetry, which leads to imprudent lending decisions. This is caused by the limitations in data captured by the credit registry.

4.5 Banking branch and IT infrastructure Banks are widely networked with branches, and most banks provide internet banking services to customers. Also, the use of mobile banking has increased steadily.

4.6 Active exchanges The Ghana Stock Exchange. Instruments traded are mainly shares/stocks of listed companies.

4.7 Banking sector overview Ghana’s financial system is dominated by foreign-owned banks. Commercial banks account for 75% of the total assets of the financial system. Of the 26 commercial banks operating in Ghana, 13 are subsidiaries of foreign banks and their market share is estimated at 51% of bank assets. A significant proportion of the population is unbanked and this offers the banks the opportunity for growth.

Section 5 Physical Environment 5.1 Property ownership Land in Ghana can, and in many cases does, belong to local communities, which are represented by their chiefs and kings. The constitution provides for both public land (i.e. land owned by the state) and private land (i.e. land owned by clans, families or individuals). Land cannot be legally acquired as freehold but only as leasehold. Ghana’s constitution provides that non-Ghanaians are allowed to lease residential, commercial, industrial and agricultural land for up to 50 years. The property market is quite open and flexible. Administrative procedures for property ownership/title and its registration are known to be bureaucratic and time consuming.

5.2 Transport infrastructure Ghana offers transport by road, rail, air and water. Ghana’s transportation and communications networks are centred in the southern regions, especially the areas in which gold, cocoa, and timber are produced. The northern and central areas do offer a major road system, however some of these northern areas remain isolated. Infrastructure and services has been identified as one of government’s priority areas to be developed under its mediumterm plan.

5.3 Communications infrastructure Information and Communication Technologies (“ICT”) infrastructural development in Ghana is progressing comparably to other low-income countries, but above the 1.1% average for Sub- Saharan Africa.

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Over the years, several initiatives have been made by the Government of Ghana and other agencies to develop the ICTinfrastructure, so as to bridge the digital divide between Ghana and the developed world. Prominent among these initiatives is the development of a national fibre optic network by the nation’s electricity provider. Generally, communication infrastructure is fairly good, with easy access to mobile telephony and internet modem services. However, internet speed and connectivity can be challenging. There are six private companies operating mobile phone systems. There are also several internet and e-mail providers. Broadband internet access is offered by an increasing number of providers.

5.4 Political environment The political environment has been stable for the past 20 years. There are two major political parties with a pocket of other smaller parties in the political landscape. Ghana is a maturing democracy. In December 2008, Ghana successfully held its latest round of general elections.

Section 6 Governance and reporting Issues 6.1 IFRS implementation All listed and financial institutions are required to report their financial results in accordance with International Financial Reporting Standards (“IFRS”). However, most SME’s have not yet completely adopted IFRS.

6.2 Basel II and III Basel II is scheduled to be introduced in June 2012.

6.3 FATCA Ghana has not yet implemented FATCA.

6.4 Anti Money Laundering (AML) laws/regulations Ghana has put in place most of the basic elements for a comprehensive AML/CFT framework, but it is not yet compliant with most core and key FATF recommendations.

5.5 Economic overview

6.5 Know Your Customer (KYC) laws/regulations

Ghana is rich in natural resources. Ghana is one of the world’s top gold producers. Other exports such as cocoa, crude oil, natural gas, timber, electricity, diamond, bauxite and manganese are major sources of income.

Ghana has implemented a fully comprehensive system of “know your customer” policies.

5.6 Social environment Education, housing and medicine in Ghana are fairly accessible, but this varies greatly in different parts of the country. Basic education is free, but access to higher level education is becoming challenging, due to unavailability and overstretched facilities. There is a significant shortage of housing in the major cities, and access to certain medicine can be costly.

5.7 Trading partners Ghana’s major trading partners are the Netherlands, UK, France, US, Germany, Belgium, Nigeria and China.

5.8 Crime and corruption The level of crime is minimal, whilst the level of corruption is considered to be high in the public sector, based on public perception.

5.9 Language The official language is English, which is also the medium for education and business. However, most Ghanaians also speak at least one local language.

6.6 Annual financial reporting All registered companies are required to file their accounts with the Registrar General Department on an annual basis.

6.7 Governance structures Governance structures are in place, and largely common among listed companies and financial institutions.

6.8 Government ownership and management The state has a controlling interest in five commercial banks, through direct and indirect shareholding by the government, which accounts for 29% of banking system assets.

6.9 External auditors External audit is mandatory for all registered companies. Companies are required to appoint an auditor at the time of registration.

6.10 Local regulatory developments or plans There are various projects being carried by the Central Bank in partnership with international bodies such as the IMF. A typical project is the Financial System Stability Assessment Update prepared by staff team of the International Monetary Fund.

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Section 1 Regulatory 1.1 Regulatory Regime Kenya predominantly uses an institutional regulatory framework. The banking sector is regulated by the Central Bank of Kenya (“CBK”), which was established through an Act of parliament in 1966 to licence, regulate and supervise banking operations. In addition, listed banks are also regulated by the Capital Markets Authority (“CMA”).

1.2 Basel Accord status The CBK regulation is undertaken through the implementation of policies and standards that are in line with international best practice for bank supervision and regulation. The CBK is in the process of formulating a policy position on Basel II implementation in Kenya.

1.3 Structure of supervisory body The Board of Directors of the CBK are charged with responsibility of policy formulation. The board consists of eight members who are appointed by the President. The executive management team comprises the Governor, the Deputy Governor and fifteen heads of department who report to the Governor. Supervision of the Kenya banking sector is undertaken by the Central Bank Supervision Department (“BSD”). This department is headed by a director who reports to the Deputy Governor of the CBK, who then reports to the Governor and finally to the Board of Directors. The BSD director is supported by three assistant directors, portfolio managers, surveillance teams, and policy, legal and administrative teams.

1.4 Banking licence application The process of applying for a licence is summarized below: • The institution is required to seek approval for the use of the name ‘’bank’’ or “finance” from CBK. • Once CBK has approved the name, application must be made to the Registrar of Companies for incorporation of the proposed bank, mortgage finance company or non-bank financial institution as a limited liability company. • Upon incorporation of the limited liability company an application, accompanied by supporting documentation, is made for a banking, mortgage finance company or non-bank finance institution license. • Upon meeting all the requirements, the Central Bank will grant a written approval (approval in principle) to conduct the business of a bank, mortgage finance company or non-bank financial institution, as the case may be. • When the premises are ready, an invitation is made to CBK to conduct an inspection. • If the inspection is satisfactory, the Central Bank places a notice in the Kenya Gazette to formally specify the institution.

• A license is then issued and the institution can open its doors to customers. Licence renewal applications should be made within three months immediately preceding the expiry of the licence.

1.5 Regulatory reporting requirements Licensed and operating institutions in Kenya are required to publish in a national newspaper, a copy of the audited financial statement of financial position and income statement covering its activities and any other information prescribed by Central Bank of Kenya, within three months of the end of every financial year. A copy of un-audited financial statements should be published in a daily national newspaper, in the format prescribed by the CBK. Un-audited financial statements shall be published at quarterly intervals. In addition commercial banks make the following returns to CBK: • On a monthly basis, banks report the size of their risk weighted assets while other loans & advances and larger exposures/ largest borrowers are submitted on quarterly intervals. The reports are prepared on standard manual forms. • Foreign currency exposures returns must be submitted on a weekly basis. • In addition, there is a collection of banking data on a monthly basis for the Research Department. These include data on the maturity structures of both local and foreign currency deposits, a sectoral analysis of loans and advances, an analysis of both the size distribution and the maturity of new loan approvals, and details on both the volume and prices of money market operations. • Returns on liquidity and foreign exposure are also required weekly, and CBK has capped the exposures on banks to protect depositors and other stakeholders. • The Banking Act requires banks to pay a “return” (profits) on all savings accounts kept or operated in accordance with Islamic Law. This amendment applies to institutions offering Islamic banking products which do not permit payment of interest. All institutions offering Islamic savings products should provide for a return on these accounts.

1.6 Important banking regulatory requirements Banks in Kenya are required to maintain core capital of KES 250 million (USD 2.9 million). The CBK may pursue any or all corrective actions as provided below for institutions failing to comply. • The core capital of an institution shall at all times be not less than 8% of its total deposit liabilities. • The core capital of an institution shall at all times be not less than 8% of its total Risk Weighted Assets(“RWA”) • The total capital of an institution shall at all times be not less than 12% of its RWA.

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98 41.1 million (2011 estimate)

KES 1 = USD 0.0119 KES: Kenyan shilling

$35.8 billion (2011 estimate)

• The capital adequacy ratio should be maintained at a regulatory minimum of 10%. • Statutory prescribed minimum liquidity requirement is 20% of deposit liabilities, matured and short term liabilities. An institution that fails to comply is required to report its inability, in writing, to the CBK, Bank Supervision Department, stating reasons for such failure and/or inability, and measures being taken to rectify the situation. • The overall foreign exchange risk exposure, as measured using spot mid-rates and shorthand method, shall not exceed 20% of the institution’s core capital. • The cash reserve ratio held with CBK should be maintained at a minimum of 5.25% currently, or as CBK may prescribe from time to time. • The regulatory consequences of non compliance include CBK requirement for corrective board resolutions, acceptance of a commitment letter outlining corrective actions, issuance of a Memorandum of Understanding enforceable through legal action, Issuance of Directives such as direction, advice or appointment of a person, removal of officers and denial of corporate approvals, CBK intervention in Management, removal of Directors and levying of penalties, revocation of Banking Licence, increased contributions to the deposit protection fund of the institution, and termination of Deposit Protection.

1.7 Banking supervision Banking supervision is conducted by the Bank Supervision Department (BSD) of the CBK through on-site and off-site surveillance based on predetermined inspection programmes and ratings criteria that takes into account the bank’s Capital, Assets, Management, Earnings and Liquidity (CAMEL).

Eric Aholi T: +254202806000 E: [email protected]

addition to submitting their audited financial statements under Section 23(1), also submit global financial statements. The global financial statements (audited balance sheet and profit and loss account) should incorporate the foreign subsidiaries and branches.

1.9 Deposit insurance scheme The Deposit Protection Fund Board (“DPFB”) is a significant player in the financial sector. Every institution licensed under the CBK Act as a deposit taking institution, contributes the higher of KES 100 000 (USD 1 190) or 0.4% of the average of the institution’s total deposit liabilities during the preceding 12 months period. It pays up to KES 100, 000 per account.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company Broadly the process is: • Submit the proposed name to CBK for approval. • Register the proposed company name with the Registrar of Companies at the Attorney General’s Chambers. • File the Memorandum and Articles of Association with the Registrar of Companies who, upon satisfaction, will issue the Certificate of Incorporation. • Apply in writing to CBK for an operating license. • On satisfaction, CBK will issue a letter to allow commencement of operations, with a copy to the Treasury.

Frequency of inspection is determined by the risk assessment of the institution and conducted at least once every year. CBK adopts a Risk Based Supervision (RBS) Model, where high riskrated institutions are inspected more frequently.

• A license of an institution shall be considered to have lapsed if the institution fails to commence operations within one year of the Minister’s approval.

1.8 Global financial crisis response

Minimum Kenyan co-ownership in banks, insurance companies and telecommunications companies is mandatory, while at least 25% of the shares of companies listed on the Nairobi Securities Exchange must be held by Kenyans.

In response to the global financial crisis, Kenya set up a task force comprised of officials of the ministry of finance and planning as well as the CBK to look into ways of cushioning Kenya’s economy from the negative effects of the crisis. The specific responses included lower interest rates by CBK, lowering the cash ratio and the Central Bank Rate, expanded expenditures e.g. acquisition of shares by the government or its agencies, to shore the stock market and lower the remittance costs. Going forward, the CBK is undertaking steps to enhance regulatory and supervisory oversight of the banking system, to introduce required legislation to support and enhance Deposit Protection Insurance and to increase the level of financial inclusion. All institutions, incorporated both in and outside Kenya, that maintain subsidiaries or branches outside Kenya should, in

2.2 Foreign investment in local companies

2.3 Annual costs External audits are mandatory for all banks in Kenya. The following are payable to the CBK: • Granting of a license to an institution and each anniversary thereof of KES 400 000 (USD 4 760). • Additionally, in respect of each branch of an institution within a municipality, an amount of KES 150 000 (USD 1 785). • Additionally, in respect of each branch of an institution within a town council area, an amount of KES 100 000 (USD 1 190). • Additionally, in respect of each branch of an urban council area, an amount of KES 30 000 (USD 357).

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• On application for a license to conduct business or open a branch as an institution, an amount of KES 5 000 (USD 60).

2.4 Restrictions on foreign investment Whilst there are no blanket restrictions on doing business in Kenya, foreign investments in the telecommunication, banking and insurance sectors are subject to specific requirements on the percentage of ownership. Further, at least 25% of the shares of companies listed on the Nairobi Securities Exchange should be held by Kenyans. Foreigners can be directors of companies.

2.5 Dividend remittance No restrictions in place. 100% repatriation of profits is allowed.

2.6 Intellectual property rights

of 10% on dividend payment. Head office expenses are not allowable for tax purposes, and head office payments are not subject to withholding taxes. In cases of local companies with a branch outside of Kenya, the branch’s profits are amalgamated for purposes of corporation tax calculation but the company may get a tax credit, depending on the country in which the branch operates.

2.11 Tax rates Individuals have two applicable taxes, namely withholding tax on professional services levied at 10%, and Pay as You Earn (“PAYE”). PAYE is levied against the individual according to their income level. The applicable rate starts at 10% and increases up to 30% for all income earners earning in excess of KES 466 704 (USD 5 554).

The Intellectual property rights protection is governed by the Industrial Property Act. The Act provides for the promotion of inventive and innovative activities, facilitates the acquisition of technology through the grant and regulation of patents, utility models, technovations and industrial designs.

Employees who are tax resident in Kenya are entitled to a personal relief of KES 13 944 per annum against their tax liability

2.7 Sustainability and the environment

The employer should pay the tax via its bankers to the Paymaster General by the 9th day of the month following the month to which the income relates.

The Environmental Management and Coordination Act (“EMCA”), provides a framework of environmental legislation that establishes appropriate legal and institutional mechanisms for the management of the environment. It provides for improved legal and administrative co-ordination of the diverse sectoral initiatives, in order to improve the national capacity for the management of the environment. The National Environment Management Authority (“NEMA”) is charged with the implementation of the Act.

2.8 Anti-money laundering Kenya has in place Anti-money laundering laws and regulations; the Proceeds of Crime and Anti-Money Laundering (“AML”) Act, became operational in June 2010. The Act stipulates the obligations for financial players, amongst other reporting entities, to ensure that the financial system is not used as a conduit for money laundering, drug trafficking and other related illicit activities.

2.9 Tax regime The key types of tax applicable include Corporation Tax, Withholding Tax, Value Added Tax (VAT) and Stamp Duty. Corporation tax is charged at 30% while withholding tax is charged at various rates depending on the type of income: 15% on offshore interest payment, 10% on dividends and 10% and 20% on local and foreign professional services respectively. Value added Tax is charged at a standard rate of 16%.

2.10 Branch taxation Branches of foreign companies are charged corporation tax at a rate of 37.5%. The branch profits are not subject to the WHT

The tax on emoluments earned by an employee is payable on a monthly basis by the employer, through the PAYE system.

In addition to the monthly PAYE returns, the local company will need to file annual PAYE returns by the 28th of February following the end of each calendar year.

2.12 Tax returns The income tax returns are prepared on a self assessment basis, where the taxpayer assesses its tax liability and submits a tax return based on the assessment. The tax return is to be submitted to the revenue authority on or before the last day of the 6th month following the year end. Each company should file the SAR with the tax authorities within six months following the end of the accounting period for the taxpayer. For incorporated persons, the year of income for purposes of corporation tax is usually taken to coincide with the financial year end; the financial year end for all banks in Kenya is 31 December.

Section 3 People 3.1 Skills availability Kenya has a highly skilled workforce, and the banking sector is able to secure banking staff with relevant training, including university training and finance-related professional certification. Additionally, Kenya has returning citizens with international professional experience to add to an already diverse talent pool.

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3.2 Foreign nationals While there are no blanket restrictions regarding hiring of expats, one would need to demonstrate that the right skills cannot be obtained locally. This stems from a ministerial policy to prevent companies from giving foreigners work which Kenyans can do. Foreigners, who want to own, or run a business in Kenya, need to have a work permit from the Ministry of Immigration. There are generally two types of permits that foreigners would apply for: a Class H permit or a Class A permit. The type of permit applied for depends on whether the foreigner will be an owner of the business or simply an employee.

3.3 Labour legislation Employment is governed by the general law of contract, as much as by the principles of common law. Parliament has passed laws specifically dealing with different aspects of the employer-employee relationship. These laws define the terms and conditions of employment, and consist mainly of four Acts of Parliament namely Employment Act, the Regulation of Wages and Conditions of Employment Act, Factories Act, Workmen’s and Compensation Act. Employment contracts may be for fixed or unlimited periods of time; in general, temporary and fixed-term employed workers enjoy all the rights of an employee working on permanent terms, except those that are excluded explicitly, or by the nature of a short term assignment.

3.4 Trade union presence Kenya does have a significant Trade union presence. The formation, structure and organization of trade unions in Kenya are clearly provided for in various national instruments, namely, Trade Unions Act, Trade Disputes Act and the Industrial Relations Charter. The bank workers union in Kenya is called the Bankers Insurance Finance Union (“BIFU”).

3.5 Hiring and Firing of employees Hiring and firing is required to be based on the terms and conditions set out in the Collective Bargaining Agreement for all unionisable/staff employees. Further, each employee’s contract provides for the process to be followed in case of resignation or termination of contract, and the appropriate compensation/payment.

The compulsory medical fund is the National Hospital Insurance Fund (“NHIF”) to which employees contributes KES 320 (USD 3.80) monthly. There are proposals to increase the contributions to the medical fund on a graduated scale.

Section 4 Banking Environment 4.1 Major loan and deposit products The loan products offered are mainly categorized as personal loans and institutional (corporate) loans. Personal loans include unsecured loans, secured loans and overdrafts, motor loans, mortgages, home loans, premium financing, and salary advances, while institutional loans include working capital loans, commercial motor loans, invoice discounting, contract financing and overdrafts. Deposit products offered include call deposits, savings accounts, current accounts, fixed deposit accounts, student accounts, investment accounts and salary accounts.

4.2 Payments/clearing system Kenya Real Time Gross Settlement System (“RTGS”) is called Kenya Electronic Payment and Settlement System (“KEPSS”), which transfers funds between banks in Kenya on a gross basis in real time. The transactions are settled individually, continuously and in real time in the accounts of the participants in the central bank, provided that the sending participant has sufficient covering balances or credit (settlement limit). The money transfer takes place in the books of CBK, hence the payment is taken as final and irrevocable. Participation to the KEPSS is open to a bank or financial institution or any participant, provided they meet all the eligibility criteria and conditions provided by KEPSS. For the purpose of the routing of payments in KEPSS, participants are required to have a single SWIFT Bank Identifier Code (“BIC”) on which all KEPSS payments are routed to. The National Payment System (“NPS”) oversight section is responsible for promoting the objectives of safety and efficiency of payment systems, monitoring existing and planned systems, assessing them against these objectives and, where necessary, inducing change.

Increasingly, contract employment is gaining prominence in the country.

CBK is a user of payment systems, facilitator of settlement, provider of payment systems, supervisor, and provider of liquidity, as well as being the overseer of the payment system. Recent developments in the national payment system include implementation of RTGS and cheque truncation.

3.7 Retirement and Medical Aid

4.3 Insolvency provisions

There is a compulsory social security scheme (National Social Security Fund) to which employees and employers each contribute KES 200 (USD 2.40) monthly.

• it is deemed to be unable to pay its debts within the meaning of section 220 of the Companies Act; or

3.6 Contractors

An institution shall become insolvent if:-

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• a winding-up order is made against, or a resolution for creditors’ voluntary winding-up is passed, under the Companies Act; or

The fixed income investment segment, comprising of treasury bonds and corporate bonds, is actively traded by banks in Kenya.

• it is unable to pay sums due and payable to its depositors; or

In November 2011, FTSE and NSE collaborated on the FTSE NSE Kenya index series, in an effort to give the local exchange an international profile that attracts more foreign capital.

• the Central Bank determines that the value of its assets is less than the value of its liabilities. If an institution becomes insolvent, the CBK may appoint the Board, established under section 36 of Banking Act, to be a liquidator of the institution; and the appointment shall have the same effect as the appointment of a liquidator by the court under the provisions the Companies Act.

4.4 The taking of Security The process of taking of security must be transacted through an accredited lawyer, and is subject to stamp duty and registry fees. Security creation, perfection and enforcement face restrictions in terms of costs and time. This is due to the numerous applicable statutes relating to collateral creation and perfection that make the process cumbersome, expensive and complex. Lenders cite the slow and expensive judicial process as contributing to premiums they factor into their interest rates. The presence of many manual and uncoordinated registries makes the process laborious.

4.5 Banking branch and IT infrastructure There are 1, 063 bank branches and 1, 974 ATMs in the country as at 31 Dec 2010, showing significant growth in recent years. E-banking has evolved to become the preferred mode of banking rather than as an alternative channel. Some of the e-banking services introduced by financial institutions include the EFT, payments of utility bills, airtime top ups, balance enquiries, loan applications, and cheque book requests. Use of credit information sharing (“CIS”), and enables banks to share credit information on their customers, to facilitate better assessment of the risks associated with prospective borrowers. Mobile money transfer; Safaricom’s MPESA is the most prevalent distribution channel. Other mobile networks, including Airtel, Essar and Orange telecom, have introduced mobile money facilities. Most banks in Kenya have embraced the use of mobile banking.

4.6 Active exchanges The Nairobi Securities exchange (“NSE”) is the largest and most developed in East Africa. It has 55 listed companies (five cross-listed), a market capitalisation of about USD 9.8 billion as at September 2011 and trading volumes of USD 60.6 million (equities), USD 401 million (bonds) for the month September 2011.

4.7 Banking sector overview Kenya has a comparatively developed financial sector, when compared to most African and other third world countries. The financial sector has been one of the fastest growing sectors in the economy in the last few years, driven by increased customer awareness and demand. The sector is defined by multinational institutions such as Barclays and Standard Chartered, Pan-African banks, such as Nigeria’s United Bank for Africa, and home-grown institutions, such as Equity Bank which has expanded into neighbouring nations Uganda, Rwanda and South Sudan. Key developments in the sector includes the introduction of agency banking, mobile banking, internet banking, increased use of ICT, increase in the required minimum core capital and Islamic banking products. The dynamism and growth in the banking sector is expected to continue into 2012 and beyond, as financial institutions continue to seek new opportunities in the face of regional integration and growth under the EAC platform and global recovery. Further, Kenya has a significant unbanked population. Challenges facing the industry include new regulations which require banks and mortgage firms to build a minimum core capital of KES 1 billion (USD 11.9 million) by December 2012. The implementation of this requirement poses a challenge to some of the existing banks, and they may be forced to merge in order to comply. The global financial crisis affected the banking industry in Kenya in regard to deposits mobilisation, reductions in trade volumes and the performance of assets. Fraud is a major challenge, with significant fraud cases being reported.

Section 5 Physical Environment 5.1 Property ownership Every person has the right, either individually or in association with others, to acquire and own property of any description and in any part of Kenya. A person who is not a citizen may hold land on the basis of leasehold tenure only, and any such lease, however granted, shall not exceed ninety-nine years.

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5.2 Transport infrastructure

5.5 Economic overview

The current government has prioritised the rehabilitation and development of a transport infrastructure, as part of Kenya’s Vision 2030. Domestic transport is heavily reliant on road transport. There is a reasonable bus and commuter van service between towns and within populated areas. Road safety remains a major challenge to motorists, due to reckless driving by small public transport operators.

The economy experienced some setbacks in 2008, resulting in weak GDP growth of 2.6% (2009), but has since shown recovery, albeit tempered by the recent hikes in oil prices. The forecasted GDP growth for 2011 is 4.5% followed by a rebound in 2012 to 5.9%. A strong macroeconomic policy is also expected to manage the temporary shocks, which have in the past caused rising inflation, weakened the Kenya Shilling and dampened the stock market performance. Strong import growth will keep the overall current account in deficit at 8% of GDP in 2011, up from 7.5% of GDP in 2010.

There is a limited rail service from the port of Mombasa to Nairobi, and this primarily serves commercial cargo from the Port. The existing railway line is now under concession and being rehabilitated, and the government has plans to build an additional railway-line linking Lamu to South Sudan. Jomo Kenyatta International Airport (JKIA) in Nairobi is the regional hub for international and domestic air traffic. Other airports are located in Mombasa, Eldoret, Nairobi and Kisumu, and numerous other airstrips across the country.

5.3 Communications infrastructure Mobile penetration in Kenya is over 60%, with about 25 million mobile lines and 0.5 million fixed lines. The telecoms landscape is highly competitive, with four players. There are two fibre optic cable connections, which are transforming internet connectivity with faster and cheaper services. Data and internet services are also widely available, and used by businesses, institutions, a small segment with access to home PC’s and youth accessing social media on cell phones. Kenya has a vibrant print, audio and visual media sector with at least five large TV stations and two leading local dailies, as well as a plethora of radio stations in English and vernacular. International programming is available through satellite TV, with monthly subscription, ranging from USD 10 to USD 100. Freedom of press is reasonably open.

5.4 Political environment The last elections were held in 2007, and disputes over the election results led to violence, which left many people displaced. This greatly set back the economy in 2008. Negotiations, led by Kofi Annan were held, and a grand coalition was formed to contain the election violence and carry out constitutional, legal and social reforms needed to restore peace in the country. The resolution included the formation of a coalition government, headed by the incumbent, and the creation of a Prime Minister post. Progress has been made politically, with the adoption of the new constitution in 2010. This improved the image and confidence in the country, both domestically and internationally, that the new constitutional order will allow the country to move past its previous instability.

Long-term growth prospects are favourable. Kenya’s location as a key regional hub, and the process of EAC integration, will support average annual growth. Growth will also be underpinned by new investment in infrastructure (especially transport and power), pro-market reforms (including deregulation and privatisation) and a gradual improvement in governance and public-sector capacity, although drought will remain a key risk.

5.6 Social environment Free primary and secondary school education was introduced in 2002 when a new government came in, and is still offered, albeit under financial constraints. There is some access to public healthcare at government clinics and hospitals for a minimal fee. Country’s literacy level is at 85%. Kenya has made significant progress on the Millennium Development Goals concerning HIV/AIDS, infant mortality and achieving universal primary education.

5.7 Trading partners Exports- Uganda 10.1%, Tanzania 9.8%, UK 8.8%, Netherlands 8.2% Imports- China 13.6%, India 13.4%, UAE 9.7%, South Africa 8.4%

5.8 Crime and corruption Corruption is still rife in the country, and attempts to strengthen the Kenya Anti Corruption Commission are ongoing. The country is perceived as the second least corrupt State in East Africa, even as its police force takes the unenviable position of being the most corrupt institution in the country. Crime and petty theft have significantly reduced in the last decade, owing to better economic prospects and previous initiatives to move street families out of towns.

5.9 Language English is widely spoken and the main language of doing business. Kiswahili is the national language.

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22 | Africa Banking survey

Section 6 Governance and reporting Issues 6.1 IFRS implementation Kenya Adopted the use of IFRS in 1999. All organizations, in Kenya including banks, report based on the IFRS framework. The Institute of Certified Public Accountants carries out annual competitions covering IFRS, corporate governance and Corporate Social Responsibility (CSR). Banks have consistently won the first slot over the 11 years of the competition. This indicates quite robust reporting standards in the banking sector.

6.2 Basel II and III The Central Bank of Kenya (CBK) began a process in 2007 that will lead to the preparation of a comprehensive roadmap for implementation of Basel II. To date the implementation is in progress.

6.3 FATCA There is no evidence of FATCA implementation in Kenya to date.

6.4 Anti Money Laundering (AML) laws/regulations The Crime and Anti-Money Laundering (AML) Act became operational in 2010. Accordingly, financial institutions licensed under the Banking Act, the Central Bank Act, and the Microfinance Act are required to adhere to the requirements. The Act stipulates the obligations for financial players among other reporting entities of ensuring that the financial system is not used as a conduit for money laundering, drug trafficking and other related illicit activities

6.5 Know Your Customer (KYC) laws/regulations As per the CBK prudential guidelines, all institutions operating within the financial sector are required to obtain basic information on its customers. The CBK prudential guidelines requires that a bank should establish to its satisfaction that it is dealing with a person that actually exists, and identify those persons who are empowered to undertake the transactions, whether on their own behalf or on behalf of others. When a business relationship is being established, the nature of business that the customer expects to conduct with the institution concerned should be ascertained, so as to determine what might be expected as the customer’s normal activity levels.

6.6 Annual financial reporting

6.7 Governance structures The CBK prudential guideline provides for the minimum standards required from directors, chief executive officers and management of an institution, so as to promote proper standards of conduct and sound banking practices, as well as to ensure that they exercise their duties and responsibilities with clarity, assurance and effectiveness. The CBK requires all institutions licensed under the Banking Act, to have at least five directors, at least three-fifths of who should be non-executive directors, in order to achieve the necessary balance. As per the CBK prudential guidelines, each financial institution should have in place the board audit committee, credit committee, ALCO committee, risk management committee and executive committee.

6.8 Government ownership and management As at 31st December 2010, the banking sector comprised of the CBK, as the regulatory authority, 44 banking institutions (43 commercial banks and one mortgage finance company), two representative offices of foreign banks, five Deposit-Taking Microfinance Institutions (DTMs) and 126 Forex Bureaus. 31 of the banking institutions are locally owned, while 13 are foreign owned. The locally owned financial institutions comprise three banks with public shareholding, 27 privately owned commercial banks, one mortgage finance company (MFC), while five DTMs and 126 forex bureaux are privately owned.

6.9 External auditors Every institution shall, in terms of the Companies Act appoint annually, an auditor approved by the CBK, whose duty shall be to audit and make a report upon the annual balance sheet and profit and loss account which area to be submitted to the CBK.

6.10 Local regulatory developments or plans The following continue to impact on Kenyan businesses: • Promulgation of the new constitution in 2010 • Introduction of agency banking model in 2010 • Roll-out of credit information sharing (CIS) initiative in July 2010. • The continued geographic expansion of banks in Kenya, both nationwide and across the East African region, which was given further impetus by the signing of the EAC Common Market Protocol in July 2010 • Increase in minimum core capital to KES 1 billion by end of 2012.

The year end for all banks is 31 December. All banks must submit their Audited Annual Financial report to the Central Bank by not later than 31 March.

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Financial Services | 23

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24 | Africa Banking survey

Section 1 Regulatory 1.1 Regulatory Regime The Central Bank of Mauritania is the principle regulator of the banking sector. The “Institutional” framework is used in Mauritania.

1.2 Basel Accord status Practices followed by the regulator are similar to Basel I but a transition to Basel II is underway and planned for 2012.

1.3 Structure of supervisory body Supervisory is under the control of the Central Bank through the Financial and Banking Supervision Department. The Bank Control Department collects the banks’ reporting and is also in charge of the intelligence and risk management. The Inspection Department is in charge of the audit/inspection of banks.

1.4 Banking licence application Applicants are required to submit to The Central Bank a number of specified documents for application. The Central Bank has six months to approve a banking license.

1.5 Regulatory reporting requirements There are a number of reporting requirements. There are extensive foreign currency reports which are required to be submitted weekly. Financial control reports vary but are largely required on a monthly basis. Credit report requirements vary between monthly, quarterly and biannually. Trade finance reports are requested on an ongoing basis, while financial statements are required annually.

1.6 Important banking regulatory requirements • Obligatory reserves in local currency and obligatory reserves in foreign currency are required - 7% of the average customer deposit. In case of non compliance, penalties of MRO 200 000 (USD 740) per day + interest based on CBM debit rate are payable.

1.8 Global financial crisis response There are no specific supervisory responses being considered in Mauritania in response to the global financial crisis, as the latter did not affect the Mauritanian banking system.

1.9 Deposit insurance scheme A deposit insurance scheme was implemented in 2008, and the banks’ required contributions are as follows: • 1.75% of the minimum capital for new approved banks, • 0.1% of the average of deposits during the year for the others. A Compensation threshold will be determined on an annual basis starting January 1, 2012.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company Registered parties wishing to invest in Mauritania use a simplified form, attaching duly certified supporting documents, and a file containing various required documents. Foreign corporations are required to have a permanent establishment able to represent them in accordance with the laws of the Islamic Republic of Mauritania. Any person is free to create a private company. In the case of a business corporation, there must be a minimum of seven shareholders with registered capital of at least MRO 5 million (USD 18 500). Under Mauritanian law, limited companies require a minimum of MRO 1 million (USD 3 700) and at least two partners. Foreigners wishing to invest in Mauritania must form companies in accordance with corporate law in Mauritania.

2.2 Foreign investment in local companies

• penalties equivalent to 2% of the excess amount are payable for each following day.

The commercial code guarantees equal status to all national and foreign shareholders. There is no shared jurisdiction when it comes to investment. Therefore, regardless of the amount involved, proponents are required to fill a simple statement of investment at the “Guichet Unique”. A certificate of investment is issued to the proponent within 30 days. Investors are equal, irrespective of nationality or origin. This equality applies to the use of all rights and obligations resulting from investment in Mauritania, and is normally recognized by the certificate of investment.

• Fixed assets/equity ratio: max 100%.

2.3 Annual costs

• Daily exchange position should not exceed 10% of the shareholders funds by currency and 20% for all foreign currencies. In case of non compliance, and after a grace period of 48hours.

• Minimum capital requirement: MRO 6 billion (USD 22.2 million).

1.7 Banking supervision

There are no particular mandatory costs associated with owning a company. External audit by a Mauritanian chartered accountant is compulsory.

Banking supervision is conducted on a solo basis.

2.4 Restrictions on foreign investment

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In the case of investment through a private company, exit must occur through legal channels. In the event of liquidation,

Financial Services | 25

165 3.1 million (2009 estimate)

MRO 1 = USD 0.0037 MRO: Mauritanian Ouguiya

$4.4 billion (2011 estimate)

a liquidator is appointed to clear the company’s liabilities before distributing the balance of claims amongst the various creditors.

2.5 Dividend remittance The freedom to transfer capital is guaranteed under the investment code. It is granted only to persons or companies that have invested foreign or joint capital. In practice, the transfer of capital is handled by the primary banks. Since the sector was liberalized, banks do not need authorization from the central bank to transfer funds abroad. There are no exceptions to this freedom. As a result, investors can deal directly with their banker when they need to transfer money.

2.6 Intellectual property rights Mauritania has been a member of the World Intellectual Property Organization and the African Intellectual Property Organization (AIPO) for a significant period of time. Within the framework of AIPO, various treaty provisions were merged into a single document called the Bangui Agreement. The Agreement was revised in 1999 to bring it into line with various international agreements, such as the WIPO Convention. Although intellectual property rights are not very well developed in Mauritania, there has been renewed interest in this area. Efforts have been made to raise awareness among the population. Any matters pertaining to the protection of intellectual property, including registration, are handled by the Industry’s Ministry.

Pape Bocar Gueye T: +221338492727 E: [email protected]

• VAT is at 14%. • Tax on dividends and interest at 10%. • Tax on royalties at 3%.

2.10 Branch taxation Subsidiaries and branches are treated the same for tax.

2.11 Personal tax Taxes on individuals are mainly salaries tax and they are deducted and remittance to tax authorities by companies. The rates applicable are 15% for monthly salary less than or equal to MRO 22 500 (USD 83) and 40% for salaries above this threshold.

2.12 Tax returns In general, tax payments are annual.

Section 3 People 3.1 Skills availability The educational system was affected by the political instability of the country. Globalization requires a good command of English. Unfortunately few managers are fluent in this language.

2.7 Sustainability and the environment

3.2 Foreign nationals

The environmental code defines all the basic principles of the national environmental protection policy, and acts as the foundation for harmonizing economic imperatives with what is required for sustainable economic and social development. The coastal waters are among the richest fishing areas in the world, and the country is threatened by the advance of the desert. Local authorities are working with the main nongovernmental organisations to preserve the environment.

A working license is needed when hiring “ex pats”. Company information, job description and the rationale of the hiring should be documented and presented to the administration. There is a two year, or four year working licence available. There is no restriction on the renewal of licenses.

2.8 Anti-money laundering Anti-money laundering laws were adopted in 2005, and financial institutions are required to incorporate the risk of anti-money laundering in their relations with customers and foreign correspondents and institutions. A notification to the Anti-money Laundering Authority is required for suspicious transactions of more than MRO 2 million.

2.9 Tax regime There are a number of applicable taxes in Mauritania, including: • Income Tax is charged at 25%. The minimum income tax payable is the higher of MRO 240 000 and 4% of turnover.

3.3 Labour legislation The employment contract is an agreement by which the worker is engaged to provide professional services for payment, under the direction and authority of an employer. The worker enters freely, and forced labour is prohibited. The employment contract is individual. The working week is set at 40 hours, and the retirement age is of 60 years for men and 55 years for women.

3.4 Trade union presence It is very difficult to assess the significance of trade union activity in Mauritania, due to a lack of accurate data regarding the unionization rate. There are two major trades unions in Mauritania, the CGTM (Confédération Générale des Travailleurs de Mauritanie) and the CNTM (Confédération Nationale des Travailleurs de Mauritanie).

• Non commercial income tax is levied at 35%.

3.5 Hiring and Firing of employees

• Land income tax is charged at 6%.

The only constraint when hiring employees is the working license in case of “ex pats” workers. Before the layoff of any

• Training tax is at 0.6%.

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26 | Africa Banking survey

permanent workers, the employer must inform the employee in writing, stating the rationale and inviting him to provide written explanations within forty eight hours. Any termination is subject to a notice which shall be put in writing by the party who initiates the break. The reason for the termination must be mentioned in this notice.

3.6 Contractors No employer can conclude with the same worker, successively and without interruption, more than two fixed-term contracts, or renew more than once a fixedterm contract. However this does not apply to hourly or daily workers, seasonal workers hired for the duration of agricultural, commercial, industrial or tourism campaigns, casual dockers hired for handling work inside the port, workers hired following increased activity of the company, workers hired to provide temporary replacement of an employee whose contract has been legally suspended, and workers hired temporarily for the purposes of building and construction works. Note also that the duration of a fixedterm contract cannot exceed two years, renewal included.

agencies are located in the major cities of Nouakchott and Nouadhibou. The country is experiencing a development of payment means (e-banking, ATM etc) following the economic and financial liberalization.

4.6 Active exchanges Treasury bills are the main exchanges in Mauritania. There are no stock or bond markets.

4.7 Banking sector overview There are currently 12 banks in Mauritania. Penetration of banking services remains very low at 5%, and the privatization and liberalization of the economy attract foreign investors, especially mining companies, as the country has extensive deposits of iron ore, which account for nearly 40% of total exports. These companies need high quality modern financial services.

Section 5 Physical Environment

3.7 Retirement and Medical Aid The employer shall, within the framework of labour law, ensure health care services are provided to its employees and their family members. The employer also assumes the payment of daily allowances in case of illness. Employers are required to contribute to social security systems for Occupational Medicine, Old Age, Disability, Death, Accident at work, Occupational Disease, Family Benefits.

5.1 Property ownership For the purposes of acquiring private property, foreigners and nationals are equal in the eyes of the Law in Mauritania. Consequently, any individual or corporation may freely acquire or transfer personal or immoveable property, irrespective of nationality.

5.2 Transport infrastructure

Section 4 Banking Environment 4.1 Major loan and deposit products Loan Products Real estate, auto, consumption, overdraft facilities, Islamic finance products, letters of credit and guarantees and acceptances. Deposits Current accounts, saving accounts and term deposits.

4.2 Payments/clearing system The clearing system is not automated and cheques represent the principal transactions (82% in 2010). A project was launched in February 2008 in order to upgrade the Mauritanian payments system to international standards regarding automatic bills processing, cheque numbering, security improvement, implementation of IBAN, among others.

4.5 Banking branch and IT infrastructure

The Mauritanian transport sector suffers from a series of problems which are mainly related to the absence of an overall strategic vision. Studies conducted as part of the National Plan for Transport showed that transport is dominated by road which accounts for more than 90% of passenger traffic and 80% of goods traffic. Total roadways represent more than 11 000 km, where one third is paved. There are 28 airports, with 1 being capable of handling international traffic.

5.3 Communications infrastructure There is a limited system of cable and open-wire lines and there are minor microwave radio relay links, and radiotelephone communications stations. Mauritel, the national telecommunications company, is privatized, and remains the monopoly provider of fixed-line services. Mobilecellular services are expanding rapidly, and are provided by three companies. Internet is also expanding and is available through fiber-optic and ADSL cables. However there are some discrepancies between the capital Nouakchott, where the level of market penetration is good, and the other regions.

The banking network is composed of more than 80 agencies and covers the main cities of the country. However 45% of © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

Financial Services | 27

5.4 Political environment The government of Mauritania was overthrown in 2008, in a military coup. Mohamed Ould Abdel AZIZ is the current president. Bicameral legislature consists of the Senate or Majlis al-Shuyukh (56 seats - 53 members are elected by municipal leaders and 3 members elected for Mauritanians abroad, to serve six-year terms; a portion of seats is up for election every two years), and the National Assembly or Al Jamiya Al Wataniya (95 seats - members an elected by popular vote to serve five-year terms). Meetings between the ruling party and some opposition parties were held in 2011, which indicates an easing of the politic tension following the 2008 coup.

5.5 Economic overview Despite being rich in natural resources, Mauritania has one of the lowest GDP rates in Africa. Mauritania’s economy is split between a traditional agricultural sector and a modern mining industry. The majority of the population still depends on agriculture and livestock for a livelihood. Mauritania has extensive deposits of iron ore, which account for almost 50% of total exports. GDP is estimated at USD 4.4 billion in 2011.

5.6 Social environment Some improvements are being effected to the education system. Growing fiscal pressure is a concern for education financing in Mauritania, and education spending was out in 2009 and 2010. The budget is around two and a half times the primary education budget. National average attendance rate in pre-primary education is very low, at less than 10%, and children from the wealthiest households are more than seven times as likely as poor children to attend early learning programs. Adult literacy rate is below 60%. The main health indicators (communicable and non communicable diseases, environmental risk, mother, newborn and child health, health promotion) remain very low, and this reveals the poor performance of Mauritanian health system.

5.7 Trading partners Iron ore and fishery products are the two main items of exports representing 36.8% and 14.1%, respectively while crude oil accounts for 5.2%. The main customers of Mauritania are China, Italy, France, Belgium and Spain. Its imports are largely made up of equipment for mining and mineral oil, capital goods, vehicles and food. Its main suppliers are France, China, the United States, Belgium and Spain. Mauritania has few commercial contacts with other African countries. As an example, Egypt is its 19th largest supplier.

that are intended to provide checks and balances within the system are generally under-resourced and lack independence.

5.9 Language Arabic is the official language, bur French is also widely spoken. Mauritanians are showing interest in learning and speaking English.

Section 6 Governance and reporting Issues 6.1 IFRS implementation For statutory accounts, a Mauritanian chart of accounts is used. But when reporting for international subsidiaries or branches, IFRS are used.

6.2 Basel II and III Currently the transition to Basel II is in progress.

6.3 FATCA There is no evidence of FATCA implementation in Mauritania to date.

6.4 Anti Money Laundering (AML) laws/regulations Anti money laundering laws were adopted in 2005.

6.5 Know Your Customer (KYC) laws/regulations In force, particularly in financial institutions.

6.6 Annual financial reporting Financial reporting is not mandatory for all companies.

6.7 Governance structures Governance structures, such as use of Audit Committees and Boards are implemented in Banks and International companies’ subsidiaries.

6.8 Government ownership and management There is a Prevalence of Government ownership and management in Banks and International companies’ subsidiaries.

6.9 External auditors Banks financial statements are to be certified by auditors or chartered accountants.

5.8 Crime and corruption Corruption remains one of the biggest challenges in Mauritania. Public services are unevenly provided and of poor quality, and civil servants are often so badly paid that they resort to petty corruption in order to survive. The institutions

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28 | Africa Banking survey

Section 1 Regulatory 1.1 Regulatory regime

1.6 Important banking regulatory requirements Regulatory capital requirement: • According to the Banking Act, all banks should have an amount paid as stated capital and an amount of assigned capital of not less than 200 million Mauritian rupees.

The Mauritian banking sector is regulated by the Central Bank, the Bank of Mauritius (“BOM”). Non Banking Financial Institutions are regulated by the Financial Services Commission (“FSC”), who issue licences and act as the regulator.

• Furthermore, a minimum capital adequacy ratio of 10 % is required for both banking and non banking deposit taking institutions (calculated on the basis of weights attached to the different risks faced by the entity).

1.2 Basel Accord status

According to the liquidity risk management guideline, banks should secure a sound liquidity cushion and must set a liquidity risk tolerance in the light of its business objectives, strategic direction and risk appetite.

The Bank of Mauritius currently follows a Basel II approach.

1.3 Structure of supervisory body The Bank of Mauritius is wholly owned by the Government of Mauritius, with a stated and paid up capital of MUR 1 billion (USD 32.9 million). The Audit and Monetary Policy committees are present and are highly active. They have a Board of directors constituting of seven directors, and presided over by a chairman.

1.4 Banking licence application The banking licence application process is guided and regulated by the Mauritius Banking Act 2004 (the “Act”). Any corporate body can apply for a banking licence. Applications must be accompanied with documents such as its constitutive documents, names and details of the directors and CEO, a list of its shareholders, and a copy of financial statements. The Central Bank will notify the applicant within 30 days whether the application is completed, and shall notify the applicant if a licence will be granted within seven working days after the decision has been taken. An Annual licence fee (determined by the Central Bank) is payable to the Bank of Mauritius.

1.5 Regulatory reporting requirements A bank should disclose annually in its annual report, information about country risk management. As per its capital adequacy ratio guideline, NBDTIs (Non Bank Deposit Taking Institutions) shall submit a quarterly return together with an external auditor’s report to the Bank of Mauritius. Guidelines for calculation and reporting of foreign exchange exposures of banks require banks to submit a daily return to the Bank of Mauritius, and amounts reported should be in the foreign currency recorded in the reporting bank’s books. Banks shall disclose on an annual basis their approach to corporate governance, in accordance with the requirements of the guideline on corporate governance in their annual reports.

The liquidity requirement:

Forex requirement: Banks should maintain their overall foreign exchange risk exposure as at the close of each business day to a limit of 15% of their Tier 1 Capital with effect from 4th January 2011.

1.7 Banking supervision The Mauritian banking supervision is conducted on a solo basis.

1.8 Global financial crisis response The Bank of Mauritius has been monitoring commercial banks very closely, requiring them to produce regular reports to ensure that there is little or no spill-over effect of the crisis, and that exposures to toxic assets and complex derivatives are reduced. Greater reliance was placed on deposit funding rather than on money markets or external funding. In response to tight liquidity conditions in global credit, which might have exerted an adverse impact on the cost and availability of short term trade finance, the Bank of Mauritius took pre-emptive action by making available a special foreign currency line of credit of USD 125 million. This allowed local banks to maintain the flow of credit for international trade. The Bank of Mauritius also reviewed its supervisory structures and revisited most of its regulatory guidelines.

1.9 Deposit insurance scheme Mauritius became a member of the International Association of Deposit Insurers and is preparing the necessary steps to establish a deposit insurance scheme.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company A company incorporated in Mauritius can be either a global business company (GBC1 or GBC2 license) or a domestic company.

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Financial Services | 29

20 1.2 million (2011 estimate)

MUR 1 = USD 0.03294 MUR: Mauritius Rupee

$10.3 billion (2011 estimate)

Ashish Ramyead T: +2304069885 E: [email protected]

Appointment of a management company to assist with incorporation, application of a licence and provide ongoing compliance is advised. Applicants are required to submit an application to reserve the proposed company name with the Registrar of Companies (“ROC”), accompanied with various prescribed documents. A GBC 1 is incorporated in 4 working days, subject to all information being in order. A GBC 2 company is incorporated within 2 working days.

2.6 Intellectual property

2.2 Foreign investment in local companies

2.7 Sustainability and the environment

Mauritius offers a low tax jurisdiction and an investor-friendly environment to encourage domestic and foreign companies to set up a business.

There are certain laws in Mauritius which cover sustainability and environment and these are amongst others, the Building Act 1919, the Environment Protection Act 2002, the Occupational Safety and Health Act 2005, the Radiation Protection Act 2003 and the Beach Authority Act.

Features of this investor friendly environment include harmonised corporate and income tax of 15%, tax free dividends, no capital gains tax, 100% foreign ownership, free repatriation of profits, dividends and capital, no minimum foreign capital required, and 50% annual allowance on declining balance for the purchase of electronic and computer equipment.

2.3 Annual costs Global Business Category One Company (“GBC 1”) • Annual licence fees USD 1 750, prorated licence fees to be paid depending on the time the application is made. • Processing fees for the Financial Services Regulator USD 500. • Annual ROC fees -USD 250, • Processing fees for the ROC USD 100,

In Mauritius, the legislative framework for IPR enforcement took a new turn in 1995 when the TRIPS (“Trade Related Aspects of Intellectual Property Rights”) Agreement of the World Trade Organisation came into effect. In order to conform Mauritian legislation with the principles and obligations laid down the in the TRIPS agreement, new pieces of legislation were adopted that guide the IP regime.

Furthermore, there is currently a project – “Maurice Ile Durable” – under the aegis of the Government of Mauritius, introduced as a long term vision aimed at promoting sustainable development.

2.8 Anti-money laundering The Financial Intelligence Unit (“FIU”) was established and the Financial Intelligence and Anti Money Laundering Act was established in August 2002. It is the central Mauritian agency for the request, receipt, analysis and dissemination of financial information, to relevant authorities regarding suspected proceeds of crime and alleged money laundering offences as well as the financing of any activities or transactions related to terrorism.

• Legal fees USD 500 to 8000 (depending on structure),

2.9 Tax regime

• Ongoing administration USD 1 500 to 5 000,

• Income Tax – single rate at 15%.

• Audit fee USD 1 200 to 5 000

• Value added tax – Standard rate of 15% with some, zero rated, and exemptions.

Global Business Category Two Company (“GBC 2”) • Annual licence fees USD 235, • Processing fees for the Financial Services Regulator USD 100, • Annual ROC fees USD 65, • Legal fees USD 500 to 8 000 (depending on structure), • Ongoing administration USD 1 500 to 3 000.

• There is currently no state, local or national tax in place in Mauritius.

2.10 Branch taxation Branches and subsidiaries are taxed at the same rate and on the same basis.

2.11 Tax rates

2.4 Restrictions on foreign investment

There is a single tax rate of 15%.

Foreign and domestic investors are treated equally, and foreigners may control 100% of companies in most economic sectors. A transparent and well-defined foreign investment code makes Mauritius one of the best places in the region for foreign investment. The domestic legal system is generally non-discriminatory and transparent. Residents and nonresidents may hold foreign exchange accounts.

In the case of an employee, the employer is responsible for retaining the appropriate amount of tax under PAYE on a monthly basis and remitting it to the authorities.

2.5 Dividend remittance There is no withholding tax or other taxes.

In the case of a self employed individual, he/she must file this tax return under the Current Payment System (“CPS”) basis and pay their tax accordingly.

2.12 Tax returns All individuals have to file an annual tax return within three months after end of the income year (that is by 31 March) and pay their tax accordingly. If filing is made electronically, and

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payment is through internal banking, the deadline is extended for an additional 15 days (that is by 15th April). Self employed individuals must file their returns on a quarterly basis, that is, within three months after the end of each quarter.

Section 3 People

members, the Mauritius Trade Union Congress (MTUC), with about 25 000 members, and the National Trade Union Confederation (NTUC), with about 59 000 members (2008).

3.5 Hiring and Firing of employees Procedures/restrictions are within the parameters of the Employment Rights Act and the Employment Relations Act 2008. Failing which, severe penalties can occur - from payment of severance allowance to court hearings.

3.6 Contractors 3.1 Skills availability Personnel employed in the banking sector in Mauritius tend to be highly skilled.

The use of contractors in Mauritius is governed by the Employment Rights Act. However, it concerns mostly job contractors in the sugar industry sector.

Mauritius has educational institutions (the University of Mauritius and the University of Technology) which both provide undergraduate and postgraduate courses in banking. Furthermore, banks, (such as the Mauritius Commercial Bank and the Bank of Mauritius) provide internship opportunities to school leavers, as well as to undergraduates.

3.7 Retirement and Medical Aid

3.2 Foreign nationals

Section 4

Generally, an occupation permit allows a non-national to work in Mauritius. It is both a work and a residence permit. A complete application is made through the Board of Investment to the Passport and Immigration Office. Applicants must register with the Board of Investment, and registration is done at the same time that an application is submitted. Expats can thus be said to be generally welcome in Mauritius, particularly where they come to new or expanded operations. Ex pats are taxed on the same basis as residents, i.e. 15%.

3.3 Labour legislation The two main pieces of legislation governing labour are Employment Relations Act and the Employment Rights Act 2008. The Employment Rights Act covers agreements, minimum age for employment and hours of work, remuneration and conditions of employment, workers in the sugar industry, termination of agreement and workfare programme, compensation and violence at work, job contractors and labour advisory council. The main principles of The Employment Relations Act cover registration of trade unions, constitution and administration of trade unions, property and funds, protection of fundamental rights, collective bargaining, labour disputes and dispute settlement procedures, strikes and lock outs, employment relations Institutions, offences and penalties.

3.4 Trade union presence Mauritius was a founding member of the World Trade Organization (WTO) in 1995 and belongs to the International Trade Union Confederation, the world’s largest trade union federation. The three primary trade unions in the country are the Mauritius Labour Congress (MLC), with about 30 000

Membership to a retirement fund is not compulsory. All employees and employers should contribute to the National Pension Fund. Medical insurance is optional, as medical services in Mauritius are free.

Banking Environment 4.1 Major loan and deposit products Banks in Mauritius usually offer the full spectrum of deposit products from current accounts to term deposits in most currencies. Advances are offered over and above traditional overdraft facilities, and most banks provide financing for both corporate and private requirements. These range from short to long term loans and multi currency lending facilities. Others include home loans (limited), fixed deposit, current accounts, savings accounts, credit cards, online accounts, mobile banking.

4.2 Payments/clearing system The Bank of Mauritius operates the Mauritius Automated Clearing and Settlement System (“MACCS”). The system electronically links all Commercial Banks in Mauritius to the Bank of Mauritius. MACCS is used to send funds from any commercial bank account to another and there is no exchange of paper, as in with paper money or cheques. This makes the system very secure.

4.3 Insolvency provisions Liquidation in Mauritius can be initiated using four processes, namely • Initiation by creditors for voluntary winding up; Petition filed at the Supreme Court of Mauritius by a creditor, or • Conduct of watershed meeting following a voluntary administration, or

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• Or by a shareholder/shareholders via a voluntary members winding up or a petition filed in the Supreme Court of Mauritius by a member, or

Mauritius has a widespread bus network with around 220 bus lines and roughly 900 bus stops. They are operated by a number of major companies.

• The company wishing to file a petition of winding up may also do so.

There are five airports, one of which is capable of handling international traffic.

Liquidators in Mauritius must be registered as insolvency practitioners and hold proper qualification. The Insolvency Act 2009 governs the above.

4.4 The taking of Security There are very limited restrictions in the taking of security. Perfecting security occurs on default, unless blocked by a court order.

4.5 Banking branch and IT infrastructure Banks in Mauritius are now integrating IT at a high level in their system. Mobile and online banking is becoming more common. Banks work in close collaboration with Internet Service Providers to be able to attend to customers’ needs. There is limited use of mobile phone banking. This is an area which still lacks awareness.

4.6 Active exchanges Stocks and bonds traded on the Stock Exchange of Mauritius. Treasury Bills and Government bonds are also traded.

4.7 Banking sector overview There are approximately 20 licensed commercial banks in Mauritius. Banks have an important role to play in the economy of Mauritius. They act mainly as financial intermediaries and provide a platform for providing finance to both individuals and corporate and taking deposits. The Banking services offered are very varied, and banks are also being encouraged to lend to small and medium enterprises.

Section 5 Physical Environment 5.1 Property ownership Property ownership is regulated by the Registration Duty Act and the Land (Duties and Taxes) Act. Foreigners are entitled to purchase and own land in Mauritius.

5.2 Transport infrastructure Roads in Mauritius are generally considered to be in good condition, especially in the urban regions. Congestion is a problem, as the number of cars on the road is steadily increasing. As a result, there has been recent road development conducted by the Government of Mauritius. Congestion has decreased, but remains a big issue.

5.3 Communications infrastructure Telecommunications in Mauritius have developed considerably in the last two decades. Most Mauritian households have a landline. Possession of a mobile phone is also becoming more common. Mobile and internet services are provided by two main service providers, namely Mauritius Telecom and Emtel. Different prices are offered for different internet services, and they are generally affordable. Internet connection is good. The Government of Mauritius plans to introduce fibre optic cable around the island.

5.4 Political environment Mauritius is a democratic country whereby a ‘by the people for the people’ approach is adopted. Every five years, there are general elections held in the country. As a result, members of different parties are voted to have a seat in Parliament. Different ministries will be allocated to a number of elected members. Mauritius offers a stable political environment, and there are no ethnic tensions in the country.

5.5 Economic overview Mauritius has moved considerably from an agricultural economy to a more tourism and textile -oriented economy. The provision of financial services is also growing in importance in the country. The IT sector is growing rapidly, tourists are being encouraged to visit the country, and the textile industry is performing well. GDP is estimated at USD10.3 billion in 2011.

5.6 Social environment Amenities provided in Mauritius (housing, schooling, medicine, transport) can be described as being fair. Medical services and healthcare services are provided free of charge by hospitals in Mauritius. Education in Mauritius is mandatory until the age of 16. Education is free in government schools and colleges, but there are also private schools. Children usually attend the pre-primary, primary and secondary levels, and tertiary education often comes as a choice. The University of Mauritius is subsidised by the Government of Mauritius.

5.7 Trading partners Mauritius has a number of trading partners. They key trading partners to Mauritius are India, China, Africa and Europe.

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5.8 Crime and corruption The crime rate in Mauritius is low compared to industrialized countries. Whilst there are incidents of corruption, Mauritius is considered one of Africa’s least corrupt countries.

Under the Banking Act 2004, financial institutions may open accounts for deposits of money only where they are satisfied that they have established the identity of the person in whose name the funds are to be credited.

5.9 Language

6.6 Annual financial reporting

For business purposes, mostly English and French language is used.

Companies having their accounts audited should submit their audited accounts within six months after their financial year end to the Registrar of Companies. Where the company is a regulated entity, it must submit the same to the Financial Services Commission.

However, Creole, the mother tongue is widely used at home, among friends and families. Most schools in Mauritius are English medium, English is a widely understood language in Mauritius.

Section 6 Governance and reporting Issues 6.1 IFRS implementation IFRS is widely adopted for the preparation of accounts of Mauritian Companies. The Mauritian Accounting Standards also are derived from IFRS.

6.2 Basel II and III Mauritian banks are currently applying Basel II. Basel II is compulsory, with the guidelines issued by the Bank of Mauritius.

6.3 FATCA Mauritius has not yet implemented FATCA.

6.4 Anti Money Laundering (AML) laws/regulations Anti Money Laundering is governed by the Financial Intelligence and Money Laundering Act (FIAMLA). The act: • provides for the offences of money laundering and the liability for a MUR 2 million fine, and a term of imprisonment not exceeding 10 years. • reporting institutions have a duty report suspicious transactions to FIU. • caters for the exchange of financial intelligence information with the respective overseas FIUs or comparable bodies.

6.5 Know Your Customer (KYC) laws/regulations In order to combat money laundering and the financing of terrorism, every financial institution must take measures to ensure that neither it nor any services offered by it are capable of being used to commit or facilitate the commission of a money laundering offence.

6.7 Governance structures In October 2003, the Code of Corporate Governance for Mauritius was launched. Compliance with the Code, which is based on the OECD Principles, is on a voluntary (comply or explain) basis, and applies to listed companies, banks and non-bank financial institutions, large public and private companies, and state-owned enterprises (including statutory corporations and parastatal bodies). The Bank of Mauritius also provides guidelines on Corporate Governance for banks, which was implemented as from 1 June 2001.

6.8 Government ownership and management Ownership and management in Mauritius tend to be varied between private and state ownership. The government administers law and order and owns the National Transport Corporation and the State Trading Corporation (responsible for import of essential commodities such as rice and petroleum). The government contributes to free health through public hospitals and dispensaries, free education, and has shares in parastatal (partly private and partly state owned) bodies such as the Mauritius Institute of Training and Development.

6.9 External auditors According to the Mauritius Companies Act 2001, Small private companies (turnover less than MUR 50 million) are permitted to submit a financial summary in compliance with the Companies Act, or any other accounting standards under the Mauritius Accounting and Auditing Standards Committee Act 1989. Such companies do not have a statutory obligation to have their accounts audited. Companies with turnover of above MUR 50 million are required to have their accounts audited.

In addition, in terms of the FIAMLA, financial institutions have a duty to verify the true identity of customers and other persons with whom they conduct transactions.

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Section 1 Regulatory 1.1 Regulatory Regime The principal regulator of the banking sector in Morocco is the Central Bank (Bank Al Maghrib). Exchange transactions are regulated by the Exchange Authority. The Moroccan Capital Authority controls organisations that engage in any activity related to the capital market. A legal entity could have several different regulators, depending on the type of business it conducts. Therefore, the framework used is a Functional approach.

1.2 Basel Accord status

• Each quarter, banks should communicate to Bank AlMaghrib on the risks relating to counterparty exposures, where the amount is equal to or higher than 5% their equity.

1.6 Important banking regulatory requirements Banks are required to comply with various requirements as determined by the regulator. Included in these requirements are the following: Maximum coefficient of division of the risks of the financial companies: Financial companies are required at all times to hold a maximum risk exposure of 20% of total equity on any one borrower. In case of non compliance with this provision, the lending banks are liable to sanction.

The regulator (Bank Al Maghrib) reinforced the regulation framework by the adoption of the Basel II approach in 2007. The application of the rules of Basel II are anticipated to be completely adopted by Moroccan banks by 2012.

Solvency coefficient:

1.3 Structure of supervisory body

Liquidity coefficient:

The Central Bank’s governance bodies are composed of Administrative and management bodies, namely the Bank Board, the Governor and the Management Committee.

Banks are required to have a minimum coefficient of 100% between their assets available and realizable in the short term, and their current liabilities “at sight” and short-term.

The most important departments of the Central Bank board structure are as follows:

1.7 Banking supervision

• Monetary operations and exchange department • Economics and international relations department • Banking supervision department • Network and corporate relations department • Audit and risk prevention department • Financial department.

1.4 Banking licence application To exercise any banking activities in Morocco, authorization is required from the Ministry of Finance and Bank Al Maghrib.

Banks are required to have, at all times, a minimum coefficient of solvency of 8% of the total of their equity, and the total of their balanced credit and market risks.

The Central Bank (“Bank Al Maghrib”) conducts its supervisory function on both a solo and consolidated process.

1.8 Global financial crisis response There have been no specific supervisory responses to the global financial crisis. However, Bank Al-Maghrib) was mobilized to evaluate the impacts of the crisis on the banking system, whilst reinforcing its process of prudential monitoring and continuous watch. It carried out investigations on direct and indirect exposures, and asked the banks for more detailed and frequent communication of reporting on these exposures.

Authorisation or refusal is notified within a maximum period of four months, as from the date of final acceptance of all documents and necessary information.

1.9 Deposit insurance scheme

Non-bank entities in a banking group do not require any regulatory approval.

Section 2

1.5 Regulatory reporting requirements • Banks are required to report the financial statements for each semi-annual period. • Banks are required to periodically report to the management of the banking supervision of Bank Al-Maghrib specifically reporting on the risk management of liquidity. • Each semester, banks should communicate the statements of calculation of the minimum coefficient of solvency.

There is no specific deposit insurance scheme in Morocco.

Commercial, Legal and Tax Environment 2.1 Process for establishing a new company The setting up of an entity (i.e. a bank) is subject to several formalities prescribed by Moroccan legislation. Credit institutions located in Morocco should be constituted as a limited company with fixed capital. To exercise any banking activities in Morocco, authorisation is required from the Bank Al Maghrib after consulting the Committee of Credit Institutions.

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114 35.7 million (2012 estimate)

MAD 1 = USD 0.117 MAD: Moroccan Dirham

$100.3 billion (2011 estimate)

When the request for approval is made by a credit institution having its headquarters abroad, either for subsidiary or branch, the request must be accompanied by an opinion of the relevant supervisory authority in the country where the headquarters are located.

2.2 Foreign investment in local companies There is no specific process for foreigners seeking to purchase local companies. Foreign companies and individuals are entitled to hold 100% of the share capital of Moroccan companies. Approval is required should the transaction involve: • The merger of two or more credit institutions, or

Jamal Saad El Idrissi T: +212537633702 E: [email protected]

protection issues, such as biodiversity, climate change, endangered species, marine dumping, marine life conservation, nuclear test ban, ozone layer protection, protection of world cultural and natural heritage and the protection of the wetlands. It has also signed agreements for the establishment of a General Fisheries Council for the Mediterranean, and the Commission for Controlling the Desert Locust in the Near East.

2.8 Anti-money laundering Central Bank has an issued circular on the due diligence to be carried out by credit institutions. This circular regulates antimoney laundering.

• The absorption of one or more credit institutions by another institution.

2.9 Tax regime

2.3 Annual costs

• Corporate Tax - 37% for credit institutions.

Within the banking sector, the credit institutions receiving public funds are required to contribute to financing the collective deposit insurance, by paying an annual fee. These fees cannot exceed 0.25% of deposits and other repayable funds.

• Value added Tax (VAT) - common rate is 20%, with some goods and services attracting a reduced VAT rate between 7-14%.

For credit institutions, an external audit is mandatory, and they have to designate at least two auditors. The annual audited reports are not required for tax filings.

• Withholding tax of 10% on dividends, or after tax profits paid.

2.4 Restrictions on foreign investment There are no restrictions on foreign investors. Foreigners may freely invest in Morocco in any business activity which is not illicit under Moroccan law.

2.5 Dividend remittance Exchange controls are in place over Moroccan currency. Foreign investors may, however, freely invest into Morocco, including the transfer of investment income derived from their investments and transfer of disposal proceeds from their investments. However, the Foreign Exchange Office must be notified within six months following the realisation of any investment, by completing a comprehensive set of documents.

2.6 Intellectual property rights The competent authority in relation to intellectual property is “Office Moroccan de la Propriété Industrielle et Commerciale”. Morocco has a relatively comprehensive regulatory and legislative system for the protection of intellectual property. Intellectual property laws in Morocco cover areas such as domain names, traditional knowledge, transfer of technology, patents/copyrights, etc.

2.7 Sustainability and the environment Morocco has active environmental law. Morocco is party to various international agreements regarding environmental

Major taxes applicable to companies include:

• Professional taxes vary between 10-30%, depending on the type of business or activities.

• Communal tax on land and buildings dependent on location.

2.10 Branch taxation From a fiscal point of view, the taxation treatment of a branch is different from that of a subsidiary only when these branches provide administrative services and then produce no turnover.

2.11 Tax rates Individuals who are tax residents in Morocco are liable for income tax on all their income from Moroccan and foreign sources. Individuals who are taxable in Morocco are required to submit an annual income tax return. Income tax is calculated by applying a progressive tax rate to the taxable income base. This scale extends from 0% to 38% for individuals earning in excess of MAD 180 000 (USD 26 000).

2.12 Tax returns Moroccan companies and branches of foreign companies are required to file their tax returns by the end of the 3rd month after the end of the financial year, and pay any remaining tax due within this same period. Moroccan branches of foreign companies are also obliged to make four provisional tax payments by the end of each quarter of the financial year, each payment being equal to one fourth of the previous year’s tax liability. Employees are required to file an annual declaration of salaries before the end of February of each calendar year.

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Section 3

Section 4

People

Banking Environment

3.1 Skills availability

4.1 Major loan and deposit products

Currently, Morocco has many efficient training courses with regard to the banking sector. In addition, there are facilities for Moroccan students to pursue financial studies outside Morocco.

Loan products

3.2 Foreign nationals

Savings accounts, fixed term deposits and current accounts.

According to Moroccan law, any Moroccan employer who wants to hire foreign employees must request on their behalf a work permit. A foreign employee cannot work in Moroccan without such authorization.

3.3 Labour legislation There is labour legislation which contains clauses that include the hiring and firing of employees, remuneration, legal duration of working days, paid holidays, redundancy rules, maternity leave and sick leave.

3.4 Trade union presence Moroccan trade unions played a crucial role in the independence movement. Since independence, this once powerful movement has shrunk considerably. Three unions hold the majority of union influence.

3.5 Hiring and Firing of employees According to Moroccan labour legislation, companies have some restrictions regarding the hiring and firing of employees. For the hiring of Moroccan employees, there is no legal restriction. However, and as explained above, the hiring of foreign employee is subject to some restrictions in Morocco. Furthermore, the firing of an employee is subject to the Moroccan labour law, and could imply redundancy allowances for the employee.

3.6 Contractors Companies are authorised to hire contractors, subject to certain conditions. There is an applied time limit period not exceeding 12 months, and in exceptional cases 24 months. When opening a business for the first time, or a new establishment within the company, or when launching a new product for the first time in a sector other than agriculture, the contract can be entered into for a fixed-term of employment of a maximum period of one year, renewable once.

Short, medium and long-term loans (i.e. consumer credit, mortgage), credit lines and leasing. Deposit products

4.2 Payments/clearing system The authorities have put in place the Moroccan Interbank Clearing and Settlement System (“SIMT”) for mass operations on all means of payment, excluding credit cards. This system, which replaces the system of physical exchange of payment by the channel clearing houses, ensures the exchange clearing and settlement is automated for the whole, country.

4.5 Banking branch and IT infrastructure Implementation of the strategic plan for the payments system has allowed for modernisation of the payment system. Therefore all payment instruments including cheques, drafts, and bills of exchange are paperless, which has led to a reduction in settlement periods. A platform for on-line payments has been established. In close co-operation with the local market, a large value settlement system in real time and in secure manner has been put in place. Currently, the local Banks provide many internet services for individuals and corporates (i.e. order transfers, on-line access to the bank account, management of stock portfolio).

4.6 Active exchanges The Casablanca Stock Market is the country’s main exchange. There are other types of financial markets, including the bond market.

4.7 Banking sector overview There are 84 credit institutions, 19 of which are classified as banks. There are 4425 branches, including 887 for Bank Al-Maghrib. There are 4,144 ATMs.

3.7 Retirement and Medical Aid Membership of a retirement and medical aid fund is mandatory in Morocco. All employers must register their employees with the Social Security authorities. Companies established before 2005 can subscribe to private health companies on behalf of their employees. © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

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Section 5 Physical Environment 5.1 Property ownership Property ownership in Morocco is governed by a number of laws. Buildings and land are recognized by law as private (freehold) ownership, only, if they are entered on special registers, called land books.

5.2 Transport infrastructure Morocco has committed billions of dollars to the improvement of the country’s infrastructure. Morocco has a developed public transport sector in the main cities of the kingdom. Morocco is considered to have one of the most dynamic transport infrastructures in Africa.

5.3 Communications infrastructure

5.6 Social environment The current social environment is characterized by social and regional inequality, poverty and exclusion. However, the Moroccan government is focusing on the social sector. In 1963, education became compulsory for Moroccan children between the ages of 7 through 13. However, enrolment was only at about 85% in 2000. Many children, particularly girls, still do not attend schools. The illiteracy rate remains very high, reaching up to 90% in certain rural areas. One of the priorities of the Moroccan government is that of developing the skills, training and qualifications in order to meet the country’s needs. Major efforts have been made during the past 30 years to improve the health system, but much work remains to be done to provide a decent health service, and to providing more access to health services for its citizens, especially in rural or poor areas.

Telecommunications services in Morocco are thoroughly modern and have greatly improved in recent years. Most telephone and internet service is provided by the country’s three largest service providers. Those companies provide services, including fixed and mobile telephony and internet, including 3G internet.

5.7 Trading partners

The country had 3.5 million fixed line subscribers and 36 million mobile subscribers by the end of September 2011.

Morocco is considered a safe country, but corruption remains one of its main issues.

At the end of September 2011, the internet accounts reached 2.8 million and recorded a very, significant growth by taking advantage of the dynamics provided by 3G access.

5.9 Language

5.4 Political environment The politics of Morocco take place in a framework of a parliamentary constitutional monarchy, whereby the Prime Minister of Morocco is the head of government, and head of a multi-party system.

Morocco has signed many international trade agreements with countries, especially with the European Union, United States and countries located in the Mediterranean zone.

5.8 Crime and corruption

Moroccans speak Arabic. However the language used for local business is French. English remains predominant for international businesses (especially in multinational firms, financial and banking sectors).

Section 6

Executive power is exercised by the government. Legislative power is vested in both the government and the two chambers of parliament, the Assembly of Representatives of Morocco and the Assembly of Councillors. The Moroccan Constitution provides for a monarchy, with a Parliament and an independent judiciary.

Governance and reporting Issues

5.5 Economic overview

6.2 Basel II and III

Moroccan’s economy is considered to be relatively liberal, and is governed by the law of supply and demand. Since 1993, the country has followed a policy of privatization of several economic sectors which used to be the property of the government. Morocco has become a major player in African economic affairs. Sectors showing the highest growth include tourism, telecoms and textiles.

6.1 IFRS implementation Banking groups have been required to apply IFRS since January 2008.

As part of its second strategic plan for 2007-2009, Central Bank has set the regulatory framework applicable to the banking sector in line with international standards for banking supervision, and in accordance with most of the Basel Committee’s recommendations. In recent years, the prudential regulatory framework for credit institutions has seen the implementation of large-scale reforms, including, in particular, the adoption of Basel II.

GDP was estimated at USD 100.3 billion in 2010.

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In this respect, credit institutions are required, by virtue of Central Bank’s relevant circulars and directives, to comply with a set of prudential ratios and quality standards.

6.3 FATCA FATCA has not yet been addressed.

6.4 Anti Money Laundering (AML) laws/regulations Recognizing the seriousness of the situation, Morocco is armed with an arsenal of legal defences against money laundering. Penalties under the Act range from two to five years in prison for individuals, in addition to fines. These sentences and fines are doubled in case of facilities provided by a business or profession for acts attributed to an organized gang.

6.5 Know Your Customer (KYC) laws/regulations There is no specific regulation in relation Know your Customers in Morocco. However, a Circular issued by Central Bank specifies that credit institutions have to identify and know their customers through documentary evidence. The institutions are required to follow up and monitor customer transactions, and update this information regularly.

6.6 Annual financial reporting Banking law requires that financial companies produce financial statements at the end of each accounting period. Banks are also required to draw up these documents at the end of first semester of each accounting period. Those financial statements are transmitted to Central Bank under the conditions stipulated.

6.7 Governance structures Under the provision of banking law, credit institutions are required to adopt an appropriate internal control system to identify, quantify and monitor all the risks, and develop tools that allow them to assess the profitability of their operations and transactions.

6.8 Government ownership and management The Moroccan banking system is composed of six banks, mostly domestically privately owned, and five banks mostly foreign owned. There are a further 5 which are publicly owned. In 2008, the government controlled, directly or indirectly, about 23% of the banking sector. This was down from 40% in 2002.

6.9 External auditors Financial companies are required to appoint two statutory auditors, as approved by Central Bank. After two consecutive terms of office, the renewal of the term of statutory auditor can only be for a further three year period. © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

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40 | Africa Banking survey

Section 1 Regulatory 1.1 Regulatory Regime The Bank of Namibia is the Central Bank of Namibia and regulator of the banking sector.

1.2 Basel Accord status Following the Bank’s successful migration to the Basel II Capital Adequacy Measurement on 1 January 2010, Namibia has officially become a Basel II regime. The Central Bank continues to monitor the impact of Basel II, especially the local banking institutions’ risk management capabilities, with the aim of eliminating any weaknesses identified. 2011 will mark the first anniversary of the Basel II adoption in Namibia, and the Central Bank intends to allow for third party review in order to assess the effectiveness of Basel II implementation in the country.

1.3 Structure of supervisory body The Governing Board of the Central Bank consists of a governor, a deputy-governor and such other members of the Board as shall be prescribed by Act of Parliament; all members of the Board are appointed by the President in accordance with procedures prescribed by such Act of Parliament. The Board comprises seven members. Directors are appointed for five year terms by the President and may be reappointed at the end of their terms.

1.4 Banking licence application All prospective license applicants will be provided with an application package. The applicant is required to complete and submit a comprehensive application for the banking license for consideration. The application should contain, amongst others, the required supporting information and documentation outlined in the application forms.

statements in a newspaper as may be approved, and in the form specified, by the Bank of Namibia. • The Bank of Namibia may, in order to determine whether a banking institution is in a sound financial condition and whether compliance to acts or any other legal requirements pertaining to banking business have been, and are being complied with by the banking institution, and without prior notice, at any reasonable time, conduct an examination of the affairs of a banking institution. • Commercial banks in Namibia are required to submit monthly statutory returns.

1.6 Important banking regulatory requirements Minimum Capital Funds: The minimum capital funds, unimpaired by losses, of a banking institution shall not be less than the greater of • An amount of NAD 10 million (USD 1.3 million); or • An amount which represents a percentage of the risk weighted assets and other exposures of a banking institution as the Bank may determine. Bank of Namibia (“BoN”) currently requires banking institutions to hold a minimum amount of capital equal to, or more than, 10% of the calculated risk weighted assets in terms of the standardised approach of Basel II. Minimum Liquid Assets: • The Central Bank may determine the minimum or minimum average liquid assets which a banking institution shall hold at any time, or over the period of time as specified in the determination. Capital Adequacy Ratios (minimum regulatory requirements) • Total capital adequacy ratio 10% • Tier I capital adequacy ratio 7% • Leverage ratio 6% Credit Risk

The process involves a critical evaluation of the application to determine whether it meets the minimum licensing requirements as set out in the Banking Institutions Act. Based on the results of the assessment, the Bank of Namibia will make recommendations to the Minister of Finance on whether the application should be approved or not. Thereafter, the Bank informs the applicant of the final outcome of its application.

• There are three approaches under Basel II for credit risk, the standardised approach, the FIRB approach, and the AIRB approach. The FIRB and AIRB approaches are collectively referred to as the internal ratings based (IRB) approaches.

1.5 Regulatory reporting requirements

Banking Supervision in Namibia is conducted on a consolidated approach.

Bank’s broad reporting requirements: • Within a period of three months after the end of its financial year, the bank must submit a copy of its audited annual financial statements to the Bank of Namibia. • Within a period of one month from the date of acceptance of the financial statements at an annual general meeting of the banking institution, the bank must publish the financial

• The Bank of Namibia requires commercial banks to use the standardised approach.

1.7 Banking supervision

1.8 Global financial crisis response There have been no specific responses to the global financial crisis.

1.9 Deposit insurance scheme Spurred by neighbouring South Africa’s debate on whether or not to adopt deposit insurance, the Central Bank of

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69 2.1 million (2009 estimate)

NAD 1 = USD 0.13084 Silvia Rosado T: +26461387500 E: [email protected]

NAD: Namibia Dollar

Namibia formally investigated the desirability and feasibility of implementing deposit insurance in Namibia. The Namibian banking system is dominated by a few South African banks. The study concluded that domestic banks were too small and too few to warrant an insurance scheme. Hence, no explicit Deposit Insurance system is in place. The vision of the Bank of Namibia states they are “working in the public interest” and have regulations in place to protect depositors and stakeholders.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company Registering a new company in Namibia requires the applicant to obtain approval for a company name from the Registrar of Companies. Applicants are required to pay the registration fees and buy revenue stamps at the Receiver of Revenue. Applicants must hire an attorney to register the company with the Registrar of Companies and obtain the certificate to commence business. Various documents are required for submission to the Registrar of Companies. A trading license must be obtained from the local municipality. Applicants are also required to register with the Receiver of Revenue for both VAT and PAYE.

2.2 Foreign investment in local companies Namibia has a highly competitive incentive and fiscal regime which adds to its attractions for foreign investors. The cornerstone of this is the Foreign Investment Act (The Act) and its provision for a Certificate of Status Investment (CSI). A CSI certificate can be obtained from Namibia’s Ministry of Trade and Industry. A foreign national may invest and engage in any business activity in Namibia which any Namibian may undertake. Where the investment is for the acquisition of shares in a company incorporated in Namibia, the investment shall qualify as an eligible investment only if• Not less than 10% of the share capital of the company is held or will, following the investment, be held by the foreign national making the investment; or • The Minister is satisfied that the foreign national making the investment is or will be actively involved in the management of the company. The last “minimum value” set out in a Government Gazette indicated that the minimum value of foreign assets required to constitute an eligible investment under The Act shall be the equivalent NAD 2 million (USD 261 680).

2.3 Annual costs There are various mandatory costs on an annual basis: • Annual return (CM23) payment of annual duties to keep the company alive. Failure to submit this form will lead to the

cancellation of the company from the Registrar’s records. Minimum amount of NAD 80 (USD 11) is payable. • Licensing fees where applicable (depending on the type of company and the industry in which it operates). • Audit fees (external audits are required for all companies as laid down in the Companies Act). • Annual external audit is compulsory and the company is expected to file its audited accounts with the tax authorities annually, along with its tax returns, and as well as with its annual returns for each year.

2.4 Restrictions on foreign investment The Namibian Constitution expressly encourages foreign investment. Realising the importance of foreign investment to the country, the Namibian government passed the Foreign Investments Act.

2.5 Dividend remittance Trading profits and dividends earned on investments are transferable to non-resident beneficiaries. Such transfers may be authorised by authorised dealers without reference to exchange control. However, if the Namibian company is availing of any local financial assistance, an application should be lodged with Bank of Namibia, accompanied by an auditor’s certificate confirming that monies arise from normal trading profits, as opposed to disposal of fixed assets.

2.6 Intellectual property rights Rights to intellectual property are protected under Namibian law, largely by statute, but also by common law. The existing statutes applicable are being reviewed in order to ensure eventual compliance with international agreements to which Namibia is party.

2.7 Sustainability and the environment In Namibia, a wide number of enactments have an impact, directly or indirectly, on the environment. Environmental framework legislation of cross-sectoral nature such as the Environmental Management Act20 or the Nature Conservation Ordinance21 are rather broad in scope, while sectoral legislation such as the Forest Act22 or the Water Management Act23 cover specific environmental issues.

2.8 Anti-money laundering The Financial Intelligence Centre (FIC) is mandated on behalf of the Bank of Namibia, to manage Namibia’s national money laundering risk by its administration of the Financial Intelligence Act.

2.9 Tax regime Namibia levies, inter alia, the following taxes: • Income tax is source-based at a rate of 34%. • VAT applies to the supply of goods and services at a rate of 15%. • Municipal taxes are payable on the value of fixed property.

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• Stamp duty (on documents and marketable securities). • Transfer duties payable on property transactions. • Customs and Excise duties. • Withholding tax on royalties.

skills sector, where Namibia is currently experiencing severe staff shortages. Expatriates taking up employment in Namibia will be subject to Namibia’s comprehensive tax rules.

• Non-resident’s shareholders tax.

3.3 Labour legislation

2.10 Branch taxation

The Labour Act is applicable to all employees in the private sector, and stipulates basic conditions of employment, prohibits discrimination on various grounds in relation to a person’s employment or occupation, and authorises affirmative action. Affirmative action is regulated by the Affirmative Action (Employment) Act.

Normal company income tax rules also apply to the Namibian branch tax profits of overseas companies.

2.11 Tax rates Individuals are taxed under the same statute as companies, i.e. the Income Tax Act. Generally, the income of a nonresident which derives from Namibia is taxed in the same manner as that of a resident. Only income from a source within Namibia will be included in taxable income. Profits of a capital nature are not taxed. All individuals are taxed on income at progressive marginal rates over a series of income brackets. Tax rates vary from 0% to NAD 236 200 (USD 31 000) plus 37% on amount exceeding NAD 750, 000 (USD 98 000).

2.12 Tax returns Company tax returns: • The tax year is the same as the financial year of the company. Tax liabilities are calculated on a self-assessment basis. • The annual tax return needs to be submitted within seven months after the company’s year end. The collection of taxes is made as follows: • Provisional Payments (1st and 2nd) are due after the first six months of the financial year and on the last day of the financial year. • A top-up payment is payable on due date for the return of Income – seven months after the end of the financial year. • Penalties and interest are levied on late submissions.

Section 3 People

3.4 Trade union presence There are two main trade union federations in Namibia representing workers: • The National Union of Namibian Workers (“NUNW”), which is affiliated with the ruling SWAPO party, represents workers organised into seven affiliated trade unions; and • The Trade Union Congress of Namibia (“TUCNA”), which is not affiliated with any party, is a national trade union centre in Namibia.

3.5 Hiring and Firing of employees There are restrictions on hiring and firing employees. Restrictions on hiring employees include prohibitions and restrictions of child labour, prohibition of labour hire/ contractors, and expatriates need work permits. Restrictions on firing employees are based on the principle of fairness by the Namibian courts, in determining if a dismissal is lawful. Any employee who is dismissed without a valid and fair reason and not in compliance with fair procedure, shall be regarded to have been dismissed unfairly. In order to be able to dismiss an employee, the internal process needs to be substantially fair.

3.6 Contractors The Namibian government has amended legislation to severely limit or prevent labour hire companies from operating in the country. This severely impacts on the use of contractors.

3.7 Retirement and Medical Aid 3.1 Skills availability A pervasive perception, largely based on experience is that Namibia is facing a critical shortage of professionals with degrees. It is possible that the situation could worsen over the next five years.

There is no law that requires compulsory membership to a retirement or medical aid fund. Membership of a retirement / pension fund or medical aid fund is company specific.

3.2 Foreign nationals Expatriates are generally welcome in Namibia (subject to their complying with the Immigration laws of the country, and obtaining a work permit), especially in the specialized © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

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Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Mortgage loans / home loans, infrastructure financing in urban and semi-urban areas, term loans, vehicle and assets finance (instalment sales), personal loans, student loans and credit cards. Deposit products Savings account, cheque accounts, call accounts / investment accounts and fixed deposit accounts.

4.2 Payments/clearing system The Central Bank provides banking services to the Government for State Account and certain donor accounts. This consists of cheque and EFT clearing and settlement. All domestic transfers exceeding NAD 5 million (USD 654 000) are made through the real time settlement system – NISS (“Namibia Interbank Settlement System”) – to ensure timely and irrevocable payment.

4.5 Banking branch and IT infrastructure In 2010 the Central Bank authorised MobiCash Payment Solutions (Pty) Ltd to provide mobile payment services in Namibia. MobiCash Payment Solutions is the first mobile payment service provider in Namibia. Research has shown that one of the key methods to reach the unbanked or under banked communities in developing countries is through mobile phone technology. In 2010, the Common Monetary Area (”CMA”) governors re-affirmed their commitment towards developing the CMA cross-border payment system infrastructure with active development continuing in the year 2011. The CMA central bank payments representatives have agreed that the CMA payment infrastructure will be developed with a view to become a platform for the development of the SADC (Southern African Development Community) cross-border payment system infrastructure. At this stage, the four national real-time gross settlement systems (RTGS); electronic funds transfers (EFT) and card payments in the CMA are the only payment channels that are considered to be adequately regionally integrated. However, this excludes the clearing and settlement of cross-border cheque payments.

The Central Bank, in collaboration with NamClear and the banking industry, implemented NamSwitch through a phased approach, whereby the Automated Teller Machine (“ATM”) solution and the Point-of-Sale (“POS”) solution was rolled out. The Switch is hosted at BankservAfrica in South Africa, and settlement files are submitted on a fund settlement value day to the Bank via NamClear in Namibia. Once debits and credits have been posted in the books of the Bank, the settlement of domestic ATM, debit card and credit card transactions is considered final and irrevocable.

4.6 Active exchanges

4.3 Insolvency provisions

4.7 Banking sector overview

The Companies Act makes the Insolvency Act applicable to the winding-up of Companies unable to pay their debts. The winding up of a company may be either: • by the Court; or

• Bonds • Treasury Bills • Equities traded on the Namibian Stock Exchange The Stock Exchange Control Amendment Act introduced a stock exchange in Namibia (NSX) which opened in September 1992 and which currently has thirty-seven listings, with a continually increasing market capitalisation which presently totals NAD 417.7 billion (USD 54.6 billion).

Namibia’s banking sector is still mainly in the hands of foreignowned companies, mostly South African. The Central Bank, the Bank of Namibia, regards Namibian banks as still serving simply as branches of their South African parent banks.

• voluntary; or • subject to the supervision of the Court. In the event of a company being wound up, every present and past member shall be liable to contribute to the assets of the company an amount sufficient for payment of its debts and liabilities, and the costs, charges, and expenses of the winding up, and for the adjustment of the rights of the contributories among themselves, subject to certain provisions in the Companies Act.

4.4 The taking of Security There are very limited restrictions on the taking of security. Perfecting security occurs on default, unless blocked by a court order.

Section 5 Physical Environment 5.1 Property ownership The Namibian Constitution guarantees all persons the right to acquire, own and dispose of all forms of property in any part of Namibia. From a conveyance perspective, once legally allowed to be in the country and official permits provide proof thereof, foreign residents and citizens of Namibia are generally regarded as having equal status when it comes to the purchase and possession of land/real estate with the important exception of agricultural land.

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44 | Africa Banking survey

5.2 Transport infrastructure

5.6 Social environment

The infrastructure in Namibia is considered to be one of the country’s competitive advantages. International air connections for both passengers and freight are available at Windhoek’s International Airport. All Namibia’s main towns and tourist resorts have airports, landing strips and/or heliports.

Poverty and inequality remain high in Namibia. The upper 20% of the population lives on 78.7% of the country’s total annual income, while the bottom 20% lives on a mere 1.4%. Approximately 35%-40% of the population depends on subsistence agriculture for its livelihood.

Walvis Bay, with its world-class standard of cargo handling and sheltered deepwater harbour, is poised to become the most important port on Africa’s west coast, and puts the port on a par with South African ports. Namibia has a well developed road network covering more than 40,000 km’s and providing access to the majority of towns, as well as tourist resorts and nature reserves. The primary routes are tarred. A network of railways covering 2,382 km’s connects Walvis Bay and Ludertiz with key destinations in Namibia and South Africa.

5.3 Communications infrastructure International satellite services link Namibia to telecommunication services worldwide. Telecom Namibia Ltd is the country’s national communications operator. Namibia boasts a 98% digital telecommunications infrastructure, which provides direct dialling to most places in the world. Namibia has mobile telephony coverage in most towns and road coverage along virtually all of the major routes in the country.

The government considers education as the most important long-term investment. Accordingly, it continues to allocate the largest share of the budget, 23%, to this sector, followed by health with 12% in 2010. The quality of education is low. Life expectancy was 62.1 years in 2010. Namibia has an effective anti-retroviral (ARV) programme.

5.7 Trading partners As per the World Trade Organisation Namibia’s main trading partners are South Africa, Angola, European Union (EU), UK, U.S., Canada, China, India, Russia and Japan.

5.8 Crime and corruption Crime is a becoming a serious concern in Namibia. The most common crimes are poverty-motivated crimes of opportunity, including pick-pocketing, purse snatching, vehicle theft, vehicle break-ins and house break-ins. Such crimes most commonly occur in the central business districts of cities, or other areas frequently visited by foreign tourists. The World Bank has said that Government corruption is a bigger problem than any other form of organised crime and fraud in Namibia.

5.4 Political environment

5.9 Language

Namibia is a multiparty, multiracial democracy, with a president who is elected for a five year term. The constitution establishes a bicameral Parliament, and provides for general elections every five years and regional elections every six years. The judicial structure in Namibia comprises a Supreme Court, the High Court, and lower courts. Roman-Dutch law is the common law. Namibia’s unitary government is currently in the process of decentralization.

English is the official language of Namibia, and is taught in all Namibian schools.

5.5 Economic overview The Namibian economy has a modern market sector, which produces most of the country’s wealth, and a traditional subsistence sector. Although the majority of the population depends on subsistence agriculture and herding, Namibia has more than 200 000 skilled workers, as well as a small, welltrained professional and managerial class. The country’s sophisticated formal economy is based on capital-intensive industry and farming. However, Namibia’s economy is heavily dependent on the earnings generated from primary commodity exports in a few vital sectors, including minerals, livestock, and fish. Furthermore, the Namibian economy remains quite tied to the economy of South Africa, as the bulk of Namibia’s imports originate there. GDP estimated is USD 11.9 billion at 2010.

Section 6 Governance and reporting Issues 6.1 IFRS implementation All domestic listed companies in Namibia are required to comply with International Financial Reporting Standards (“IFRS”) effective 1 January 2005, under the requirements of the Namibian Stock Exchange Act. Unlisted Namibian companies have the option to apply IFRS or Namibian GAAP.

6.2 Basel II and III Following the Bank’s successful migration to the Basel II Capital Adequacy Measurement on 1 January 2010, Namibia has officially become a Basel II regime. The Bank continues to monitor the impact of Basel II, especially the local banking institutions’ risk management capabilities, with the aim of eliminating any weaknesses identified.

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Financial Services | 45

6.3 FATCA There is no evidence of FATCA implementation in Namibia to date.

6.4 Anti Money Laundering (AML) laws/regulations The Financial Intelligence Centre (“FIC”) is mandated on behalf of the Bank of Namibia, to manage Namibia’s national money laundering risk by its administration of the Financial Intelligence Act (“FIA”). In particular, the FIC is mandated to: • Receive and analyse suspicious transaction reports (“STR’s”) pertaining to money laundering, which are received from accountable institutions and supervisory bodies designated in the FIA; • Disseminate intelligence so gathered from the analysis conducted, to local law enforcement agencies, foreign law enforcement agencies and foreign financial intelligence units, in order to combat money laundering in the country and abroad; and • Ensure that accountable institutions and supervisory bodies comply with their obligations under the FIA.

6.5 Know Your Customer (KYC) laws/regulations KYC requirements are being enforced by the Bank of Namibia.

6.6 Annual financial reporting Annual financial reporting is mandatory for all companies in terms of the Companies Act of Namibia.

6.7 Governance structures Unless otherwise prescribed or determined, a banking institution shall comply with the standards of corporate governance generally practiced, or required to be so practiced, by companies listed on any stock exchange established in Namibia under the Stock Exchanges Control Act.

6.8 Government ownership and management State-owned enterprises operate in many key sectors of the Namibian economy. The government has stakes (often 100% ownership) in companies in the following sectors: telecommunications (fixed and mobile voice and data services), energy, water, transport (air, rail, and road), postal services, fishing, mining, and tourism.

6.9 External auditors It is a legal requirement for all companies registered in terms of the Companies Act of Namibia to appoint an external auditor.

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46 | Africa Banking survey

Section 1 Regulatory 1.1 Regulatory Regime The principal regulator is Central Bank of Nigeria (“CBN”) with other regulatory support by the Securities and Exchange Commission and the Nigeria Deposit Insurance Corporation. A ‘’Hybrid’’ approach is practiced in Nigeria.

1.2 Basel Accord status Nigeria follows International practice. The CBN is currently in the process of implementing Basel II and III in Nigeria.

be addressed was banks doing businesses other than core banking activities. As a result of this, it was made clear to the major ‘’banks’’ that only core banking related activities could be handled by them. Those who had other non-banking subsidiaries would have to sell them off or the company would be required to register as a holding company. Other recent regulatory changes by the CBN include the new banking model, a 10 year tenure for external auditors, and maximum tenures for bank managing directors of 10 years, and 12 years for non executive directors.

1.9 Deposit insurance scheme

1.3 Structure of supervisory body

There is deposit insurance in Nigeria. It is called the Nigerian Deposit Insurance Corporation (NDIC).

The supervisory role falls under the CBN. A single person is not responsible for supervision, rather, there is a unit within the CBN responsible for bank supervision.

Section 2

1.4 Banking licence application All banking licensing applications pass through the CBN. The interested party will make a formal application for the grant of a licence to carry on the business of banking in Nigeria and address the request to the Director of Banking Supervision Department, CBN with the various prescribed fees and documents. The time frames are variable.

1.5 Regulatory reporting requirements Bank reporting is done monthly and is automated.

1.6 Important banking regulatory requirements Capital Requirement for Banks • Regional USD 64 million • National USD 160 million • International USD 320million Liquidity • Cash reserve ratio 8% • Liquidity ratio 30% Credit • Loans to Deposit 80% Forex

Commercial, Legal and Tax Environment 2.1 Process for establishing a new company The government agency responsible for the incorporation of new companies in Nigeria is the Corporate Affairs Commission (“CAC”). The process for registering a company involves reserving the proposed name, and submitting a completed application with prescribed documents to the CAC.

2.2 Foreign investment in local companies The process of Portfolio investments by foreign investors can be achieved through the allotment of shares from the company, or a transfer of shares. Either option requires the preparation and submission of documents and the entry of the name of the new shareholder into the register of members. The CAC is to be notified of the change in ownership the company.

2.3 Annual costs Relevant taxes and levies include company’s income tax, education tax, national information technology development levy, industrial training fund levy.

Appropriate sanctions are determined by the level of violation.

An annual external audit is compulsory, and the company is expected to file its audited accounts with the tax authorities annually along with its tax returns.

1.7 Banking supervision

2.4 Restrictions on foreign investment

Net open position 3% of the Shareholders funds.

Banking supervision is conducted in a consolidated process.

1.8 Global financial crisis response Following on from the near total collapse of the banking sector in Nigeria in 2009, the banking regulator (Central Bank of Nigeria) conducted an audit. After the audit of the sector, it found that one of the key issues which needed to

There are no restrictions on investments and divestments in Nigeria. All investors are to obtain a certificate of capital importation (“CCI”) from their bankers, which should be designated as ‘equity contribution’ for the foreign company’s investments in Nigeria. The CCI will be used to repatriate dividend and capital, at the point of divestment.

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137 170.1 million (2012 estimate)

NGN 1 = USD 0.00632 NGN: Nigerian Naira

$247.1 billion (2011 estimate)

Bisi Lamikanra T: +23412718962 E: [email protected]

2.5 Dividend remittance

2.11 Personal taxes

Dividends are capable of being remitted abroad in any currency through a Nigerian Bank, on the submission of all required documentation to the bank.

Individuals are liable to pay tax, dependant on their income level. Rates extend from 5% to 25% for income earners earning in excess of NGN 160 000 (USD 1 012).

2.6 Intellectual property rights Intellectual Property (“IP”) rights can be protected through the registration of such rights with the relevant government departments. These rights include copyrights, patents and trademarks. The applicable registries for IP registration are maintained by the Nigerian government.

2.7 Sustainability and the environment There is no official regulation on this. However there is a law being proposed by the legislature.

2.8 Anti-money laundering The enabling Acts & Regulations seek to achieve the AML objectives by requiring individuals, banks and other financial institutions to render politically exposed persons returns and currency transaction reports (“CTRs”) to the CBN (AML/ CFT Office in Financial Policy & Regulation Department) and Nigerian Financial Intelligence Unit (“NFIU”). The intention is to properly identify persons conducting transactions and to maintain a paper trail by keeping appropriate records of their financial transactions.

2.9 Tax regime The following taxes are inter alia applicable:

The employer is designated as the agent of government for the collection of personal income taxes, which should be deducted at source and remitted to the relevant tax authority on or before the 10th of the following month.

2.12 Tax returns The broad process for the submission of returns is as follow: • For new companies, the tax return is to be submitted within 18 months of incorporation or six months of its year end, whichever is earlier. • New companies are expected to file their tax returns based on the commencement rules set out in the Companies Income Tax Act for their first three years of business. • Tax returns, along with the audited accounts of the company, are to be submitted within six months after the company’s year end. • Tax returns of the company are filed annually. • Provisional tax will be paid by companies based on the tax paid in the prior tax return.

Section 3 People

• Companies’ income tax at a rate of 30% of taxable income. • Education tax at the rate of 2% of assessable profits.

3.1 Skills availability

• Value added tax at a rate of 5% of the cost of goods and services supplied.

Key skills/knowledge gap areas in Nigerian banking sector include risk management, project finance and product loyalty schemes. There is also limited depth of skills in Consumer Banking. Islamic Banking is relatively new, and would require significant capacity building.

• Withholding tax at varying rates (5% or 10%) on qualifying transactions. • Petroleum profit tax at a rate of 85% of chargeable profit of Oil Companies. • NITDA levy at 1% on profit before tax. • ITF levy at 1% of turnover. • Employee’s Compensation Act at a minimum of 1% of the company’s monthly payroll. • If your office will be in Lagos, business premises levy of NGN 10 000 (USD 64) in the first year and NGN 5 000 (USD 32) for subsequent years.

2.10 Branch taxation Nigeria does not operate a branch system for companies. All companies are expected to incorporate and form a local company (subsidiaries). All Nigerian companies (including subsidiaries) are expected to register for and pay all the relevant Nigerian taxes.

3.2 Foreign nationals There is no negative attitude to the use of ‘’ex-pats’’ in the Nigerian banking sector but there is a restriction to the total percentage that any company can have, not necessarily a bank. The law stipulates a maximum of 40% for foreigners in any organisation.

3.3 Labour legislation Passed in 1974, the Labour Act sets general employment rules for the country of Nigeria. For employees, it includes protection on wages, contractual requirements and provides guidance on conditions of employment.

3.4 Trade union presence There is an active Nigerian Labour Congress and Trade Union Congress in Nigeria.

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3.5 Hiring and Firing of employees

4.7 Banking sector overview

There are no specific restrictions on hiring; however labour laws must be adhered to in the recruiting and termination employment process.

The banking sector currently comprises 20 local banks and foreign banks.

Either party to a contract of employment may terminate the contract on the expiration of notice given by him. The terminating party must indicate to the other party of his intention to do so.

3.6 Contractors Contractors are tolerated, but all contracts pass through a bidding process.

3.7 Retirement and Medical Aid Membership of a retirement fund is compulsory. It is a contributory system in which an employee and the employer contribute 7.5% of the employee’s monthly emolument respectively. Membership of a medical aid fund is not compulsory.

The top four banks are: First Bank of Nigeria, Guaranty Trust Bank, Zenith Bank and UBA and they account for 44% and 42% of industry assets and deposits respectively. Hindrances in the current environment include decline in middle income class, poor risk management, high operating costs, lack of credit information and a lack of accessible consolidated financial sector data. Opportunities in the current environment include finance of small and medium enterprises, untapped agriculture finance and the high number of unbanked citizens.

Section 5 Physical Environment 5.2 Transport infrastructure

Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Term loans, overdraft, lease financing and invoice discounting. Deposit products Early saver account, call deposit account and standard savings account.

4.2 Payments/clearing system The clearing system in Nigeria is done through private switching companies. The Central Securities Clearing System Limited (the clearing system of the Nigeria capital market) relies on Nigerian Inter-Bank Settlement System (NIBSS) for the settlement of operations. The settlements of these companies are transmitted electronically to NIBSS daily (over the NIBSS secure payment network). The NIBSS settlement engine processes receive data and aggregates it and processes it through the CBN. Appropriate electronic advices are provided to banks and other stakeholders in each processing cycle.

Nigeria Transport Infrastructure is sub standard. Nigeria has a fairly extensive infrastructure of roads, railroads, airports, and communication networks. The road system is by far the most important element in the country’s transportation network, carrying about 95% of all the nation’s goods and passengers. Currently, many of the roads are in disrepair because of poor maintenance and years of heavy traffic. The Nigerian rail transport system is presently undergoing rejuvenation.

5.3 Communications infrastructure Nigeria Telecom sector has been experiencing an astronomical growth in the last few years, with MTN being the market leader with over 40 million subscribers. There are five GSM providers in Nigeria. Internet users are estimated at 22.1%. The sector is ranked among the fastest growing sectors in the country.

5.4 Political environment The country has adopted a Presidential system of democratic government, with more power at the centre. There are over 20 registered political parties, with three of these parties considered as the dominant players.

5.5 Economic overview

IT Infrastructure in Nigerian banking is still evolving. However, mobile money services, extensive ATM machine deployment across the country, internet services for banks, branch network, customer processing centres and call centres, are all currently in place.

Nigeria is the United States’ largest trading partner in subSaharan Africa, largely due to the high level of petroleum imports from Nigeria. Nigeria has an abundant supply of natural resources, and is the largest producer of oil in Africa. Nigeria has one of the fastest growing telecommunications markets in the world, and a highly developed financial services sector.

4.6 Active exchanges

5.6 Social environment

The Nigerian Stock Exchange is the main exchange in Nigeria.

Nigeria is the most populous country in Africa with over 250 ethnic groups. The major tribes are: Hausa (29%), Yoruba

4.5 Banking branch and IT infrastructure

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(21%) and Igbo (18%). 56% of the population are between the ages of 15 – 64 years. 48% of the total population reside in the country’s urban areas. The literacy level is estimated to be at 68%. Nigeria has a number of religions: it is estimated that Muslims make up 50%, Christians 40% and others 10%.

5.7 Trading partners Nigeria has interactions and a number of trading partners globally. The key partners are the United States of America, China, Russia, Switzerland, and Norway.

5.8 Crime and corruption The crime rate in Nigeria is at manageable levels, while corruption levels are high. Crime syndicates are generally less formal and more organized along familial and ethnic lines, thus making them less susceptible by infiltration from law enforcement. Police investigations are further hampered by the fact there are at least 250 distinct ethnic languages in Nigeria.

5.9 Language English is the predominant language in Nigeria and it is widely spoken and understood for business.

Section 6 Governance and reporting Issues 6.1 IFRS implementation 2010 was a period for awareness, assessment, legislative changes, training and planning. In 2011 entities prepared IFRS Opening Statement of Financial Position (SFP), dry runs of IFRS statements were compiled for listed and SPE’s.

6.2 Basel II and III The adoption of IFRS would facilitate the implementation of Basle III requirements by banks in Nigeria.

6.3 FATCA Nigerian banks are generally aware of the major requirements of the FATCA regulations, as the provisions could impact their businesses. However, the banks are yet to implement measures to enable them to comply with the requirements of the FATCA.

information. The Central Bank has stated that those banks and other financial institutions that violate this order, by way of allowing the operation of customers’ account without evidence of an update, shall be subjected to appropriate regulatory sanctions, while non-compliant account holders would not be permitted to operate the accounts.

6.6 Annual financial reporting Listed companies are mandated to prepare and make public their annual reports a maximum of three months after financial year end. The Nigerian Stock Exchange is entitled to suspend from trading, shares of companies whose annual reports are due, but not made it available to the exchange.

6.7 Governance structures Different corporate governance structure and requirements include: • The number of non-executive directors should be more than that of executive directors, subject to a maximum board size of 20 directors. • At least two non-executive board members should be independent directors, appointed by the bank on merit. • The internal control system should be documented and designed to achieve efficiency and effectiveness of operations reliability of financial reporting, and compliance with applicable laws and regulations at all levels of the bank. • External auditors should render reports to the Central Bank on the banks’ risk management practices, internal controls and level of compliance with regulatory directives.

6.8 Government ownership and management Three of the banks currently operating in Nigeria are government owned. Government ownership was brought about by the inability of the banks to recapitalise after the expiration of the deadline given by the CBN.

6.9 External auditors It compulsory for a company to have an external auditor. The external auditor of any bank in Nigeria has a limit of 10 years to audit that particular bank, after which it must rotate.

6.4 Anti Money Laundering (AML) laws/regulations Anti Money Laundering laws/regulations are very active in Nigeria. There is an agency saddled with the responsibility of prosecuting offenders (among its other responsibilities), called the Economic and Financial Crimes Commission.

6.5 Know Your Customer (KYC) laws/regulations This is a serious issue in Nigeria. The Central Bank recently mandated all the banks to update their customers’ © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

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Section 1 Regulatory 1.1 Regulatory Regime The Senegalese banking system is regulated as follows: • the Council of Ministers, which defines the monetary and credit policy; • the Central Bank of West African States (“BCEAO”), which implements the monetary policy, draws up the prudential and accounting requirement, and monitors the banking system; • the Banking Commission, which oversees the organization and the control of banks and financial institutions; and • the Ministry of Finances.

1.6 Important banking regulatory requirements There are a number of regulatory requirements applicable to the Senegalese banking system. Of these the most important include: • Net effective equity is to be held at a minimum XOF 5 billion (USD 10.1 million). • Risk ratio to be held at a minimum of 8%. • Exposure on the same client may not exceed 75% of net effective equity. • Total commitments may not be greater than 25% of net effective equity, and may not exceed 8% of net effective equity • Liquidity ratio is to be maintained at a minimum of 75%.

1.7 Banking supervision

The framework used is similar to Twin Peaks.

Banking supervision is conducted on a consolidated process.

1.2 Basel Accord status

1.8 Global financial crisis response

The banking sector is governed by the banking law applicable to the West African Monetary Union (“WAMU”) zone. The clauses of this law come from national laws (business law), community law (banking law, banking chart of accounts, prudential regulation) and international conventions (including the recommendations of the Basel Committee). The second pillar of Basel II is in implementation.

There are no specific supervisory responses being considered in Senegal in response to the global financial crisis, as the latter did not affect the Senegalese Banking System.

1.9 Deposit insurance scheme A deposit insurance scheme is in implementation, and negotiations are under way regarding contribution and compensation terms.

1.3 Structure of supervisory body The WAMU Banking Commission is a supervision and control organ, which was created by an Agreement that came into force on 1st October 1990. The Commission is governed by the provisions appended to the Agreement. The Banking Commission is an organ of WAMU. It meets at least once every quarter. It has a permanent Secretariat composed of officers.

1.4 Banking licence application Banks and financial institutions must be authorised and registered on the list of banks and financial institutions, to be able to operate. This authorisation is granted by the Minister of Finance, after BCEAO has examined the application and the WAMU Banking Commission has certified its conformity with applicable laws. Typical licence approval takes up to six months.

1.5 Regulatory reporting requirements There are a number of reporting requirements. • Daily foreign currency position. • Monthly, quarterly, biannual and annual financial statements and prudential ratio. • Quarterly internal control reports. • Biannual loans portfolio review reports.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company In Senegal, start-up times have been considerably shortened and procedures simplified. The APIX Administrative Procedures Facilitation Centre (CFPA) can simplify and perform, on your behalf, all procedures with government and local authorities, as well as relevant public institutions, all in a guaranteed time frame. When you (or your agent) present the deeds and other documents of incorporation, a receipt will be issued, and 24 hours later you will have registered articles of organization, the register of commerce and movable capital, your company’s tax registration identification number and the declaration of establishment.

2.2 Foreign investment in local companies Foreign individuals or companies (physical or moral persons) receive the same treatment as those individuals or companies (physical or moral persons) of Senegalese nationality, with the reservation of reciprocity and without prejudice to any measures that may concern all foreign nationals, or may result from the dispositions of treaties or agreements to which the Republic of Senegal is party.

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152 12.9 million (2011 estimate) $13.5 billion (2010 estimate)

XOF 1 = USD 0.00202 XOF: Communaute Financiere Africaine franc

2.3 Annual costs There are no particular annual mandatory costs associated with owning a company. External audits are compulsory for limited companies and limited liability companies in the following cases: • Capital of XOF 10 million (USD 20 200) and more. • Turnover of more than XOF 100 million (USD 202 000) or • Staff of more than 50 people.

2.4 Restrictions on foreign investment Some activities such as baking, shipping lines and fish wholesaling are reserved for Senegalese nationals. There are also restrictions on certain professions (lawyer, doctors and accountants). Divestment must occur through legal means.

2.5 Dividend remittance The freedom for the enterprise to transfer revenue or any products of any nature whatsoever that may result from its operations, to cede any part of its assets or to go into liquidation is guaranteed, according to the laws currently in force. The same guarantee is extended to investors, entrepreneurs or associates, whether they be individuals or companies (physical or moral persons), who are not citizens of Senegal.

Pape Bocar Gueye T: +221338492727 E: [email protected]

of West African States (“ECOWAS”) is responsible for facilitating the adoption and implementation of Anti-Money Laundering and Counter-Financing of Terrorism (“CFT”) in West Africa.

2.9 Tax regime Single Tax Payment (Contribution Globale Unique) Senegal applies a global representative system of taxation for: industrial and commercial profits, minimum fiscal tax, licenses, value added tax, lump-sum payroll taxes and alcohol sales licenses. • Corporate Tax is levied at 25%. • Income Tax is levied against individuals fiscally domiciled in Senegal, whatever their nationality. They are subject to income tax on their entire income, Senegalese and foreign. This includes income from property, movable capital, loans and deposits and funds. • Lump Sum payroll tax is established each year by individuals, corporations and organizations that pay salaries to their employees, and cannot exceed 50% of the taxable salaries. • VAT is levied at 18% in general, 15% for tourism, and 10% for local products and imported consumer goods and services.

2.6 Intellectual property rights

2.10 Branch taxation

In the conditions provided for in the laws and regulations in force, the right of private ownership of all assets, whether fixed or movable, and whether material or immaterial, is protected in all legal and commercial aspects, in all its constituent parts, however divided, its transfer and any contracts of which it forms the object.

Double taxation can be avoided for branches when an agreement is concluded with the parent country. Deductibility of certain financial expenses, interest and royalties are not applicable to branches.

2.7 Sustainability and the environment Senegal entered into bilateral and multilateral cooperation agreements with the international community. As such, it seeks through the implementation of development strategies, to comply with international standards in terms of socioeconomic development indicators. In this context, the institutions of the UN system are important partners of Senegal. Each institution contributes to the establishment of mechanisms for monitoring the recommendations of global conferences, for fighting desertification and pollution and for protecting nature.

2.8 Anti-money laundering Anti- money laundering laws were adopted by the Council of Ministers of the WAMU in 2003. The laws make provision for administrative and criminal sanctions applicable to individuals and companies, as well as preventive measures which may be carried out by a judge. An anti-money laundering Authority was created in 2004 (CENTIF), and Senegal is host to the head office of GIABA (“Inter Governmental Action Group against Money laundering in West Africa”). The institution of the Economic Community

2.11 Tax rates Taxes on individuals are mainly salaries tax, and they are deducted and paid to tax authorities by their companies. The rates applicable are progressive, and vary according the family members in charge and cannot exceed 50%.

2.12 Tax returns In general, the tax payment is annual. The corporation tax is payable in three installments during the year following the financial year.

Section 3 People 3.1 Skills availability Long convinced that educating and training men and women creates invaluable wealth for the country, Senegal spends over a third of its national budget on education. The country has many primary, secondary and higher education institutions, public and private. Education is mostly in French, but also in Arabic or English. Prestigious universities and foreign schools offer high quality initial and ongoing

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52 | Africa Banking survey

training, locally or abroad, through partnerships with foreign institutions. The curricula match the high-level needs of all sectors, and are particularly strong in agribusiness and services (banking sector included).

Section 4

3.2 Foreign nationals

4.1 Major loan and deposit products

An approval is required when hiring “ex pats” as a director, executive or manager. Note that “ex pats” refers to a non citizen of the WAMU area. The request is to be sent to the Ministry of Finance and the Central Bank, accompanied by various required documents.

Loan Products Real estate, auto, consumption, overdraft facilities, Islamic finance products, letters of credit and guarantees and acceptances.

3.3 Labour legislation

Current accounts, saving accounts and time deposits.

The Senegalese Constitution states the basic principles of employment law, such as the principle of non-discrimination, prohibition of forced labour, regulation of employment contracts, working conditions and the establishment of conflict settlement procedures. The conclusion of a definitive employment contract may be subject to a trial period, which shall be written down either separately or in a clause of the contract. The trial period, cannot exceed six months. The working week is set at 40 hours, and the retirement age is 60 years in public sector and 58 years in the private sector.

4.2 Payments/clearing system

3.4 Trade union presence Education, health and transport are the main sectors where union presence is prevalent.

3.5 Hiring and Firing of employees Fixed-term contracts may be terminated before their term, as a result of circumstances making it impossible for the continuation of the contract, or by mutual agreement of parties involved, or due to gross negligence of either party, or considered as such by competent court, or following the death of the worker. Any termination of contract is subject to a notice which shall be put in writing down by the party who initiates the break. The reason for the termination must be mentioned in this notice.

3.6 Contractors The duration of a fixed term contract cannot exceed 24 months.

3.7 Retirement and Medical Aid The employer is responsible of the declaration and the payment to IPRES (National Retirement Agent) of its retirement contribution, as well as the employees’ contribution, which is deducted from their monthly salaries. Employers are obliged to affiliate employees to a social security scheme in order to ensure their health coverage.

Banking Environment

Deposits

The automated transfer and settlement system within the WAMU, implemented since 2004, is designed for large value interbank transfers. Each transaction is settled on a gross and real time basis. It is characterised by rapid transaction processing, great safety and availability, and also affordable costs. The automated interbank clearing system within the WAMU, which is operational in all the Union member countries, is a major innovation compared to the manual clearing system. It is characterised by the dematerialisation and the transmission through electronic files of the values to be exchanged within the clearing system. This system is the infrastructure for low value payments between participating institutions which are banks, the BCEAO, the Treasury and postal financial services.

4.5 Banking branch and IT infrastructure Approximately 300 branches have been established all across the country. A significant number of these are located in the economic and political capital, Dakar. ATM and internet banking services are provided by the majority of the banks, and two mobile-cellular operators are testing mobile banking.

4.6 Active exchanges A regional stock market was created in 1996, Bourse Regional des Valeurs Mobilieres SA (“BRVM”), and a representation is implemented in each country member of the WAMU. Bonds represent the main exchange producer in the region.

4.7 Banking sector overview The Senegalese banking sector has expanded significantly in the last few years. 19 banks are in operation. The banking sector is now split in two. Historical players such as Société Générale, CBAO Groupe Attijariwafa Bank, Ecobank, Banque de l’habitat, and BICIS represent 75% of market share. New players, are attracted by good prospects of economic growth, political stability, housing boom and lower penetration of banking services (represent about 20%, microfinance institutions included). Some consider that the market is now saturated, and that a consolidation process is inevitable in the future. But others

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remain optimistic, encouraged, for example, by the approval of a new law requiring payment of salaries of more than XOF 100,000 (USD 202) by bank transfer. However, the lack of accurate data, and the suspicious attitudes of a part of the active population, regarding banking, are the main restraints on the banking system.

Section 5 Physical Environment 5.1 Property ownership Individuals or companies (physical or moral persons), whatever their nationality, within the framework of the laws in force, may acquire any rights of whatever nature in property, concessions or administrative authorizations.

5.2 Transport infrastructure Senegal has a dense and quite well maintained road network compared to other West African countries. This ensures the smooth movement of people and goods. Senegal boasts three international airports: Dakar, Saint Louis and Ziguinchor. The existing 1060 km railway provides great potential for the transport of goods and raw materials, especially on the DakarBamako (Mali) line, which gives access to the wider West African sub-region.

5.3 Communications infrastructure Senegal has a fully digitized network of efficient telecommunication, with more than 2,200 km of fibre optic wiring. It is linked to Europe, America, Asia and the Middle East through permanent cable connections. Internet and telephone services penetration levels are high, both in companies and amongst the general public. There are currently three providers of mobile-cellular services.

5.4 Political environment Senegal remains one of the most stable democracies in Africa, and has a long history of participating in international peacekeeping and regional mediation. Senegal was ruled by a Socialist Party for 40 years, until current President Abdoulaye Wade was elected in 2000. He was re-elected in February 2007. Presidential elections last took place in February 2012.

5.5 Economic overview Senegal’s major economic contributors are agriculture, industry and services. The country’s key export industries are phosphate mining, fertilizer production, and commercial fishing. The country is also working on iron ore and oil

exploration projects. GDP is estimated at USD 13.4 billion in 2010.

5.6 Social environment Senegal is experiencing a boom in its real estate sector. Hotels, luxurious houses and apartments are under construction. However, this boom has some drawbacks, as access to housing is becoming more difficult for middle households. This has led to overcrowding in some neighbourhoods. Pre-primary school participation has increased in Senegal, but it remains very low as the pre-primary gross enrolment ratio is around 10%. However the number of children not attending school is declining, and the primary education adjusted net enrolment ratio is around 80%. Senegal is experiencing some delays on health targets, due to the difficulty of access to health services and shortages of vaccines in some rural areas.

5.7 Trading partners Exports are mainly made up of fish, groundnuts (peanuts), petroleum products, phosphates, and cotton. The main customers include Mali, India, France and Gambia. Imports are largely made up of food and beverages, capital goods and fuels. Main suppliers are France, UK, China and Nigeria.

5.8 Crime and corruption Corruption remains one of the biggest challenges in Senegal. As in many other sub-Saharan countries, public services are unevenly provided and of poor quality, and civil servants often resort to petty corruption. The institutions that are intended to provide checks and balances within the system are generally under-resourced and lack independence. Whilst there are some incidents of crime, Senegal is still considered to be a country with low crime statistics.

5.9 Language French is the official and business language. Senegalese are showing interest in learning and speaking English.

Section 6 Governance and reporting Issues 6.1 IFRS implementation For statutory accounts, the SYSCOA chart of accounts is used (regional chart of accounts). But when reporting to group for international subsidiaries or branches, IFRS is used.

6.2 Basel II and III Currently the transition to Basel II is in progress.

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54 | Africa Banking survey

6.3 FATCA There is no evidence of FATCA implementation in Senegal to date.

6.4 Anti Money Laundering (AML) laws/regulations Anti money laundering laws were adopted in 2003.

6.5 Know Your Customer (KYC) laws/regulations In force particularly in financial institutions.

6.6 Annual financial reporting Mandatory for banks, for Limited Companies, and for Limited Liability Companies in certain conditions.

6.7 Governance structures Governance structures such as use of Audit Committees, Boards are implemented in Banks and International companies’ subsidiaries.

6.8 Government ownership and management Prevalence of Government ownership and management is noted in Banks and International companies’ subsidiaries.

6.9 External auditors Financial statements are to be certified by auditors for banks, for Limited Companies, and for Limited Liability Companies in certain condition.

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Financial Services | 55

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56 | Africa Banking survey

Section 1

1.7 Banking supervision

Regulatory

Solo basis. Other financial institutions (e.g. Insurers) have their own regulators.

1.1 Regulatory Regime

1.8 Global financial crisis response

South Africa currently has an Institutional approach to regulation, but is moving towards a Twin Peaks methodology. Currently regulation of the banking sector is the responsibility of the South African Reserve Bank, under the authority of the Registrar of Banks.

1.2 Basel Accord status The Regulator follows international best practice. South Africa is Basel II compliant, and is moving to adopt the Basel III framework.

1.3 Structure of supervisory body The South African Reserve Bank has responsibility for the supervision of banks, and this falls into a department called “Bank Supervision”, which is headed by a senior executive called the “Registrar”, who reports to a Deputy Governor of the Central Bank.

Yes: the regulatory framework being proposed will broaden supervision to a “Twin Peaks” methodology, which will then include the establishment of oversight regulatory bodies, macro-prudential supervision, a separate regulator for market conduct, i.e. “Treating the Customer Fairly (TCF)”, amongst others. In addition, adherence to the Liquidity recommendations of Basel III is being considered (probably with adjustment for local conditions).

1.9 Deposit insurance scheme No deposit insurance scheme currently exists, but this is being considered as part of the changes mentioned above.

Section 2 Commercial, Legal and Tax Environment

1.4 Banking licence application

2.1 Process for establishing a new company

Application must be made to the Registrar using a prescribed format, together with a fee. Information required would include business plans, capital structure, funding profile, risk management frameworks, human resources, technology infrastructure and governance. Typically a foreign exchange licence would also need to be applied for, through the Financial Surveillance Department. The process can take from three to six months.

Broadly; the process would include:

1.5 Regulatory reporting requirements South African banks (and branches) are required to submit monthly returns in a prescribed format. There are also annual meetings, after the AFS are produced, with banks, their board and their auditors. Returns may be submitted electronically. Banks are also required to submit daily market risk reports, and there are also various quarterly and six-monthly returns required.

1.6 Important banking regulatory requirements Other than requiring separate banking and foreign currency licences, the following apply: • Minimum capital of R250 million (or 9.5% of risk-weighted assets), whichever is the greater, the Regulator requires add-ons for individual banks. • Minimum reserve balance of 2.5% of adjusted liabilities. • Liquid assets of 5% of adjusted liabilities. • Non-compliance could result in penalties, including annulment of the banking licence.

• Decide on the corporate structure required. • Obtain necessary regulatory approvals (e.g. banking licence). • Lodge specified formation documentation with the “Companies and Intellectual Property Commission” (“CIPC”). • Open a bank account. • Register with the tax authorities (SARS) for income tax, VAT, employees’ taxes. • Register with the Department of Labour. • Register with the authorities for Occupational Health and Safety.

2.2 Foreign investment in local companies Foreign investment is generally encouraged, and the process would be the same as for locals. There are some ownership, competition, black economic empowerment and control restrictions, and some sectors (e.g. banking) require specific authorisations. There are also Exchange Control regulations to be aware of.

2.3 Annual costs There is an annual fee payable by each company, within 30 days of its year end. The amount depends on the size and nature of the company. There are also costs associated with the annual audits or reviews.

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34 50.5 million (2011 estimate)

ZAR1 = USD 0.13050 ZAR: South African Rand

$422.037 billion (2011 estimate)

Richard Buchholz T: +27 (0)11 647 6204 E: [email protected]

2.4 Restrictions on foreign investment

2.11 Tax rates

There are very few restrictions on investment in South Africa, but investors should be aware of local requirements in terms of inter alia, the Competition Act, Black Economic Empowerment, and industry-specific approvals.

Individuals are taxed on “taxable income” at rates from 18% to 40%, depending on the amounts. Certain age thresholds and rebates apply.

2.5 Dividend remittance

(Note: these are subject to change).

All foreign payments (i.e. out of South Africa) are regulated by the S A Reserve Bank’s Exchange Control department. Generally, dividends are freely transferable, as long as they are supported by an auditor’s certificate, a board resolution, a director’s representation letter and financial statements.

2.6 Intellectual property rights Yes. Intellectual property rights are protected through a number of laws as well as through Common Law (legal precedent). Registration of rights is done through the Companies and Intellectual Properties Commission (CIPC).

2.7 Sustainability and the environment There are laws regarding the protection of the environment, the most significant of which is the National Environmental Management Act (NEMA). South Africa hosted the 17th Conference on climate change in Durban (COP17) in December 2011, and is committed to the agreement reached at that conference. There is a growing corporate awareness of the environment, and companies’ responses to the sustainability challenges. Listed companies are required to provide Integrated Reporting in their financial statements.

2.8 Anti-money laundering

Trusts are taxed at 40%. Taxes on employees are collected by the employer on a Pay As You Earn (PAYE) basis, and paid over to SARS on a monthly basis.

2.12 Tax returns Individuals and companies are required to submit tax returns annually. Companies and certain individuals are required to submit provisional returns at least every six months, and pay any taxes due at that time.

Section 3 People 3.1 Skills availability South Africa has a reasonably well structured Primary, Secondary and Tertiary educational system. The challenges are: • Trying to develop a skills base that is representative of the demographics of the country. • Developing appropriate skills to meet the challenges of a rapidly developing country.

Yes. The Financial Intelligence Centre Act (FICA) and Prevention of Crime Act (POC) were established to regulate money laundering, including stringent Know Your Customer (KYC) principles required on financial transactions.

• Retaining existing skills and preventing a skills flight.

2.9 Tax regime

There are requirements for ex-pats to obtain the necessary work permits, and the authorities generally prefer that local resources are employed and developed where practical.

There are several important taxes, the most important of which are (rates are indicative only and subject to various provisions) : • Corporate Income Tax: 28% • Capital Gains Tax: Up to 20% effective • Value Added Tax: 14% • Secondary Tax on Companies (STC) : 10% on dividends (note: to be replaced by a new tax on 1 April 2012). • Various Excise Duties and Levies. Note: It is important to obtain detailed advice on applicable taxes, as this is by no means comprehensive, and they are subject to change.

2.10 Branch taxation Yes. Branch profits are taxed at a rate of 33%.

By and large, in the banking sector, there is a reasonable base of skills and experience.

3.2 Foreign nationals

3.3 Labour legislation The principal labour law is embodied in the Labour Relations Act of 1995 and Basic Conditions of Employment Act of 1997. They aim to promote economic development, social justice, labour peace and democracy in the workplace, as well as regulating various labour processes and practices. As such, they regulate the relationships between the employer and employee, as well as specifying the rights and obligations of both.

3.4 Trade union presence Yes – there are a number of active unions, including in the banking sector. The umbrella organisation, COSATU, is a strong political influence in the country.

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58 | Africa Banking survey

3.5 Hiring and Firing of employees

4.5 Banking branch and IT infrastructure

There are generally no restrictions on the hiring of employees, although it is necessary to be cognisant of the country’s Broad Based Black Economic Empowerment (B-BBEE) requirements in terms of racial mix. Firing of full time employees is strictly regulated by the various applicable labour laws.

3.6 Contractors

The major banks in South Africa have a very comprehensive physical branch infrastructure. Several of the smaller players have also developed reasonable branch footprints. Access to banking services is across a wide number of channels, including internet, mobile telephones, chain stores and various agencies. The technology is sophisticated, and penetration is increasing.

There are no restrictions on the use of contractors, but applicable taxation and labour laws need to be considered.

4.6 Active exchanges

3.7 Retirement and Medical Aid Most employers require employees to become members of an approved Medical Aid Scheme. Membership of a registered Retirement Fund is required for all employees.

Section 4 Banking Environment 4.1 Major loan and deposit products The major lending products are loans, overdrafts, structured finance, vehicle and asset finance and home loans. The major deposit products are current accounts, overnight, money market notice, call and fixed term deposits.

Equities, bonds, derivatives (including commodities) are all traded “on-exchange” through the Johannesburg Stock Exchange (JSE). South Africa follows G30 principles in terms of trade settlements (through the “Strate” system).

4.7 Banking sector overview South Africa has a well-developed and sophisticated banking sector, regulated by the South African Reserve Bank. There are around 18 registered local and foreign banks operating in South Africa, as well as a large number of branches and representative offices of foreign banks. The sector is dominated by 4 large full service banks, with significant branch footprints, and a number of others operating in niche markets. The sector is extremely competitive, both at a wholesale and retail level.

Most banks offer a full range of treasury and forex products.

Section 5

4.2 Payments/clearing system

Physical Environment

The payments system is regulated by the National Payments System (NPS), under the oversight of the Reserve Bank. Clearing is effected through various clearing houses (PCH), depending on the nature of the transaction, and settlement takes place through either SAMOS (owned by the Reserve Bank) or CLS (for foreign transactions).

5.1 Property ownership There are very few restrictions on the ability to buy and hold property on a freehold basis. Property ownership is a legal right enshrined in the country’s Constitution.

There are rules governing the participants of all of the above.

5.2 Transport infrastructure

4.3 Insolvency provisions

South Africa has, by and large, an excellent infrastructure, with well-maintained major road routes across the whole country. There is also a good rail network, and a number of reasonablysized seaports (Durban has recently launched its own Trade Port). There is also a well-established and comprehensive air transport network, with passenger and freight terminals in all major centres, and a number of International Airports.

The insolvency of individuals and companies is regulated by the Insolvency and Companies Acts, and, in particular, the Business Rescue provisions of the Companies Act. There are very specific requirements contained in both, designed to protect creditors and businesses, as well as employees.

4.4 The taking of Security Whilst there are generally no restrictions on the taking of security (and its perfection), one needs to be mindful of Insolvency and Companies Act provisions relating to the taking of security, various which are particularly applicable at or near insolvency.

5.3 Communications infrastructure South Africa has a regulated telecommunications industry, supported by the long-established landline infrastructure, dominated by Telkom, the local telecoms parastatal. However, recent years have seen a rapid growth in mobile telephony and broadband connectivity. The network is nearly 100% digital, and is probably the most developed in Africa.

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With the commissioning of improved undersea cabling, linking South Africa to the rest of the world, and improvements in broadband etc, internet usage has also grown exponentially. Local connectivity is gradually being improved with the development of fibre optic cable networks.

5.4 Political environment South Africa became a fully fledged multi-party democracy in 1994, when all citizens gained the franchise. The country has a Westminster-based parliamentary system, and elections are held every 4 years.

Section 6 Governance and reporting Issues 6.1 IFRS implementation All listed companies are required to prepare their financial statements in accordance with IFRS. Unlisted companies and certain others may apply IFRS or SA GAAP (which is consistent with IFRS), for SME’s.

6.2 Basel II and III

The rights of individuals are enshrined in the country’s Constitution.

South African banks were required to adopt Basel II by January 2008. Most are preparing for Basel III, but there is no finality yet on the application of some of the requirements (e.g. liquidity).

5.5 Economic overview

6.3 FATCA

The practical landscape is dominated by the majority party, the ANC, with the DA being the official opposition.

South Africa is regarded as a middle income emerging market, with a GDP of around USD 560 billion. It is rich in natural resources, and has a thriving industrial base. The major contributors to GDP are Finance, Real Estate and Business Services; wholesale, retail motor trade and services.

South African banks are still considering the implications of FATCA.

6.4 Anti Money Laundering (AML) laws/regulations

South Africa has a high level of formal unemployment, at over 20%, and GDP per capita of around USD11 000.

There are very strict AML laws in South Africa, most specifically the Financial Intelligence Centre Act (FICA) and the Prevention of Organised Crime Act (POCA), and all banks are required to have processes to address the requirements of these.

5.6 Social environment

6.5 Know Your Customer (KYC) laws/regulations

The biggest challenge currently facing South Africa is the provision of social services to the majority of its people.

The KYC requirements for South African companies are set out in the Financial Intelligence Centre Act (FICA), and all banks (and many other businesses) are required to verify certain facts about their customers.

The system of Apartheid, which ended in 1994, meant that the vast majority of South Africans did not have unfettered access to housing, schooling, hospitals and the like, and the country is now having to play “catch-up” in these areas. Similar problems face the electricity supplier, Eskom, where the rapid growth in demand is causing strains on the power network.

5.7 Trading partners China, Japan, USA, European Union (specifically the UK, Germany, Netherlands, Spain and Belgium), and Africa.

5.8 Crime and corruption Crime and corruption continue to be an ongoing issue for all South Africans, but government has taken steps to improve the statistics and/or eliminate the problem. The September 2011 S A Police Services report shows that overall crime levels are down 24% over the previous year. Fraud and corruption, however, continue to attract widespread media attention.

5.9 Language English is the main business language in South Africa. There are 10 other official languages, as recognised in the country’s Constitution.

6.6 Annual financial reporting All South African companies are required to publish financial statements at least annually. All public and state-owned entities require external audit. Certain other companies require “independent reviews”, whilst others are exempt from such review.

6.7 Governance structures South Africa is generally in compliance with international governance standards, including integrated reporting. The King Code on Corporate Governance is widely applicable. All banks are required to have, inter alia, an independent Audit Committee.

6.8 Government ownership and management Government and parastatal bodies play a significant role in the economy. Principal parastatals are Telkom (communications), Eskom (energy), Transnet (logistics), Development Bank (DBSA), SABC (broadcasting) amongst a host of others, including airports.

6.9 External auditors See previous paragraphs

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Section 1 Regulatory 1.1 Regulatory regime The principal regulator in the country is the Central Bank (known as the Bank of Tanzania) which monitors the operations of all commercial banks in the country. The major framework used for monitoring commercial bank is the Hybrid, whereby the Institutional as well as the Functional approaches are used. All Banks are monitored by the Bank of Tanzania. In addition, banks that are listed on the Dar es Salaam Stock Exchange are also under the supervision of the Capital Markets and Securities Authority.

1.2 Basel Accord status The Bank of Tanzania (“BOT”) follows International practice and, as of now, Basel I and II have already been implemented and are operating. Basel III is in the pipeline, but there is no set date for this implementation.

1.3 Structure of supervisory body The Bank of Tanzania is the sole authority responsible for supervising commercial banks under its directorate of banking supervision, which holds direct supervisory responsibilities for the commercial banks.

1.4 Banking licence application Prospective investors are required to apply to the Central Bank for a license. License approval will normally depend on how quick the applicant is in fulfilling the licensing procedures, as stipulated by the Central Bank from time to time. Like banks, non-bank entities also require regulatory approval and licensing. Procedures are more or less the same as those for banking entities.

1.5 Regulatory reporting requirements The Bank of Tanzania has daily, weekly, monthly quarterly and annual returns which are mandatory for every bank to submit on prescribed deadlines. The returns have recently been automated, but there is still a requirement for banks to submit hardcopy as evidence and for filling purposes to Bank of Tanzania.

1.6 Important banking regulatory requirements The most important regulatory requirements include:

Capital requirement: • To start a commercial bank, one should have a total capital not below TZS 5 billion (USD 3.1 million) which shall be contributed by at least five people. The limit is in the process of being revised to TZS 15 billion (Usd 9.3m). • Every bank shall maintain, at a minimum, a core capital and total capital equivalent to 10% and 12% respectively of its total risk weighted assets and off balance sheet exposures.

Liquidity: • Every bank shall maintain minimum liquid assets amounting to not less than 20% of its demand liabilities. • Every bank shall maintain at all times its gross loan portfolio at levels not exceeding 80% of its total deposit liabilities. Total deposits shall include local and foreign exchange deposits of customers, banks, and special deposits.

Credit: • The total amount of credit accommodation which any bank, other than a microfinance company and financial cooperative, may grant, directly or indirectly, to any person and his related parties, is required to be monitored against a number of stringent criteria.

1.7 Banking supervision Banking supervision in Tanzania is performed on both a solo and consolidated basis.

1.8 Global financial crisis response The global financial crisis did not directly affect commercial banks in Tanzania. The effect was indirectly felt through certain sectors of the economy and its interaction with commercial banks. The Bank of Tanzania is in the process of investigating the possibility of increasing capital requirements to allow for unexpected losses. There is a move to increase the capital requirement for commercial banks to around TZS 15 billion (USD 9.3 million).

1.9 Deposit insurance scheme Tanzania does have a deposit insurance fund. The fund is managed by the Deposit Insurance Board and it is the obligation of every licensed bank or financial institution to contribute to the fund an annual amount determined by the Deposit Insurance Board. Currently the, amount of contribution is 1% of the total deposit liabilities of the commercial bank, during the period of 12 months. The fund’s responsibility is to protect depositors in case of a bank going bankrupt.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company An application is made to the Registrar of Companies for the reservation of a name, accompanied by various prescribed documents. Once approved, a Certificate of Incorporation is issued. Applications are made to the Registrar of Companies in the required format. This process takes approximately one month. Once the company is appropriately registered with the Registrar of Companies, it should be registered for tax purposes. This requires completion of the respective tax registration forms and submission of various specified documentation. Thereafter, a business license must be obtained from the municipal authorities. This takes approximately five to eight weeks.

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128 43.2 million (2010 estimate)

TZS 1 = USD 0.00062 TZS: Tanzanian Shilling

$29 billion (2012 estimate)

2.2 Foreign investment in local companies Foreigners may buy local companies, either by purchasing the shares of the said company, or by establishing an entity which will buy the assets and liabilities of the local company. It is important to have a board resolution of the local company, authorising the sale of shares, and a sale agreement. Depending on the size and importance of a transaction, additional approvals by the Fair Competition Commission (FCC) may be required.

2.3 Annual costs There are mandatory annual costs, such as filling fees (of annual returns etc) and audit fees. It is compulsory to have an external audit every year.

2.4 Restrictions on foreign investment Investment is encouraged in Tanzania. Investment issues are regulated by Tanzanian investment laws. There are some restrictions on foreign investments where registration is sought under the Tanzania Investment Authority, e.g., investment capital is not permitted to be less than USD 300,000.

2.5 Dividend remittance In most cases, dividends may be remitted abroad freely. In specific instances, regulatory approvals may be required before dividends are declared. There are no restrictive foreign currency regulations or laws.

2.6 Intellectual property rights Intellectual property rights are well protected in Tanzania. The work that is subject to protection has to be registered with the Registrar of Trade and Service Marks for it to have legal force, in order to enjoy that right.

2.7 Sustainability and the environment Environmental issues are regulated by the National Environmental Policy and Environmental Management Council Act.

2.8 Anti-money laundering There are very restrictive anti- money laundering laws. There are AML regulations issued by the Central Bank requiring every bank to comply.

2.9 Tax regime Tanzania has a number of applicable taxes, including: • Corporate tax. • Resident corporation – 30%. • Non-resident corporation – 30% (a non-resident corporation with a permanent establishment also has to account for tax of 10% on repatriated income). • Newly listed Companies have reduced rates of 25% for 3 years provided at least 30% of shares are publicly issued. • Alternative minimum tax is charged on turnover where a corporation makes tax losses for 3 conservative years as a result of tax incentives – 0.3%.

Ketan Shah T: +255 22 2118866 E: [email protected]

• Withholding tax depends on the nature of the tax payer’s residency status, and the nature of the item on which tax applies. • VAT - 18% • Other taxes include custom duty, skills and development levy, PAYE, social security, stamp duty and city service levy.

2.10 Branch taxation Branches and subsidiaries are taxed at the rate of 30%. However, branches also have to account for tax of 10% on repatriated income.

2.11 Tax rates The collection of individual tax is made by the employers, and remitted to the Tanzania Revenue Authority not later than the seventh day of the following month after the month of deduction. Tax rates vary from 0% to 30% of individual’s taxable salary. Any amount in excess of TZS 8.6 million (USD 5,356) on annual taxable salary is taxed at the higher rate of 30%.

2.12 Tax returns Provisional returns are filed and payment is made to the Tanzania Revenue Authority (“TRA”) within the first quarter of the accounting period of the company. Final returns are filed with the TRA within the six months after the end of the accounting period. VAT returns are filed with the TRA on the last working day of the following month. Withholding tax returns are filed within 30 days after each six months period. Stamp duty is required to be paid within 30 days of execution.

Section 3 People 3.2 Foreign nationals Under the Licensing regulations of 2008, The Bank of Tanzania restricts the employment of non Tanzanians to not more than five at any point in time, for institutions that are under its regulation.

3.3 Labour legislation Employment of citizens remains the first priority. Expatriates are encouraged to coach/mentor local staff so that local staff become skilled to perform the job.

3.4 Trade union presence Trade unions, which are industry based, have a significant presence in Tanzania.

3.5 Hiring and Firing of employees There are various pieces of labour legislation in place. These have introduced restrictions and procedures to follow when hiring and firing employees.

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3.7 Retirement and Medical Aid Provision of medical assistance to employees is compulsory, through either medical insurance, medical fund, medical allowance or reimbursement of actual expenses. Social Security Schemes for employees are also compulsory. Employers contribute between 10-15% of gross pay, whilst employees contribute between 5-10 of gross pay.

Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Overdraft Facilities, term loans, unsecured loans, auto loans, mortgages (recently introduced), asset finance / equipment loans, structured agri-finance, structured trade finance, SME loans, letters of credit, guarantees and bills for collection.

Deposit products

• Where security is a matrimonial property, free consent of both spouses has to be obtained for the transaction to have legal force.

4.6 Active exchanges The relevant and active exchange in Tanzania is the Dar es Salaam Stock Exchange.

4.7 Banking sector overview The financial services industry in Tanzania is regulated by the Banking and Financial Institutions Act, 2006 and the various banking regulations that are issued by the Bank of Tanzania under powers granted to it by the Act. Banks are supervised by the bank supervision directorate of the Bank of Tanzania. The Act also supervises the Bank of Tanzania in relation to policy formulation and other related matters. The banking sector continues to perform strongly, with growth in assets and loan portfolios liabilities and profits. There is a trend towards the establishment of more community banks which are reaching out to communities outside Dar es Salaam. There are a number of micro-finance institutions that have entered the market over the past few years.

Individual accounts, partnership accounts, corporate accounts, call accounts, time deposits, and currents account for business.

Section 5

4.2 Payments/clearing system

Physical Environment

The Bank of Tanzania initiated efforts to automate the clearing house operations in order to replace manual processing. The NPS automation developments include are but not limited to:

5.1 Property ownership

• The Tanzania Inter-bank Settlement System (“TISS”) is an on-line system that processes high value and time sensitive payments, that enable real time and gross settlement of payment instructions between banks. The system facilitates settlement of inter-bank transfers and clearing house balances, money market and foreign exchange market transactions. • The Bank of Tanzania implemented the Electronic Clearing House (“BOTECH)” System to facilitate inter-bank electronic debit clearing. • Members of the Dar es Salaam Clearing House have installed the Magnetic Ink Character Recognition (“MICR”) equipment for processing paper encoded payment instruments.

4.3 Insolvency provisions Insolvency provisions for companies are contained in the Companies Act. The liquidation process for companies begins either by court order (compulsory liquidation), or by members passing a resolution to wind up (voluntary liquidation).

4.4 The taking of Security Assets that that can be advanced/ treated as collateral for security include personal and real estate such as land, houses, equipment etc. The restrictions are as follows: • Property which is offered as security must have a title to be effective. If the property bears the title of a third party, there has to be evidence that the owner of the property provided consent for his property to be used as security for the loan of borrower.

Ownership of property is a constitutional right. Thus, if a person owns a property; he/she is entitled to a title for it. However there are some restrictions relating to freehold title of land. The land is vested in the President, and citizens only have a right to occupy the land for a certain period (subject to renewal and revocation of the said right). Foreigners are not allowed to own land.

5.2 Transport infrastructure Tanzania offers a road network of approximately 85,000 km’s of which about 5% is paved and the remaining is unpaved. Tanzania is currently in the middle of a 10 year Integrated Roads Programme, which is designed to upgrade 70% of the country`s road network, and to build some 3,000 km of new roads. Tanzania has more than 3,685 km of railroads. There are two railway networks which provide both freight and passenger services. Tanzania has three international airports, and more than 30 official airports and airstrips. The Tanzania Port Authority (“TPA”) operates three major ports.

5.3 Communications infrastructure Tanzania Telecommunication Company Ltd (“TTCL”) is the main gateway to international exchanges and is jointly owned by the Tanzanian government and private investors. Currently there are six cellular mobile network operators licensed by the Tanzania Communication Regulatory Authority. All mobile phone companies operate on both the mainland and on Zanzibar. Currently there are nine Public Data Communication Service Providers.

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5.4 Political environment

5.9 Language

The Government of the United Republic of Tanzania has authority over all Union matters in the United Republic, and over all other matters concerning Mainland Tanzania. The Revolutionary Government of Zanzibar has authority over all matters, which are not Union matters in Zanzibar. Tanzania is democratic and operates a multiparty political system.

Swahili and English are the official languages, with the national language being Swahili. English is encouraged as the business language in the corporate environment. Higher education is conducted in English.

There are 16 permanently registered political parties in Tanzania. Multiparty elections are usually conducted after every five years, with the President’s mandate limited to a maximum of two fiveyear terms. The Constitution of the United Republic of Tanzania (1977) provides that Tanzania aims at building a democratic society, founded on the principles of freedom, justice, fraternity and concord, in which the Executive is accountable to a Legislature, composed of elected members and representatives of the people.

Section 6 Governance and reporting Issues 6.1 IFRS implementation All companies are required to prepare financial statements using International Financial Reporting Standards (“IFRS”) as prescribed by the National Board of Accountants and Auditors.

5.5 Economic overview

6.2 Basel II and III

Over the past two decades, Tanzania has been transformed from a centrally planned/command economy to a market oriented system, through successful implementation of trade liberalization measures. The Government has taken deliberate steps to encourage private sector-led growth through restoration of market forces, and less interference in commercial activities. These measures include the privatization of state owned companies, reduction of tariff and non-tariff barriers. Fiscal/monetary reforms have opened doors for expansion of private sector operations in all spheres of business. GDP is estimated at USD 29 billion in 2012.

Basel I and II have been implemented.

5.6 Social environment

6.5 Know Your Customer (KYC) laws/regulations

Medical treatment is free, or highly subsidized, in company clinics as well as hospitals. The pyramid structure of Tanzania’s national healthcare system, stressing primary care at an affordable cost, makes it a pioneer in sub-Saharan Africa. In 2000, 54% of the population had access to safe drinking water and 90% had adequate sanitation. Even in rural areas, more than 90% of people live within 10 km’s of a basic clinic. While access is not a problem, however, waiting times, lack of medicine and high costs continue to be stumbling blocks to effective healthcare.

There are various pieces of legislation governing KYC procedures. Banking institutions have a responsibility to carry out KYC procedures for all its customers.

The state owns all land in Tanzania. Therefore, no private (freehold) ownership is allowed for either citizens or non-citizens. Nevertheless, the Government grants rights of occupancy of land. There is also the option of obtaining sub-leases on land, which has been granted to the private sector through a right of occupancy. Foreigners can only occupy land for investment purposes.

5.7 Trading partners Tanzania has a large number of trading partners. China, Germany, Japan, India, the European Union, United Arabic Emirates, United Kingdom, Kenya, Japan, India and South Africa are all considered to be the key trading partners.

5.8 Crime and corruption Crime in Tanzania is generally not violent, but it is a growing concern. The Government of Tanzania continues to battle with corruption, and has made strong commitment to eradicate corruption at all levels in society.

6.3 FATCA Tanzania has not implemented FATCA.

6.4 Anti Money Laundering (AML) laws/regulations The Anti-Money Laundering Act is in force, and through this legislation a Financial Intelligence Unit (“FIU”) was created. The Act empowers the FIU to receive, analyse and disseminate suspicious transactions.

6.6 Annual financial reporting Audited financial statements are required to be published once annually. The Companies Act places this responsibility on the directors.

6.7 Governance structures There are Board of Directors guidelines issued by the Central Bank in 2008 which stipulate a number of requirements.

6.8 Government ownership and management Since the economy was privatised at the beginning of 2000, the banking sector has been fully privatised, with the Government owning minority stakes in a limited number of banks where the private sector is the major shareholder. The Government does wholly own a limited number of banks for strategic or legacy reasons.

6.9 External auditors All commercial banks and financial institutions, which are regulated by the Central Bank, are required to appoint independent auditors. Failure of the commercial bank to appoint an independent auditor could result in the Central Bank appointing an auditor on behalf of the commercial bank.

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Section 1

Capital Requirements:

Regulatory

• All banks should have a minimum paid up capital of UGS 25 billion (USD 9.2 million) by 31 march 2013.

1.1 Basel Accord status

• The total capital of financial institution is not permitted to be less than 12% of total risk adjusted assets.

The principle regulator for commercial banks in Uganda is the Bank of Uganda. The Bank of Uganda is the central bank for the country.

• The core capital of the financial institution is not permitted to be less than 8% of total risk adjusted assets.

The country uses a framework of an Institutional regime.

• All banks are required to have ALCO committees, monitored by the regulator. The committees are mandated to set acceptable liquidity parameters.

1.2 Basel Accord status The Central Bank uses a phased approach to Basel and has, since 2004, been implementing the recommendations of the three pillars in Basel II.

1.3 Structure of supervisory body The Central Bank is the supervisory body. It performs its role of oversight of the banking sector through the supervision department, headed by an executive director and assisted by a deputy. The Central Bank itself is headed by a governor and has several departments through which it carries out its monetary sector roles and banking sector supervision. The Central Bank has a board of directors, comprising four non-executive directors and two executive directors who provide oversight to its operations.

1.4 Banking licence application All entities that are under a banking group would require approval from the Central Bank. The procedures are set out in the Financial Institutions (Licensing) Regulations. An application for a licence is made in duplicate, in the prescribed format, and is accompanied by the necessary supporting documents. The supervision function of the Central Bank will, within 10 days, send the applicant a formal letter of acknowledgement, or a letter of deficiency. The Central Bank will, within six months after receipt of a complete application, prepare a detailed report in respect of each application. The report will indicate the decision of the Central Bank whether to grant or refuse the license.

1.5 Regulatory reporting requirements The Central Bank requires all banks to submit weekly, monthly and quarterly returns. These returns are standardised, and the formats can be found on the regulator’s website. In addition to the periodical returns, every bank should submit its annual financial statements for approval before publishing them.

Liquidity Requirements:

Credit Requirements: • A financial institution may not grant credit facilities to a single or a group of individuals which is more than 25% or more of its total core capital. • A financial institution may not have exposures that exceed 800% of its total capital. • A financial institution should not grant credit facilities to any of its affiliates and associates, directors, persons with executive authority, substantial shareholders, or to any of their related persons or their related interests, except on terms which are non-preferential. Non compliance with regulatory requirements results in the imposition of penalties by the regulator.

1.7 Banking supervision Generally, banking supervision in Uganda is conducted on a solo process.

1.8 Global financial crisis response In response to the global financial crisis, the Bank of Uganda (the Central Bank) has increased capital requirements for all commercial banks to UGS 25 billion (USD 10 million) by March 2013.

1.9 Deposit insurance scheme The Deposit Protection Fund in Uganda was established in 1994, following the first Bank closure in November 1993. All deposit-taking financial institutions are required to maintain a certain amount of cash (deposit protected) for each period (determined by the Central Bank) and this is communicated to the accounting officer by the supervision department. This amount is deposited with the Central Bank.

Section 2 Commercial, Legal and Tax Environment

1.6 Important banking regulatory requirements There are several regulatory requirements. Important requirements include:

2.1 Process for establishing a new company Every new company is to be registered with the Registrar of Companies.

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122 32.3 million (2009 estimate)

UGX 1 = USD 0.0004 UGX: Uganda Shilling

$17.7 billion (2010 estimate)

Benson Ndung’u T: +256414340315 E: [email protected]

To set up as a limited company in Uganda, several prescribed documents and forms are required to be completed and sent to the Registrar of Companies. This takes on average 17 days.

• PAYE - This is paid by employees and is according to income bands.

2.2 Foreign investment in local companies

2.10 Branch taxation

To facilitate a foreigner buying a local company, the following requirements must be met:

There is a difference in the taxation of branches and subsidiaries. Branches are taxed based on a formula stated in the Uganda Income Tax Act.

• A special resolution authorising the sale. • A sale of shares agreement must be drawn up and signed by both the buyer and local company. • A sale of shares agreement is to be registered with the Registrar of Companies. • A transfer of shares stock form is completed and filed with the Registrar of Companies. • A share certificate must be issued by the Registrar of Companies to the new owners of the company.

2.3 Annual costs There are annual trading license fees payable to the city authority, and these may vary from year to year. All companies are required to file audited financial statements.

2.4 Restrictions on foreign investment There are no restrictions. The Ugandan government set up an Investment Authority to encourage direct foreign investment.

2.5 Dividend remittance Dividends may be remitted abroad, and there are no restrictive currency regulation laws.

2.6 Intellectual property rights The Copyright Act was in enacted to protect intellectual property (“IP”) but, in practice, it is poorly enforced, and IP rights are poorly protected.

2.7 Sustainability and the environment

• Various withholding taxes.

2.11 Tax rates There are two types of taxes for individuals i.e. Pay as You Earn (“PAYE”) and Local Service Tax (“LST”). These are based on a progressive scale. For collection purposes, the employer is obliged to withhold these taxes and remit them to the tax authority.

2.12 Tax returns PAYE, V.A.T and withholding tax must be submitted by the 15th day of the following month. Generally, a final corporation tax return is required to be submitted not more than six months following the financial year end of a company. In addition, a provisional return is required to be made at the half year. A filing extension may be obtained from the Uganda Revenue Authority.

Section 3 People 3.1 Skills availability There are generally no major skills gaps in the market for low and mid entry points. Most of the low level staff are university graduates, who learn on job. Skilled resources can be expensive, and it is sometimes difficult to find senior experienced bankers.

The National Environment Management Authority (“NEMA”) regulates the legislation. The regulations are relatively new, and enforcement is not uniform.

In order to improve skills, the Uganda Bankers Association (“UBA”- the body that unites all banks) decided to tailor a diploma that is recognised internationally for the local market.

2.8 Anti-money laundering

3.2 Foreign nationals

There is currently a bill in parliament for anti-money laundering that is yet to be passed into a law. However, the Central Bank has enforced the Basel accords on operational risk, therefore requiring all commercial banks to enforce KYC and AML procedures.

2.9 Tax regime Major taxes applicable to companies include: • Corporation Tax - 30% of a company’s taxable profits. • Value added Tax (VAT) - 18%, financial services are exempt from VAT with the exception of leasing products.

Companies may use ex pats. However they will require a work permit granted by the Department of Immigration. For financial institutions specifically, the Central Bank has to approve the appointment of any resources (both local and foreign expatriates) in managerial positions as well as board members.

3.3 Labour legislation There is an Employment Act, and it contains clauses that regulate the employee-employer relationship, including leave, pension and conditions of employment. There is, however, no minimum wage prescribed in the bill.

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3.4 Trade union presence

4.4 The taking of Security

Uganda does not have a significant trade union presence.

Generally, there are no restrictions on the taking and perfecting of security, except for the following:

3.5 Hiring and Firing of employees There are no specific restrictions on hiring or firing employees. However, precedence has been set that employers have to compensate employees if they have to terminate employment contracts, even if the employee is in the wrong.

3.6 Contractors Generally there are no restrictions on the use of contractors. However, the regulator regularly monitors the employment contracts of all managerial positions for commercial banks.

3.7 Retirement and Medical Aid All employers with more than five employees are required to contribute to the National Social Security Fund. The employer contributes 10% and employee 5%. Some companies, including banks, have established in-house pension funds in addition to the statutory social security contribution. It is not a requirement to have a medical aid fund; however most employers, including banks, have medical insurance cover for their employees and their immediate families.

Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Mortgages, working capital loans, personal loans (unsecured loans based on salary) and card products (card products are new in the market, and quickly becoming popular). Deposit products Current accounts (corporate and individual) and fixed deposits (time deposits).

4.2 Payments/clearing system Settlement in Uganda can occur in the following ways: • Manual – Banks go through a clearing house to settle their payments or receive bills due to them. • Electronic Fund Transfer (“EFT”). Whereas this is electronic, it takes the same number of days as the manual process. • Real Time Gross Settlement (“RTGS”).This is, as the name suggests, the fastest means of settlement.

4.3 Insolvency provisions The liquidation process is usually slow in Uganda. This is because of the slow court proceedings (this applies to the rest of the judicial system) in Uganda. On average it takes two to five years to complete a liquidation process.

• There is a restriction on offering listed banks’ shares as security to the same bank; • Any loan that is between 25% to 50% of the core capital, will require qualifying liquidating assets as security. These qualifying assets include government securities, fixed deposits held by the bank and secured by a lien, and other qualifying assets as prescribed by the central bank.

4.5 Banking branch and IT infrastructure Over the last four years, there has been increased branch penetration in the country side with commercial banks opening up more branches in the rural areas. This has been enabled by an improvement in the IT infrastructure, as telecom companies invest more in fibre optics, thus improving better internet access. Internet banking is relatively new in the market, with 7 banks out of the 23 offering this service to customers. It is generally still seen as a “white-collar” product, given the relatively limited internet usage. There is limited use of mobile phone banking. This is an area which still lacks awareness.

4.6 Active exchanges Government securities (T-bills and T-bonds) and corporate bonds.

4.7 Banking sector overview There are 23 banks in the market, with the top four banks claiming over 70% of the market share and profitability. The sector is dominated by multinationals, who have an edge over the local banks in terms of capital support and skills. The formal sector is dominated by multinationals, and these prefer to bank with fellow multinationals. The country is largely rural, with about 29 million out of the 32 million people being unbanked. The most banked area is the central business district, with the most bank branches in a small area. Oil and gas was recently discovered in the country, and this will present an enormous opportunity for growth in the Banking sector. The discovery of oil has caused many companies (even those that are non energy related) to register, awaiting the production of oil.

Section 5 Physical Environment 5.1 Property ownership Anyone may own property in their own right irrespective of their nationality. The only exception relates to land, whereby a non-Ugandan can only own a leasehold land (this includes foreign-owned companies).

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5.2 Transport infrastructure Roads are the most commonly used transportation infrastructure in Uganda, accounting for more than 90% of cargo freight and passenger transportation. Uganda has about 78,100 km of roads. Only 3,000 km are paved, and most roads radiate from Kampala.

the world. Uganda has the second youngest population in the world, with about 50% of its population in their teen age. The government introduced universal primary education in 2006, and universal secondary education in 2011 to help alleviate the levels of illiteracy. Between 2003 and 2008, 74% Ugandans were literate.

The railway system has broken down and now has only one route that connects the capital Kampala to the port of Mombasa in the neighbouring Kenya. There are, however, efforts by the East African governments to revitalise the railway system.

Life expectancy is 52.7 years. There are several ethnic groups in Uganda. Uganda has freedom of worship, with the majority of the population practising Christianity.

Uganda has one international airport – Entebbe international Airport - with several other regional airstrips.

There is a slow but steady growth of a middle class, which has led to demand for better health and housing.

5.3 Communications infrastructure

5.7 Trading partners

The communications infrastructure is regulated by the Uganda Communication Commission (“UCC”), which is responsible for overseeing the communication sector players in the country.

Kenya – provides the nearest reach to the coast for Uganda (which is a land-locked country) and several services and products are imported from Kenya.

There are currently five major telecommunication companies carrying out mobile phone and internet services in the country. There has been a recent decrease in quality of services provided by the larger telecom companies, due to large unanticipated growth in the number of subscribers.

America supplies technological products, and South Sudan is the main Importer from Uganda.

5.4 Political environment After decades of internal strife, Uganda has experienced more than 20 years of relative political stability and economic growth. However, rampant corruption and one of the world’s highest population growth rates present challenges to the country’s continued economic growth and political stability. Uganda’s constitution provides for freedom of speech, religion, and movement. Press and civil society enjoy relative freedom.

5.5 Economic overview Uganda has substantial natural resources, including fertile soils, regular rainfall, small deposits of copper, gold, and other minerals, and oil was recently discovered. Agriculture is the most important sector of the economy, employing over 80% of the work force. Coffee accounts for the bulk of export revenues and more recently, repatriations of funds by Ugandans in the diaspora have also contributed significantly to revenues. Oil was discovered in Uganda, and oil experts estimate Uganda’s Albertine Basin has at least two billion barrels of recoverable oil, positioning Uganda to become one of subSaharan Africa’s top oil producers. This could potentially double current government revenues within 10 years. GDP at was estimated at USD 17.7 billion in 2010.

5.6 Social environment The population of Uganda in 2009 was 32.7 million people, growing at an estimated rate of 3.3%, one of the fastest in

The official language is English, but Luganda (local dialect) is widely used.

China is key for general accessories and fabrics, while most of the 35 000 imported cars come from Japan.

5.8 Crime and corruption The press reports that there is rampant corruption involving government officials as well as private entities. The government has set up departments to fight graft and corruption. In the last three years there has been a rise in white collar crime involving bankers. However, the amounts involved are not significant. On average, they range from (USD 500 to USD 50 000 est.).

5.9 Language English is the official language and is the one used for business transactions.

Section 6 Governance and reporting Issues 6.1 IFRS implementation Uganda has adopted International Financial Reporting Standards (“IFRS”) fully and has no areas of deviation.

6.2 Basel II and III Uganda is implementing the Basel II accord in a phased approach.

6.3 FATCA FATCA has not yet been addressed.

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6.4 Anti Money Laundering (AML) laws/regulations Whereas financial institutions are mandated by the regulator to put in place procedures to track anti- money laundering, there is currently no enacted law against money laundering.

6.5 Know Your Customer (KYC) laws/regulations The regulator (Central Bank) requires banks to set up and comply with KYC policies.

6.6 Annual financial reporting It is a requirement by the Companies Act of Uganda for all companies, including financial institutions, to have audited accounts, and to submit them to the Registrar of Companies.

6.7 Governance structures The Companies Act requires that companies have board members and make annual returns of directors that held office during the year. All financial institutions that are regulated by the central bank are required to have board committees such audit, risk and compensation. The board members have to be vetted by the central bank. Otherwise, there is no requirement for other companies to have sub committees. This is only done in accordance with best practise.

6.8 Government ownership and management As a measure of reform, the government embarked on divestment of all government-owned entities, to concentrate on the provision of public services and regulatory functions to the private sector. They are few non-regulatory or public goods companies that the government still has a stake in.

6.9 External auditors The Companies Act of Uganda requires all companies to have annual financial statements audited by an external auditor certified by the Institute of Certified Public Accountants (“ICPAU”). In addition, the tax authority requires that all companies registered for tax submit audited books of accounts when making the final annual tax return.

6.10 Local regulatory developments or plans The central bank is in consultation for the implementation of Basel III pillars, and this may have an impact on the capital required to open up a bank in Uganda. The central bank is also in consultation for the opening up of Islamic Banking in Uganda.

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Section 1 Regulatory 1.1 Regulatory regime The Bank of Zambia (“BOZ”) is the Central Bank of Zambia, and the regulator of the financial services sector.

1.2 Basel Accord status The current statutory instruments were modelled around Basel I requirements. However there is an upgrade planned to bring the regulatory framework in line with the guidance in Basel II and III.

1.3 Structure of supervisory body The Board of the BOZ is appointed by the Minister of Finance and National Planning. It is composed of seven members, responsible for the formulation and implementation of bank policy. Meetings are chaired by the Governor who is supported by six directors. The board members represent a cross section of academic, professional and business with interests and experience in financial, economic and other matters. With the exception of the chair, all members of the board are non-executive directors who serve renewable three year terms. One of the six directors is the secretary to the Treasury who is described as an “ex-officio” or non voting member. BOZ’s management team is led by the Governor, who has two deputies responsible for operations and administration respectively.

1.4 Banking licence application In order to acquire a banking license, the promoters of the bank must complete and submit various prescribed forms and documents to the Registrar of Banks and Financial Institutions. BOZ pledges to reach a conclusion on the status of the license within 180 days from the date that a completed application is submitted. Non-bank entities from a banking group require independent regulatory approval. They are required to disclose that they form part of a larger group structure. A decision on whether or not to grant the license will be reached within 180 days.

1.5 Regulatory reporting requirements The BOZ conducts regular spot visits to ensure compliance with the Banking and Financial Services Act (“BFSA”). All banks are mandated to submit monthly prudential returns to BOZ. The necessary forms are standard and electronic. Banks are required to publish quarterly financial statements in a daily newspaper with national circulation.

1.6 Important banking regulatory requirements Banks are required to comply with various ratio requirements determined by the regulator. Included in these are:

Capital and liquidity: • Banks are required to have a minimum start up capital of ZMK 12 billion (USD 2.4 million). • Bank and financial institutions shall maintain a minimum total capital equivalent of not less than 10% of its total riskweighted assets and off balance sheet exposures. • Primary or tier one capital shall be a minimum of 5% of the bank’s or financial institution’s total risk-weighted assets. Foreign exchange: • Banks shall maintain their overall foreign exchange risk exposure as at the close of each business day to a maximum of 25% of its regulatory capital. • At no time shall the total of the foreign exchange risk exposure exceed 40% of the bank or financial institutions’ regulatory capital. Reserves: • All banks must maintain a reserve fund that is no less than 50% of distributable profits insofar as the reserve does not exceed half of the paid up capital of the bank, or 20% of such profits, up to the level of paid up share capital. Breaches can result in de-registration of the bank, or the regulator can take possession of the bank.

1.7 Banking supervision Banking supervision is conducted on a consolidated basis.

1.8 Global financial crisis response There have been no specific supervisory responses implemented in Zambia as a result of the global financial crisis.

1.9 Deposit insurance scheme There is no specific deposit insurance in Zambia.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company The initial step towards incorporating or registering a company is to complete a name clearance form requesting for a particular proposed name to be cleared with the Registrar. There are a number of required forms and fees payable to the Registrar. Upon receipt of completed application, the BOZ will within 180 days make a decision on granting or refusal of the license. To operate a bank in Zambia, the bank must be licensed by the Registrar of banks and financial institutions (“the Registrar”) at the BOZ.

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76 12.9 million (2009 estimate)

ZMK 1 = USD 0.00019 ZMK: Zambian Kwacha

$13 billion (2009 estimate)

2.2 Foreign investment in local companies At least 50% of the directors must be resident in Zambia. Payment of Property Transfer Tax is levied on the greater of 5% of the market value of the shares or the nominal value of shares. Upon calculation by the Zambia Revenue Authority, VAT will be charged on the value of assets purchased. Registration of the share transfer is required with the Companies Registrar’s office.

2.3 Annual costs External Audits are compulsory, and annual submission of financial statements is a requirement. Annual returns of ZMK 60 000 (USD 12) are payable.

2.4 Restrictions on foreign investment With respect to companies, there are no restrictions on ownership and shareholder levels. There is no distinction in Zambian law between foreign and domestic investors. Investors are free to invest in any sector of the economy and are entitled to incentives. In the privatization process, foreign investors are eligible to bid on state-owned companies. Non-Zambians may also invest in the Lusaka Stock Exchange without restriction and on terms comparable to those received by Zambians.

Dumi Tshuma T: +260211372900 E: [email protected]

the Act in relation to mining companies. They argue that the ECZ’s supervisory function is inconsistent, and the penalties for breaches are too low to deter polluters.

2.8 Anti-money laundering Anti-money laundering in Zambia is governed by the Prohibition and Prevention of Money Laundering Act. The Bank of Zambia has the authority to act as the regulatory authority giving effect to anti-money laundering regulations. Procedures are in place, however monitoring is inconsistent. To cite an example of this, at non bank financial institutions, such as bureau de changes, it is possible to purchase USD 5 000 over the counter, from multiple institutions, without being detected.

2.9 Tax regime Zambia has a number of taxes applied to companies, including: • Corporate taxes of 35%. There are exceptions applied to this, dependant on the industry and company - specific turnover. • Withholding tax at 15% is payable on dividends, management & consultancy fees and services from non resident contractors.

Commercial banks have a separate set of rules detailed in the Banking and Financial Services Act. Highlights include:

• VAT of 16% is payable on services and most processed goods.

• A person with de-facto control of a bank may not own shares in another bank.

• Turnover tax for small businesses at 3%.

• No single person may own more than 25% of bank. The only exception to this is an organisation that is listed on an international exchange such as the FTSE, NYSE or the JSE.

2.10 Branch taxation No, treatment for branches and subsidiaries from a tax perspective is the same in Zambia.

2.5 Dividend remittance

2.11 Tax rates

Dividends are capable of being remitted abroad. Zambia has no restrictions on conversions of Kwacha into foreign currencies. Foreign exchange is freely available at market determined rates.

Individuals are taxed under the Pay as You Earn (PAYE) system. Individual tax for employees is collected by the employer through the payroll system on a monthly basis.

2.6 Intellectual property rights Copyright and related rights are protected under the Copyright Act under the Ministry of Information & Broadcasting. The Patents and Companies Registration Agency (“PACRA”) is mandated with the administration of three statutes under Intellectual Property.

2.7 Sustainability and the environment The regulator who covers issues of sustainable development is the Environmental Council of Zambia (“ECZ”). Through the Environmental Protection and Pollution Control Act they have a comprehensive framework for management of the environment. The ECZ has been criticised by the media and key stakeholders for their inability to enforce the provision of

Self employed individuals submit voluntary tax returns at the year end and pay the corresponding tax. The tax bands extend from 0% to 35% for individuals earning in excess of ZMK 50.4 million (USD 9 500).

2.12 Tax returns An estimate of the tax due for the tax year is made, and an annual provisional tax return is submitted by 30 June. Provisional tax payments are made quarterly. Annual tax returns are due for submission by 30 September. Companies whose financial year ends are after 30 June are required to submit their income tax returns by 30 September of the following. PAYE returns and payments are due by the 14th day of the month following the month on which is being reported. VAT returns and payments are due by the 21st day of the month following the transaction month.

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Turnover tax returns and payments are due by the 14th day of the month following the transaction month.

Section 3 People 3.1 Skills availability Skills are readily available, and training is offered at a number of training institutions and colleges offering banking and finance training. Banks in Zambia have a history of offering good management development programmes.

3.2 Foreign nationals Expats are generally welcome in Zambia, particularly where they come to work in either new or expanded operations. The new Government have stated their intention to make companies that bring in expatriate staff commit to longer term skills transfer programmes. Employers seeking to employ expatriate staff are required to apply for work permits from Immigration Headquarters.

3.3 Labour legislation The labour legislation is comprised of three key statutes, the Employment Act Cap 268, The Industrial and Labour Relations Act Cap 269 and The Minimum Wages and Conditions of Employment Act Cap 276. Principles embodied therein are fair treatment, the equal opportunity of women and the laws of natural justice that provide for the other side to be heard and demand a process to key employment decisions, such as termination.

3.4 Trade union presence There are established unions in Zambia. However their activities and importance have diminished over the course of the last two decades. Outside of the Zambia National Union of Teachers (“ZNUT”) and other civil service unions, strike actions or go slows are uncommon. The largest of the unions is the Zambia Congress of Trade Unions (“ZCTU”).

3.5 Hiring and Firing of employees Zambian law places certain restrictions on the hiring and firing of employees. There are restrictions on the hiring of persons under the age of 15 years. There is prohibition of termination of employment for reasons connected with pregnancy. There is a general requirement to comply with both the provisions of individual employment contacts and globally accepted procedural norms.

3.6 Contractors There are no specific laws on the use of contractors.

3.7 Retirement and Medical Aid The only compulsory requirement is the membership to National Pension Scheme Authority (“NAPSA”) which is the national body partly owned by the government. All employees in Zambia are required by law to be a member of NAPSA. Membership to a medical aid fund is optional.

Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Bonds, home loans (limited), car loans (limited), personal loans and credit Cards (limited). Deposit products Fixed deposit, current accounts, savings accounts, transaction accounts, online transact accounts (limited) and mobile banking (limited).

4.2 Payments/clearing system Zambia has an Electronic Clearing House (“ZECH”) which is a joint venture between member commercial banks and the Central Bank. It is also used as an Inter-bank clearing facility. The main services currently offered by the Zambian electronic clearing house are direct debits and credits clearing (“DDAC”), Physical Interbank Clearing and Cheque Truncation System.

4.3 Insolvency provisions The insolvency provisions relating to the winding up of a company are covered in the Companies Act. A company can be wound up by the court or on a voluntary winding up basis. When a company is wound-up, every member at the time of the commencement of the winding-up shall be liable to contribute to the assets of the company an amount sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding-up and for the adjustment of the rights of the members among themselves.

4.4 The taking of Security There are very limited instances on the restriction of taking security. Perfecting security occurs on default, unless prevented by a court order.

4.5 Banking branch and IT infrastructure Zambian banks lack in serving customers efficiently. Only five of the 18 commercial banks in Zambia offer internet baking. Awareness of online and other services remains poor, even among customers of the banks that offer them.

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Despite the technological evolution, many banking processes remain either partially or entirely paper based, which requires individuals to physically go to the bank.

4.6 Active exchanges Government bonds, treasury bills and stocks traded on the Lusaka Stock Exchange.

4.7 Banking sector overview There are currently 18 registered commercial banks. The banking sector in Zambia is based more on historical rather than competitive factors, with many workers over 30 banking with a particular institution because they opened their first account there, rather than any differentiation in service or product quality. The Zambian banking sector has expanded rapidly over a short period of time, as multinational banks invest in the country in an attempt to tap into the large unbanked population.

Section 5 Physical Environment 5.1 Property ownership In order to buy property, the buyer must be a Zambian National, or hold permanent Zambian residency. A limited company, or a foreigner with written permission from the Commissioner of Land (who is the custodian of all land),is also entitled to purchase property).

5.2 Transport infrastructure Within urban areas, and Lusaka in particular, the road infrastructure is reasonable. Closer to the CBD the roads are quite good and are currently being redeveloped. However, in squatter and peri-urban settlements, the roads and other services are poor. The public transport network is not well co-ordinated. Within towns, public bus routes are generally poorly run, and the routes are not clearly defined. Trains are poorly maintained, and are primarily used for cargo haulage. Air transport is efficient, but expensive.

5.3 Communications infrastructure Zambia’s telecommunications infrastructure is controlled by three networks. Mobile subscriber numbers have grown rapidly over the last five years, and are believed to be in the region of 6 million users. The voice network quality of the service is variable, and congestion is a growing concern. Internet access is intermittent and deteriorates outside of the major urban areas. In recent years, both pricing and penetration have improved. Two of the service providers are rolling out fibre optic networks and interlinks to undersea cables, that are

expected to increase bandwidth and improve the reliability of the services offered. Two of the mobile networks have announced plans to roll out 3G services before the end of the year.

5.4 Political environment The political environment can be described as very stable. The United National Independence Party (UNIP) ruled from 1964 to 1991, when the Movement for Multi Party Democracy ousted it in polls that ended years of a one party state. The MMD ruled through four terms and a further two Presidents. The 2001, 2006 and 2008, elections won by the ruling MMD were closely contested, and they lost the Presidency to the Patriotic Front in 2011. In a peaceful transition, the president accepted electoral defeat and handed over power.

5.5 Economic overview Key economic activities are mining, agriculture, transport and financial services. The Zambian economy has historically been based on copper mining, however this has shown a sharp decrease in more recent times. Agriculture plays a very important role in the Zambian economy. Zambia’s recorded GDP for the year 2010, was USD 20 billion. On average, Zambia’s GDP has grown at a rate of 6% over the past 11 years to 2010, whereas the world economy’s GDP has grown an average of 3.8% over the same period.

5.6 Social environment Zambia is described as a middle income country. However social amenities have not developed at the same rate as the population, or the economic gains of the last decade. According to the Ministry of Local Government and Housing, there is a housing deficit of two million units. The healthcare infrastructure, most of which was constructed in the 1970s, is run down and requires expansion. There are not enough primary, basic and secondary schools. There are only two publicly funded Universities in Zambia vs. a population of close to 13 million people.

5.7 Trading partners Zambia’s major trading partners are led by South Africa with whom it is estimated they hold a 51% share of trade. Other trading partners include Switzerland, China, DRC and Zimbabwe.

5.8 Crime and corruption Zambian crime levels are low. Armed robberies and other violent crimes do occur, but the frequency does not create a source of concern for most Zambians. Access to firearms and other weapons is tightly regulated.

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5.9 Language The official language of Zambia is English. English is the medium of instruction in schools, and is used to conduct official business.

Section 6 Governance and reporting Issues 6.1 IFRS implementation International Financial Reporting Standards (“IFRS”) is widely applied, as it is the only universal accepted financial reporting framework in the country.

6.2 Basel II and III Currently Zambian banks operate under Basel I, although the central bank is planning to upgrade to Basel II and III in the near future.

6.3 FATCA FATCA has not yet been addressed.

6.4 Anti Money Laundering (AML) laws/regulations Anti-money laundering in Zambia is governed by the Prohibition and Prevention of Money Laundering Act. The Bank of Zambia has the authority to act as the regulatory authority giving effect to anti-money laundering regulations, by having in place anti-money Laundering measures and adopting such practices as are necessary for the detection and prevention of money laundering. Though the procedures are in place, the monitoring is inconsistent.

6.5 Know Your Customer (KYC) laws/regulations KYC requirements are enforced by Bank of Zambia.

6.6 Annual financial reporting Annual financial reporting is a mandatory requirement for all companies, under the Companies Act of Zambia.

6.7 Governance structures Most companies have appropriate governance structures, including audit committees. However in most instances these structures are not effective, except in large corporates and the banks regulated by the Bank of Zambia.

6.8 Government ownership and management Government ownership in Zambia remains very high. Key power, water, insurance and other market leaders are either partially or entirely government owned.

6.9 External auditors Zambian law requires all companies following under the Companies Act of Zambia to appoint an external auditor. © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241

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Section 1 Regulatory 1.1 Regulatory Regime The single regulator in Zimbabwe is the Reserve Bank of Zimbabwe (“RBZ”). Zimbabwe predominantly uses an Institutional approach, as all registered banks are regulated by the single regulator. Where banks are part of a group which includes, for example, building societies, leasing operations and stock broking entities, further regulation may be applicable, and thus a functional approach may be used. For example, stock broking firms are regulated by the Securities Exchange Commission.

1.2 Basel Accord status

Regulatory capital: • For commercial banking institutions, minimum tier-1 capital of USD 12.5 million is required. Liquidity: • Banks should maintain a liquid asset ratio of 30% as a minimum, sound liquidity and a quality asset book. Other: • There is currently no predetermined loan to deposit rate for the market, but banks are persuaded to use internal risk management processes in deploying resources to quality assets, pursuant to economic growth. • Currently the country does not have the luxury of using its own currency. • The functional currency is the United States Dollar. The other major currency is the South African Rand.

The regulator follows international best practice, although the current operating environment has restricted the pace of adoption of some international best practices. Basel II implementation is currently in progress, using the modified standardised approach. Full Basel II compliance is expected by 31 December 2012.

• The regulator requests full compliance, and non-compliance may trigger withdrawal of the banking licence or persuasion to merge with another banking institution.

1.3 Structure of supervisory body

1.8 Global financial crisis response

Bank supervision is the prerogative of the Central Bank. The bank supervision unit is within the Central Bank, under a Bank Supervision Divisional Chief. This office reports directly to the Governor of the Central Bank. On-site bank investigations are carried out every five years, whilst desk top audits are performed annually.

There was no specific response, except to learn from the global financial crisis. The market is expected to exercise caution and apply sound judgement when dealing with institutions and regional blocs in, or experiencing, financial turmoil.

1.4 Banking licence application

Zimbabwe has a deposit protection scheme through the Depositor Protection Board (“DPB”) chaired by the governor of the Central Bank. Membership is mandatory, and it includes all deposit taking institutions i.e. commercial banks, building societies and merchant banks. Deposits with asset managers and the Post Office Savings Bank are currently not covered by the DPB. DPB will strive to compensate at least 90% of depositors in full in the event of a bank failure.

An application is required to be submitted to the Registrar of Banks. The RBZ can issue a banking license, provided that the party concerned meets the licensing criteria. A decision on the status of the licence can take up to three months. Foreign applicants are considered for licensing, only if they are authorised to conduct banking business in their home countries and are subject to adequate regulation and supervision in their home countries. Non-banking entities in a banking group require regulatory approval.

1.5 Regulatory reporting requirements The Central Bank requires weekly statutory and liquidity returns, monthly management accounts, quarterly and interim financial statements (90 days following reporting date). The returns are standard across banks and automated i.e. submitted electronically to the Central Bank.

1.6 Important banking regulatory requirements The following are the most important banking regulatory requirements:

1.7 Banking supervision Banking supervision is performed on a consolidated basis.

1.9 Deposit insurance scheme

Currently the maximum insurable limit is pegged at USD 150 per depositor per bank.

Section 2 Commercial, Legal and Tax Environment 2.1 Process for establishing a new company An application is made to the Registrar of Companies for the reservation of a name, accompanied by various prescribed documents. Once approved, a Certificate of Incorporation is issued. Applications are made to the Central Bank in the required format.

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157 12.5 million (2009 estimate)

ZWD 1 = USD 0.00266 ZWD: Zimbabwian Dollar

$5.5 billion (2010 estimate)

Themba Mudidi T: +2634302600 E: [email protected]

Once the company is appropriately registered, it should be registered for tax purposes. This requires completion of the respective tax registration forms and submission of various specified documentation. Estimated time for this process is six weeks.

the association with key international anti-money laundering control agencies. The banks use Promotion and Suppression of Money Laundering Act, which is the primary piece of legislation governing the conduct of financial institutions and their employees in relation to money laundering.

2.2 Foreign investment in local companies

2.9 Tax regime

Foreign investors must obtain an investment licence from the Zimbabwe Investment Authority (“ZIA”). They are required to comply with indigenisation requirements/regulations with regard to shareholding. The investor must obtain Exchange Control authority to operate banking business and register with the Registrar of Companies in Zimbabwe.

The Zimbabwe taxation system is source based, but reforms to adopt the residency based system are already at an advanced stage. The following are inter alia the broad types of taxes applicable to companies:

2.3 Annual costs External audits are a requirement for listed entities, however, these are not compulsory for all private entities. Fees are payable to the Registrar of Companies on a sliding scale, depending on the issued share capital. Entities where share capital is in excess of USD 26 000 are required to pay USD 140 per annum. Certain lodgements of prescribed documents carry a lodging fee of USD 100.

2.4 Restrictions on foreign investment Indigenisation requirements must be adhered to in order for foreign investments to be permitted. Taxation clearances are required on disinvestment, and may result in payment of capital gains tax, depending on the nature of the disinvestment. Compliance is required with Exchange Control regulations for repatriation of proceeds from disinvestments.

2.5 Dividend remittance Non Resident Shareholders’ Tax (NRST) is payable on dividend distributions to non-resident shareholders. Resident Shareholders’ Tax (RST) is payable on dividend distributions to local shareholders other than locally registered companies. All amounts remitted are subject to Exchange Control regulations in respect of funds availability.

2.6 Intellectual property rights Intellectual property laws in Zimbabwe cover such areas as domain names, traditional knowledge, transfer of technology, patents/copyrights, etc. Zimbabwe is also party to several international intellectual property agreements.

2.7 Sustainability and the environment Business operations which have an adverse impact on land and the environment are required to undertake rehabilitation action and submit an environment impact assessment report every year with the relevant ministry.

2.8 Anti-money laundering The country adheres to international best practice in connection with anti-money laundering and control through adoption and adherence to stringent KYC principles, as well as

• Corporate Tax (CT) which is levied at 25%. In addition a 3% AIDS Levy on the tax is payable, making the effective tax rate 25.75%. • Value Added Tax (VAT) is levied at 15% for standard goods and services, and 0% for specified goods and services. • Withholding tax (WHT) mainly levied at 15%, subject to the provisions of any double taxation agreements (DTA) between Zimbabwe and such other country. • Capital gains tax (CGT) - the normal rate is 20% on the gain in respect of specified assets. • Listed securities are taxed at 1% of the gross proceeds as a final tax, whilst unlisted securities are subject to a withholding tax of 5% of gross proceeds. • The sale of certain immovable property is subject to WHT of 15% of gross proceeds.

2.10 Branch taxation There are no different treatments for the taxation of branches and subsidiaries. The corporate tax provisions apply to income derived from trade and investment operations.

2.11 Tax rates Individual employees tax is administered through the Final Deduction System (“FDS”) which is software based and administered by the employers. Individuals who have no other sources of income other than employment income are not required to file annual income tax returns. However, the employer is required to file annual FDS returns. Income tax varies from 0% to 45% for income earners in excess of USD 120 000 per annum.

2.12 Tax returns Corporate entities are required to submit annual returns to the Registrar of Companies within the first 18 months for a newly registered company, and thereafter within every fifteen months. Corporates are required to file provisional tax returns quarterly, and an annual self assessment tax return by 30th April of the year following the end of the tax year, which is January to 31 December. The annual self assessment tax returns can be filed electronically.

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78 | Africa Banking survey

VAT returns should be filed by the 25th of the month following the end of the tax period. PAYE returns and payments should be made by the 10th of the month following the month in which the PAYE has been withheld. WHT returns and payments should be made by the 10th of the month following the month in which the WHT is deducted. CGT withholding tax is due within three days of payment of the sale proceeds, whilst the CGT return should be submitted within 30 days of the sale.

Section 3 People

With regards to hiring, each organisation is required to have an internal recruitment policy, but there are restrictions when hiring ex-pats, as the one above.

3.6 Contractors The use of contractors is tolerated, provided that the period of employment is clearly defined in the contract e.g. three months, six months. This is common in the NonGovernmental Organisations (NGO) sector where there are donor funds, and the funds usually come for a specific period and or project. When hiring someone, it is not permitted for an employee to work for a period of more than three months without a contract. Should the three months lapse, they are deemed to become permanent employees.

3.1 Skills availability

3.7 Retirement and Medical Aid

Local learning institutions offer industry-appropriate diplomas and degrees. The Institute of Bankers of Zimbabwe offers banking diplomas, while the National University of Science & Technology and the University of Zimbabwe offer banking and finance degrees. There is limited knowledge in derivative instruments, as the country has not had experience in these for over of a decade.

There is National Social Security Authority (“NSSA”) - a national pension scheme - which is compulsory. A contributory scheme, where both parties contribute to the monthly subscription. Over and above the NSSA, it has become a common trend for organisations run mostly private defined contribution pension schemes. The contributions vary depending with an organisation. Medical aid and group life assurance is not compulsory, but it is commonplace for organisations to have these schemes in place. Some organisations are moving towards a total cost to employer model, where they will gross up all the benefits together into one basic salary, which will then form the employee’s monthly package.

3.2 Foreign nationals Ex-pats are permitted only in cases where it can be justified that the skill is not available locally, or where an exchange program is in place. All ex-pat appointments have to be approved by the Central Bank. Some of the foreign-owned banks have expats in their local leadership hierarchies. Immigration laws also require that ex-pats obtain work permits.

3.3 Labour legislation Zimbabwe has a number of labour laws in place. Key aspects of this legislation include matters relating to employee rights, termination of employment contract, remuneration and deductions from remuneration, and employee dismissal.

Section 4 Banking Environment 4.1 Major loan and deposit products Loan products Short term loans, overdrafts and bankers acceptances.

3.4 Trade union presence

Deposit products

Each sector has a National Employment Council (“NEC”) that covers employees below the managerial grade. Organisations in these sectors are therefore encouraged to register their employees with the NEC. The NEC represents all employee welfare, from remuneration to welfare. The Zimbabwe Banks and Allied Workers Union (“ZIBAWU”) represents the interests of non-managerial employees in the banking sector.

Call accounts, savings and term deposits (fixed).

3.5 Hiring and Firing of employees

4.3 Insolvency provisions

Hiring and firing is required to be performed in compliance with the Labour Act. It should be noted that this act supports employees to a greater extent than the employer, making it very difficult to fire employees. There are certain procedures to be followed before an employer can fire an employee.

A company may be wound up, either by the court or voluntarily by resolution of the members. Each of these has very specific provisions with regard to process. Only upon dissolution does the company cease to exist as a legal entity and, even then, its existence may usually be revived within

4.2 Payments/clearing system Payments are done through the Real Time Gross Settlement System (“RTGS”), managed by the Central Bank. With the adoption by all banks of the straight-through process (“STP”) daily RTGS’s have to be processed the same day.

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Financial Services | 79

two years on application by the liquidator or an interested person.

4.4 The taking of Security A borrower is restricted from providing himself as a guarantee for intangible security. Depending on the security type, banks apply a discount factor to establish the extent of coverage e.g. moveable and immovable property.

4.5 Banking branch and IT infrastructure The enhanced ICT platforms have enabled most banks to introduce internet and mobile banking services, and products such as account balance enquiries, bill payments and money transfers. Electronic banking is fast becoming popular in the banking industry. Banking institutions have partnered with mobile operators to provide various mobile banking and other electronic-based products to the previously un-banked and marginalized communities. However cash-based transactions continue to be the order of the day, due to low confidence in the banking system by the general public, the confidence is increasing but at a slower pace.

4.6 Active exchanges The Zimbabwe Stock Exchange is the main exchange. The Commodity Exchange of Zimbabwe (that trades commodity linked contracts) was launched in January 2011, but is yet to start trading, due to funding constraints.

4.7 Banking sector overview There are approximately 180 financial institutions in Zimbabwe, including micro lenders (132) and asset management companies. There is competition, with most banks offering the same products. The market has a gap for home and car loan financing, and partnering with mobile network operators to provide products.

vandalised, and will need to be rebuilt. The NRZ is one of the parastatals that has been earmarked for privatisation, restructuring or commercialisation. Air Zimbabwe is the main airline operator. The country is busy upgrading its airport infrastructure.

5.3 Communications infrastructure The telecommunications industry in Zimbabwe is one of the fastest growing sectors in Africa. The voice penetration rate has improved, reaching 68% in 2011, of which mobile penetration accounted for 65% (18% in 2009). The internet penetration rate is at around 13%.

5.4 Political environment Zimbabwe has been under the administration of the Government of National Unity (“GNU”) for over two years. The GNU took effect in February 2009, following the signing of the Global Political Agreement in 2008. Since the formation of the GNU, the country has experienced relative political stability and gradual economic growth. There was an original general understanding that the GNU, as a transitional arrangement, would subsist for a period of up to two years, after which the country would choose its political leadership in a combined general and presidential election. There is, however, uncertainty on when the country will hold the anticipated elections, as these depend on certain milestones which are yet to be fulfilled. Chief among these is the revision of the country’s Constitution.

5.5 Economic overview

Section 5

Zimbabwe experienced a positive GDP growth rate of 5.7% in 2009, for the first time in 10 years, and the betterthan expected performance in agriculture underpins this growth rate. The economy grew by 8.1% in 2010 due to improvements in the production of all minerals. Zimbabwe holds reserves of chromite, coal, asbestos, gold, platinum and copper. Historically farming and tourism formed Zimbabwe’s main industries. GDP in 2010 is estimated at USD 5.6 billion.

Physical Environment

5.6 Social environment

5.1 Property ownership The laws of Zimbabwe guarantee title of residential and commercial property/land, except for agriculture land, which is owned by the State. Farmers are given a 99 year lease that allows them to use agricultural land. Foreigners are entitled to purchase property.

5.2 Transport infrastructure 20% of the road network is classified as good, 40% is fair, and 40% is poor and in need of resurfacing. A large portion of the railway network is maintained by the public sector through the National Railways of Zimbabwe (“NRZ”). Portions of the railway network have been

There is a significant housing back log caused by ruralurban migration and expansion in urban settlements. The Government since 2010 has availed USD 25 million through the Infrastructure Development Bank of Zimbabwe for housing projects in various localities. Education is one of the sectors most affected by the brain drain as qualified personnel migrated to neighbouring countries. Prior to 2009, the economic challenges lead to a deterioration of health infrastructure, loss of experienced health professionals, drug shortages and a drastic decline in the quality of health services. The health sector is currently facing insufficient financial resources to procure essential medicines, equipment and anti-retroviral therapy.

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The population is estimated between 12.2 and 12.4 million.

5.7 Trading partners Zimbabwe has a number of trading partners. In terms of exports, the following countries are included as Zimbabwe’s trading partners: South Africa (56%), China (6%), United Arab Emirates, Mozambique, Switzerland and Zambia each with 3%, and others.

5.8 Crime and corruption It is difficult to get statistical data. Crime in Zimbabwe is generally non-violent. There are, however, press reports of police officers aiding criminals. Corruption is unfortunately prevalent, and this has contributed negatively to the economy.

5.9 Language Zimbabwe has three official languages English, Shona, and Ndebele. The official business language is English.

Section 6 Governance and reporting Issues 6.1 IFRS implementation Zimbabwe has a very active accounting and auditing profession. Practising Accountants and Auditors are registered with the Public Accountants and Auditors Board, a statutory body. The accounting framework used in Zimbabwe is International Financial Reporting Standards (“IFRS’s”), issued by the International Accounting Standards Board (“IASB”).

6.2 Basel II and III Basel II implementation is in progress in the financial services sector. Full compliance is expected by 31 December 2012.

6.3 FATCA FATCA has not yet been addressed.

6.6 Annual financial reporting All business institutions/enterprises are required to formally prepare annual financial statements. This applies to all companies registered under the Companies Act, listed under the Zimbabwe Stock Exchange (“ZSE”), or regulated by the Reserve Bank of Zimbabwe. The Zimbabwe Stock Exchange, listed entities, and banks, are required to have their annual accounts audited. Industry-regulated firms also have similar requirements to the above. For instance, even if the bank or financial institution is not listed, there is a requirement to have its annual accounts audited. The same applies to municipalities and councils.

6.7 Governance structures Listed entities, multinationals, industry-regulated firms like banks (but not listed), and large firms, adhere to the King Corporate Governance guidelines. Most entities are constituted as follows: Main Board of Directors, Audit Committee, Human & Remuneration Committee and Risk (including IT, Credit, Market etc). The RBZ has published corporate governance guidelines that apply to all banking institutions.

6.8 Government ownership and management Ownership by Government is not prevalent.

6.9 External auditors Use of external auditors is mandatory for listed entities, all banks regulated by the Reserve Bank of Zimbabwe, multinationals, large corporate, municipalities and councils. Auditors in Zimbabwe use the framework of the International Standards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board (“IAASB”).

6.10 Local regulatory developments or plans Indigenisation & Economic Empowerment Act , which requires that at least 51% of share ownership be in the hands of local indigenous Zimbabweans, for all entities with share capital of US$ 500 000.

6.4 Anti Money Laundering (AML) laws/regulations AML laws in Zimbabwe can be considered to be fully implemented. Details of parties to financial transactions are required to be disclosed and confirmed as being “clean” before conclusion of the transaction.

6.5 Know Your Customer (KYC) laws/regulations All financial institutions and service sectors are expected to comply e.g. banks, hotels, telephone and cellular service providers. The Reserve bank of Zimbabwe enforces KYC compliance for banks.

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Financial Services | 81

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COUNTRY BOTSWANA

GHANA

KENYA

MAURITIUS

MOROCCO

NAMIBIA

NIGERIA

SENEGAL

BANK

REPORTING DATE

TOTAL ASSETS

TOTAL LIABILITIES

$000's

$000's

Barclays

31-Dec-10

1 591 240

1 418 930

First National

30-Jun-11

1 794 352

1 637 788

Stanbic

31-Dec-10

1 225 381

1 169 959

Standard Chartered

31-Dec-10

1 446 257

1 361 674

Barclays

31-Dec-10

913 905

778 668

Ecobank

31-Dec-10

849 180

722 104

Ghana Conmmercial

31-Dec-10

1 179 419

1 039 631

Standard Chartered

31-Dec-10

931 045

821 645

Barclays

31-Dec-10

2 055 022

1 680 589

Co-operative Bank

31-Dec-10

1 832 404

1 591 995

Equity

31-Dec-10

1 593 291

1 256 431

Kenya Commercial

31-Dec-10

2 653 992

2 167 563

Barclays

31-Dec-10

3 045 303

2 754 838

HSBC

31-Dec-10

1 016 594

952 412

Mauritius Commercial

30-Jun-11

4 840 136

4 528 287

State Bank of Mauritius

30-Jun-11

2 863 265

2 609 354

Attijariwafa

31-Dec-10

35 878 672

32 599 714

BMCE

31-Dec-10

21 900 944

20 050 125

Group Banque Centrale Populaire

31-Dec-10

25 181 422

22 493 858

SG

31-Dec-10

8 661 697

7 782 813

Bank Windhoek

30-Jun-10

2 091 454

1 885 662

FNB

30-Jun-11

2 082 079

1 848 743

Nedbank

31-Dec-10

936 748

827 658

Standard

31-Dec-10

1 870 271

1 680 127

First Bank

31-Dec-10

9 405 709

10 333 189

Guaranty

31-Dec-10

4 151 193

4 869 509

United Bank for Africa

31-Dec-10

6 179 666

7 960 051

Zenith

31-Dec-10

6 160 266

9 218 163

CBAO

2010*

1 313 444

1 150 832

SGBS

2010*

1 174 495

1 008 600

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Financial Services | 83

EQUITY

NET INTEREST INCOME

NON INTEREST REVENUE

NET PROFIT AFTER TAX

$000's

$000's

$000's

$000's

172 310

136 604

50 571

68 106

156 564

90 236

68 796

78 249

55 422

31 889

22 772

14 211

84 584

65 976

31 008

30 202

135 237

93 239

41 706

33 072

127 077

60 881

39 689

33 592

139 788

158 695

25 962

31 317

109 401

85 267

36 439

40 308

374 433

186 514

123 168

126 128

240 409

109 219

74 083

52 113

336 860

131 573

108 732

89 897

486 430

220 131

117 666

104 944

290 465

74 906

83 668

78 331

64 194

21 453

17 830

13 152

587 206

416 319

38 717

148 779

453 604

232 058

48 932

60 179

3 278 958

1 041 157

638 479

555 099

1 850 819

568 214

289 042

166 676

2 686 363

919 144

230 597

358 392

878 884

315 792

114 252

130 628

204 769

87 835

60 401

42 982

233 337

109 939

82 219

56 791

109 090

46 381

26 452

18 755

190 144

65 775

73 803

40 997

2 184 199

82 859

83 832

172 666

1 315 177

486 024

30 424

234 048

1 203 398

403 378

290 558

13 891

2 310 345

538 263

62 455

213 685

162 612

84 549

12 249

15 269

165 895

65 030

36 192

33 413

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84 | Africa Banking survey

COUNTRY SOUTH AFRICA

TANZANIA

UGANDA

ZAMBIA

ZIMBABWE

BANK Absa

REPORTING DATE 31-Dec-11

TOTAL ASSETS

TOTAL LIABILITIES

$000's

$000's

102 666 830

93 739 977

FirstRand

30-Jun-11

91 369 053

82 697 850

Nedbank

31-Dec-11

84 580 574

77 705 181

Standard

31-Dec-11

195 414 615

179 490 614

CRDB

30-Sep-11

1 623 926

1 456 090

Federal Bank of the Middle East

30-Sep-11

2 329 357

2 169 963

National Microfinance

30-Sep-11

1 377 438

1 211 523

NBC

30-Sep-11

1 003 946

899 302

Citibank

31-Dec-10

264 754

208 818

CRDB

31-Dec-10

322 895

276 666

Stanbic

31-Dec-10

960 059

868 028

Standard Chartered

31-Dec-10

722 894

631 098

Barclays

31-Dec-11

863 965

793 488

Stanbic

31-Dec-11

798 944

752 840

Standard Chartered

31-Dec-11

871 278

800 418

Zambia National Commercial

31-Dec-11

877 088

780 371

BancABC

31-Dec-11

379 384

343 888

CBZ

31-Dec-11

981 767

903 500

Stanbic

31-Dec-11

361 404

326 856

Standard Chartered

31-Dec-11

325 106

271 109

Note 1: Some groups incorporate the results of non-banking activities Note 2: Bank names may be abbreviated Note 3:

Transalation and rounding may cause slight differences in balancing

Note 4: Although these figures were extracted from the public domain, some may be unaudited Note 5: All numbers are translated as at 17 March 2012 with the exception of Nigeria where date of translation is 31 December 2010 Note *: Senegal not on IFRS

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Financial Services | 85

EQUITY

NET INTEREST INCOME

NON INTEREST REVENUE

NET PROFIT AFTER TAX

$000's

$000's

$000's

$000's

8 926 853

3 187 985

2 793 092

1 329 012

8 671 203

2 675 381

3 111 642

1 533 636

6 875 393

2 353 437

2 011 266

848 642

15 924 002

3 761 924

3 879 113

1 590 665

167 834

24 476

15 021

10 651

159 394

14 545

12 346

7 191

165 914

29 366

13 728

12 396

104 643

13 728

9 011

5 089

55 935

11 576

9 056

10 515

46 229

36 424

11 689

11 759

92 035

69 084

46 564

28 833

91 796

48 898

26 421

29 208

70 477

57 168

44 306

34 716

46 104

43 034

40 193

14 550

70 860

48 908

44 828

25 166

96 717

73 949

43 482

23 291

35 496

19 876

16 584

7 253

78 267

70 631

35 153

24 698

34 548

25 342

31 046

11 146

53 997

14 481

45 778

21 990

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Contacts Botswana

Nigeria

Gerry Devlin T: +2673912400 E: [email protected]

Bisi Lamikanra T: +23412718962 E: [email protected]

Ghana

Senegal

Nathaniel Harlley T: +233302770454 E: [email protected]

Pape Bocar Gueye T: +221338492727 E: [email protected]

Kenya

South Africa

Eric Aholi T: +254202806000 E: [email protected]

Richard Buchholz T: +27116476204 E: [email protected]

Mauritania

Tanzania

Pape Bocar Gueye T: +221338492727 E: [email protected]

Ketan Shah T: +255 22 2118866 E: [email protected]

Mauritius

Uganda

Ashish Ramyead T: +2304069885 E: [email protected]

Morocco Jamal Saad El Idrissi T: +212537633702 E: [email protected]

Namibia Silvia Rosado T: +26461387500 E: [email protected]

Benson Ndung’u T: +256414340315 E: [email protected]

Zambia Dumi Tshuma T: +260211372900 E: [email protected]

Zimbabwe Themba Mudidi T: +2634302600 E: [email protected]

We acknowledge with thanks the permission we have received to publish the “Ease of Doing Business Rank 2011” – which formed part of a co-publication by The World Bank and The International Finance Corporation entitled “Doing Business in 2011 – Making a Difference for Entrepreneurs” (© 2010 The International Bank for Reconstruction and Development/World Bank). The Ease of Doing Business Rank is a worldwide ranking, based on 9 criteria, being Starting a Business, Dealing With Construction Permits, Registering Property, Getting Credit, Protecting Investors, Paying Taxes, Trading Across Borders, Enforcing Contracts and Closing a Business. The survey included data from 183 countries. In preparing the Africa Banking Survey (“the survey”), KPMG has relied upon and assumed, without independent verification, the accuracy and completeness of any information provided to, and/ or gathered by KPMG whether from public sources or otherwise including percentages, exchanges rates, views and numbers which may vary, and accordingly KPMG expresses no opinion or makes any representation concerning the accuracy and completeness of any such information contained or provided herein. The survey shall not in any way constitute advice or recommendations regarding whether or not the reader or any third party should proceed with a proposed transaction and/or regarding any other commercial decisions associated with this survey and all relevant issues may not have been identified. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Should you wish to rely on the information contained in the survey, you acknowledge that you do so at your own risk. The information contained in this survey is based on prevailing conditions at 17 March 2012. KPMG has not undertaken to nor shall KPMG be under any obligation in any circumstances to update the survey or revise the information contained in the survey for events or circumstances arising after the 17 March 2012 and the presentation or any information contained in the survey shall not amount to any form of guarantee that KPMG have determined or predicted future events or circumstances. KPMG and/or KPMG Inc including its directors, employees and agents, and any body or entity controlled by or owned by or associated with KPMG or KPMG Inc (collectively “KPMG”) accepts no liability or responsibility whatsoever for any loss, damage, cost or expense to any party, resulting directly or indirectly from the disclosure, publication, reliance or referral of the survey and/or its contents thereof to or by you or any third party or the information or views contained therein, either in whole or in part and you agree to indemnify and hold KPMG harmless in this regard from and against any and all claims from any person or party whatsoever for expenses, liability, loss or damages arising from or in connection thereto. © 2012 KPMG Inc, a South African company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in South Africa. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. MC8241