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The Latest Changes in Africa's Regulatory Environment
With a growing presence in Africa’s top startup ecosystems, the Renew Capital team stays on top of the legal landscapes shaping the venture capital and investment space and to provide insights for investors, entrepreneurs, industry leaders and policymakers in Africa’s dynamic business environment.
Egypt:
- Egypt Privatizes Health Sector – Egyptian and foreign investors can now operate and manage public health facilities for profit. This presents a huge opportunity for investors!
Ethiopia:
- Market-Based Exchange Rate Introduced – On July 29, 2024, the National Bank of Ethiopia (NBE) adopted a market-driven exchange rate system, ending its direct control. Key changes include abolishing surrender requirements to NBE, liberalizing import restrictions, improving retention rules for exporters, removing interest rate caps on foreign borrowing and allowing residents to open foreign currency accounts. Read the directive.
- Banking Sector to Open Foreign Investment – A draft proclamation allows foreign banks to acquire up to 49% of local banks, with potential for full ownership subject to NBE approval. Foreign entities can also establish banks, create subsidiaries or set up branches or representative offices with distinct legal liabilities. This is a long contested area of deregulation and it is currently not clear when the draft proclamation will become law.
- New VAT Proclamation Passed – The VAT base now includes transportation services, portable water, electricity supply and digital transactions, while capital goods for production remain exempt to encourage investment.
Ghana:
- Court Clarifies Termination Without Cause – Ghana’s Supreme Court ruled that employers and employees can end their relationship without providing a reason, affirming that neither can be forced to retain or continue employment. This is a big step forward for employers in Ghana!
Kenya:
- New Income Tax Rules for Charitable Donations – The 2024 rules outline procedures for determining donation allowability and set administrative procedures for tax exemptions. They also restrict surplus retention by charitable organizations and limit tax deductions on donations exceeding 50% of total annual donations by a taxpayer.
Nigeria:
- National Digital Economy & E-Governance Bill Introduced – The National Assembly proposed a bill to regulate the digital economy and mandate electronic records and contracts within government bodies. It is not clear how long it will take for the bill to be enacted, but startup founders are watching it closely to identify opportunities to innovate and provide solutions for these agencies.
- Single Shareholder Structure Approved – The Federal High Court ruled that companies incorporated before CAMA 2020 can now adopt single shareholder structures. This means that founders and investors who are looking to adopt a true holding company structure can now restructure their companies such that it is solely owned by one offshore entity.
South Africa:
- Companies Amendment Act Brings Corporate Reforms – As of July 30, 2024, new laws require listed and state-owned companies to disclose pay gaps and mandate remuneration policies for public and state-owned companies.
- Climate Change Act Enacted – Signed in July 2024, the law establishes a legal framework to regulate climate change impacts, reinforcing South Africa’s commitment to international agreements.
Tanzania:
- Finance Act 2024 Enacted – Effective July 1, 2024, the Finance Act introduces major tax law amendments, enhancing public revenue management and aligning with broader African trends. It remains to be seen how this will impact foreign investments in the country.
- Diaspora Gains Land Ownership Rights – The new legislation allows foreigners and companies with majority foreign shareholders to own land in Tanzania via the Diaspora Tanzanite Card and special non-citizen diaspora status.
Uganda:
- Central Bank’s Immunity Partially Lifted – A new instrument from the Minister of Finance permits execution orders against the assets of the Central Bank of Uganda, reducing its blanket immunity.
Zambia:
- VAT E-Invoicing Implemented – Zambia Revenue Authority’s Smart Invoice system for VAT collections launched on July 1, 2024. This is expected to improve transparency and improve efficiency in tax collection.
Regulatory:
- US Bank Restricts Accounts for Certain African Residents – Historically, African founders who set up holding companies in Delaware typically open bank accounts for their startups with Mercury Bank. In a rather unfortunate turn of events, Mercury Bank has restricted account access for founders residing in Mozambique, Nigeria and 35 other countries, with closures effective by August 22. This means that many founders from these countries will have to move their foreign accounts to new banks in an already restrictive banking system in the US.
Visit our blog to learn more about some of Africa’s startup ecosystems or contact us at renew@renewcapital.com if you need to get up to speed on any of these ecosystems! Stay tuned for more updates in our upcoming briefs!
Disclaimer: The information included in his blog does not constitute legal advice. Consumers should consult their legal advisors.
Renew Capital is an Africa-focused impact investment firm that backs innovative companies with high-growth potential. Renew Capital manages investments made on behalf of the Renew Capital Angels, a global network of angel investors, foundations and family offices who seek financial returns and sustainable social impact. For the latest on investing in Africa, subscribe and follow us at our social links below.
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