TOGO Investment Guide
Openness to Foreign Investment
Togo has traditionally been a very hospitable environment for foreign
investment, with a Government that distinguished itself through the 1980s as a
western-oriented, entrepreneurial hub in a regional environment that then
tended markedly toward the centralized, rigid, and state-controlled. Investor
interest fell sharply in the early 1990s, a period of overt political unrest in
Togo. As the country continues to struggle to emerge from the negative economic
impact of that period, foreign investment is if anything even more welcome than
it was previously. The Government is seeking high-profile fora to promote its
investment opportunities, particularly in the free trade zone. A contentious
presidential election result in June 1998 brought sporadic civil disorder and
legislative elections in March 1999 were boycotted by the opposition. These
events have again raised questions about the long-term stability of the
underlying environment. The Government of Togo also has difficult work ahead of
it to improve the climate for private sector activity, particularly in areas
such as administrative and judicial transparency, as well as in banking; World
Bank programs will support these efforts.
The current investment code was enacted in April 1990. The code and related
regulations were designed to encourage foreign investment, and they represented
an improvement over the previous code. Foreign investment could be an important
element in achieving the Government's goals of diversification from traditional
exports (agricultural cash crops, phosphates), and in ongoing privatization
programs (phosphates, telecommunications, tourism, etc.) The privatization
program has largely stalled in recent years, although the World Bank is working
with the Government of Togo on means of reinvigorating the process.
The investment code will be further improved in the short- to medium-term, and
some revisions have already occurred, particularly with regard to incentives.
As a member of the west African economic and monetary union (WAEMU, or UEMOA in
French), Togo is participating in zone-wide plans to harmonize and
rationalize regulations governing economic activity. A common charter on
investment is one of the projected elements of that effort. The resulting
investment code, being carefully watched in the context of the structural
adjustment program being implemented with the international financial
institutions will be greatly simplified. It is expected to be limited in
content to general dispositions related to non-discrimination, guarantees, and
arbitration.
The 1990 code permits investment in the following sectors:
• agriculture, animal husbandry, fishing, forestry, and activities related to
the transformation of vegetable and animal products;
• manufacturing;
• exploration, extraction, and transformation of minerals;
• social and low-cost housing;
• hotels and tourist infrastructure;
• agricultural storage;
• applied research laboratories;
• socio-cultural activities.
Investment under the code is limited to new investments of at least FCFA25
million (about $42,000) for foreign companies and FCFA5 million (about $8,500)
for Togolese companies. The Togolese corporation charter covers investments of
less than FCFA five million. The investment code covers the expansions of
existing enterprises if the cost of the expansion is at least half the value of
the existing enterprise. Investors must provide at least 25 percent of the
value of a new investment. At least 60 percent of the payroll must go to
Togolese citizens.
Applications for approval under the law must be submitted to the planning
ministry, which, in consultation with the national investment commission,
approves or rejects the applications within 30 days, as compared to three to six months
under the old law. In practice, approvals take slightly longer than the
required 30 days. The Government decree granting approval spells out the
conditions of the investment.
Currency Conversion and Transfer Policies
Togo uses the CFA franc, which is the common currency among the Francophone
countries of West Africa. The FCFA is fixed at a rate of FCFA100 to 1 French
franc. The exchange system is free of restrictions on the making of payments
and transfers for current international transactions. The investment code
provides for the free transfer of revenues derived from investments, including
the liquidation of investments, by non-residents. There are no restrictions on
the transfer of funds to other West African franc zone countries or to France. The
transfer of more than FCFA500,000 (about $700) outside the franc zone requires
Finance Ministry approval. Approvals are routinely granted for foreign
companies and individuals, although it often takes as long as a week rather
than the two days stipulated in the law. Togolese citizens and companies are
not generally allowed to hold bank accounts outside of the franc zone. With its
WAEMU partners, Togo is examining removing remaining restrictions on
capital transfers. Financial transactions within the franc zone can be more
complicated than might be expected, due to certain administrative obstacles to
cross-country banking activities. The transfer of funds is also possible
through use of the recently introduced ECOWAS Traveler's Check, which has no amount
limitation within the 16 ECOWAS countries.
Expropriation and Compensation
Expropriation and compensation: The only expropriation in Togo was the
1974 nationalization of the French-owned phosphate mine. Compensation was paid.
Dispute Settlement
There are no known investment disputes outstanding in Togo. The
investment code provides for the resolution of investment disputes involving
foreigners through the provisions of bilateral agreements between the
Government of Togo and the investor's Government, conciliation and arbitration
procedures agreed to between the interested parties, or the international
center for the settlement of investment disputes, of which Togo is a
member. Lack of transparency and predictability of the judiciary is a serious
obstacle in enforcing property and judgment rights, and similar difficulties
apply to administrative procedures. Forthcoming World Bank programs hope to
devise a strategy to begin to address these shortcomings.
Performance Requirements and Incentives
Togo has had one of the most liberal tariff regimes in the CFA zone. As a
result of reforms undertaken since 1995, tariffs have been simplified to three
rates (5/10/20 percent); there is also a three percent statistical
tax. A common external tariff regime for WAEMU members has recently been
instated, but is not widely implemented. Price control and profit margin
regulations have been largely eliminated with electricity, water, and
telecommunications the only sectors still subject to administrative price
controls. Private competition in telecommunications was introduced at the end
of 1999, introducing better market-oriented pricing in that area. While the
steps for receiving residence permits are in theory well-defined, in practice
foreigners seeking to regularize their status for long-term work and residence
purposes have encountered significant administrative obstacles and delays. Such
permits, formerly the province of the national police, are now the
responsibility of the national gendarmerie, a branch of the Togolese armed
forces.
Private Ownership Rights
Regulations for the establishment of foreign and domestic private enterprises
are in theory well-defined, but there is a great deal of discretion in their
implementation, and thus discrimination across sectors. An important trend for
private entities is the movement toward privatization of parastatal
enterprises, and the gradual removal of monopolies for those state entities
that remain in operation. The cotton ginning parastatal, for example, now has
private ginning competitors, although the conditions for dividing national
cotton production between the ginning enterprises is a matter of regulation
rather than open competition. The state pharmaceutical sales company has also
lost its monopoly, and a wide range of generic drugs is available from private
competitors.
Protection of Property Rights
Togo is a member of the World Intellectual Property Organization and of the
Cameroon-based African Intellectual Property Organization. For specific
information on IPR matters, please contact:
Mr. Koakou Ata Kato, Chef de Division Propriete Industrielle et Normalisation,
Direction de l'Industrie et de l'Artisanat, BP 831, Lomé, Togo. Phone (228) 22-10-08;
fax: (228) 22-49-13.
Protection of physical property is frequently contentious in Togo, as
inheritance laws are poorly defined and property transmission outcomes are
frequently challenged. Only Togolese citizens or those granted citizenship by
court decision, French citizens, or foreign Governments are allowed to possess
real property in Togo. Real and chattel property disputes are further
complicated by judicial non-transparency, which will often favor national over
foreign entities.
Transparency of Regulatory System
Lack of judicial and regulatory transparency is a significant obstacle. Togo's structural adjustment efforts foresee a large-scale overhaul of the legal and regulatory framework to address these shortcomings in the climate for economic activity. Measures include regional initiatives regarding business and investment law, such as the common WAEMU investment charter mentioned above. The common business law treaty (OHADA), entered into force as of Jan. 1, 1998, and should in theory reduce judicial uncertainty across the region; in practice it will function well only after an overhaul of the functioning of national judicial systems. A revised labor code that should have been adopted in 1997 is now approaching a final form following consultations with the international financial institutions, and may be presented to the National Assembly in 1999.
Political Violence
Although there were incidents of political violence from 1991-1994, none were
targeted against Americans, and few were targeted against businesses. In
January 1993, elements of the security forces looted several downtown shops,
primarily owned by Lebanese or Indian businesspeople. The official results of
presidential elections in June 1998 were contested by the opposition, and there
were a few days of mostly orderly civil demonstrations followed by one day of
clashes between citizens and security forces, confined exclusively to
opposition neighborhoods and not targeting foreign concerns. None of these
incidents reached the scale of violence that marked the earlier part of this
decade. However, Amnesty International published a report in May 1999 alleging
that Government security forces had committed a significant number of
extra-judicial killings around the time of the June 1998 presidential election.
An accord between the Government and the opposition that was signed on July 29, 1999
brokered by France, Germany, the European Union, and la Francophonie, has not
been rapidly implemented, but may yet provide a way out of the country's
present political impasse.
Corruption and Crime
Although Togo has laws on the books that make corruption a crime,
it has spread as a business practice in recent years. Togo is
still a more straightforward place to do business than many other African
countries, but deals, especially in Government procurement and dispute settlements,
are more likely to go forward with greased palms than in the past. Bribes,
whether to private or Government officials, are considered crimes. The police,
gendarmes, and courts are charged with combating corruption in Togo. Some
Togolese officials have been charged and convicted of corruption-related
charges, but these cases are relatively rare, and appear mostly to be those who
have in some way lost official favor.
Labor
There is a large pool of qualified university graduates and unskilled workers,
although there are shortages of workers with intermediate technical skills and
practical experience. Generally, unemployment and underemployment are high and
young Togolese entering the formal sector job market have difficulty finding
work. The adult literacy rate is about 40 percent. Most Togolese speak French
(the official language). There are a surprising number of English speakers in Togo.
The minimum wage is FCFA16,692 (approx. $28) a month for unskilled industrial
workers. There are separate wage scales negotiated by employers, workers, and
the Government for industry, construction, public works, commerce, and banking.
Non-wage costs (e.g. social security and medical costs) run about 40 percent of
wages. Togo was unique among the CFA countries in not
introducing a general wage increase after the CFA devaluation in January 1994.
Following a five percent wage adjustment in 1996, the Government has committed
to holding wages constant for civil servants as part of its commitments to the
international financial institutions regarding Government expenditure
restraint. However, salary arrears to Government employees is a growing
problem. Private sector employers generally follow Government wage movements.
After a period of vigorous labor activity in the early 1990s mostly in support
of the democratic political transition, capped off by a nine-month general
strike in 1992-93, labor activity has been muted. Strikes have not been
otherwise common in Togo. Several of the independent confederations banded
together to form an “intersyndicale” to negotiate more effectively with the
Government and business management in the wake of the CFA devaluation. They
have not been notably successful.
International Investment Agreements
The United States and Togo signed a guaranty of private investments and an
amity and economic relations treaty in 1962. The Togolese Government has, in
the past, expressed an interest in a bilateral investment treaty with the
United States Government, but negotiations in 1991 were never concluded. Togo has
signed many economic, commercial, cooperation, and cultural agreements with its
foreign aid donor countries, including France, Germany, Canada, the Netherlands, Belgium, and Japan.
Foreign Trade Zones
Togo has had a free port for many years. It serves as a transshipment
facility for goods passing through the post of Lomé to neighboring countries.
In September 1989, the Togolese Government approved an export processing zone
(EPZ) law. Advantages of the EPZ include a less restrictive labor code, and the
ability to hold foreign currency-denominated accounts. The law stipulates that
EPZ firms should employ Togolese on a priority basis, and after five years
foreign workers cannot account for more than 20 percent of the total workforce
or of any professional category. EPZ firms may, with Government permission,
sell not more than 20 percent of their production in Togo. While
there are two EPZ sites, investors may locate outside of these areas and still
enjoy EPZ status. Approximately 35 firms are operating in the EPZ. However,
there was a severe electricity shortage in Togo from March-May, 1998. This
was a serious blow to the manufactures-oriented companies in the zone, one
company closed, and others show few signs of recovering.
Taxation
The various tax advantages that were previously bestowed under both special conventions and the 1990 investment code are being eliminated. These advantages were often maintained beyond the period prescribed, hampering revenue enhancement efforts. The 1995 finance law terminated all incentives that had been maintained beyond their legal duration. Remaining special conventions will not be renewed, and no new exonerations will be granted. To the extent that some incentives are retained, they will occur within the tax code, and address depreciation, treatment of losses, taxation of capital goods, and relief on intermediate inputs for export goods.
In September 1996, the general corporate profits tax in Togo was 40
percent, with a special rate of 37 percent for industrial enterprises. A
minimum tax of 0.5 percent of turnover is imposed on all non-exempt enterprises
Togo made a great deal of progress in 1997 with plans to rationalize the tax
system and its administration, bringing about both simplification and revenue enhancement.
The value added tax has been unified at 18 percent (as opposed to the previous
two-rate structure of seven percent and 18 percent.) Further revisions that had
been expected in 1998 were not enacted. The World Bank continues to strongly
encourage revisions to the tax code.
Stock Market
The Bourse Regionale des Valeurs Mobilieres (BRVM) was opened in September 1998
to serve as a regional financial market for the member-states of the West
African Economic and Monetary Union (UMOEA), which includes Benin, Burkina Faso,
Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo. At the end of the 1990's, the BRVM had 35 listed
companies.
Listing requirements include: a share capital of CFAF 200-500 million; 15-20
percent public ownership; five annual reports; balance sheet.
The BRVM has computerized trading with satellite links. Trading occurs on
Mondays, Wednesdays, and Fridays. Trading is decentralized so that
member-countries can trade simultaneously from their national bourse via
satellite links.
For more information on the
Bourse Regionale des Valeurs Mobilieres, see URL: http://www.brvm.org
For
further information on investing in Togo, please visit: http://www.republicoftogo.com/
Sources: International Monetary Fund (Country Watch): http://www.imf.org