Foreign direct investment (FDI) in Togo

FDI in Figures

According to the UNCTAD's World Investment Report 2021, FDI in Togo almost doubled to USD 639 million from USD 346 million in 2019, despite the economic crisis triggered by the Covid-19 pandemic. The stock of FDI amounted to USD 2.7 billion in 2020. The increase in FDI was mainly the result of investments from other West African countries. A key project was a USD 100 million plant for construction materials announced by CimMetal Group (Burkina Faso), which will start production this year. Another significant investment in 2020 was the new USD 60 million cement plant built by Dangote (Nigeria). According to UNCTAD’ Investment Trends Monitor, global FDI flows rebounded strongly in 2021, but FDI flows to African countries (excluding South Africa) rose only moderately. The sectors that attract the most foreign investment are phosphates, cotton, infrastructure, coffee and cocoa. France, Canada and Brazil are the main investors. The French group Bolloré has invested in the construction of a third wharf in the port of Lomé. Togo has a free trade zone, which has attracted so far over 60 companies and employs more than 12,000 people. The Adetikiopé industrial platform (PIA), which is focused on processing and exporting natural resources and which was opened in June 2021, could boost investments (Coface).

The Lomé Port is a major asset for Togo. It is one of the largest ports in the region, turning the country into a trade hub. The country was ranked 97th worldwide, for the ease of doing business in the latest available version of the World Bank's Doing Business Report. This represents a significant improvement from the 2019 edition when the country was ranked 137th. Starting a business, dealing with construction permits, getting electricity, registering property, and obtaining credit are the main subcategories of the ranking where Togo has made major improvements. This strong performance is the result of various reforms set to attract investments. Togo has implemented a strategy to digitise and automate tax payment and business creation procedures. Reforms also include the implementation of a single window for investment, reduction of the minimum capital for the creation of a company and as well as the reduction of the costs of obtaining a building permit. The country has improved the monitoring and regulation of power outages by recording data on the annual Average System Outage Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI). Electricity cost has also been reduced. However, efforts are still needed in terms of protection of minority investors, execution of contracts, resolution of problems related to insolvency and simplification of the system of payment of taxes. Foreign ownership of land is restricted and capital transactions are subject to government control or approval. Corruption, lack of skilled workforce, threat to maritime trade by Gulf of Guinea piracy and exposure to terrorist activity in the Sahel region are potential barriers to investments.

What to consider if you invest in Togo

Strong Points

Togo has several assets that could make it an attractive destination for FDIs:

• Mineral (phosphate, limestone and clay transformed into clinker) and agricultural (coffee, cocoa, cotton) resources
• A strategic location for trade with the rest of Africa, Europe and the North and with the potential to become a regional hub (the port of Lomé being the only deep-water port in West Africa)
• A relatively modern transportation infrastructure, with public and private investment in the sector
• Structural reforms underway (public finances, banking system, phosphate and cotton sectors)
• Member of regional organisations such as WAEMU and ECOWAS
• Presence of Export Free Zone (EFZ) which provide incentives to new companies
• Currency stability (CFA franc is pegged to the Euro)
• Nationwide availability of fibre to connect businesses locally and internationally

Weak Points

Several factors still hinder FDI inflows to Togo:

• High levels of poverty (46.2% in 2020 - World Bank) and unemployment
• Inadequate education and public health infrastructure
• A weak and opaque legal system, with a lack of clear land titles and government interference in various sectors
• A difficult business climate and high risks of corruption
• Frequent socio-political tensions
• Lack of agricultural infrastructure (in terms of storage, processing or irrigation)

Government Measures to Motivate or Restrict FDI

The government of Togo has highlighted the need for the country to boost its business climate in order to attract more FDIs. To this extent, foreign investors are granted the same rights as local ones. Indeed, in 2019, the Investment Code was adopted. The latter stipulates equal treatment between Togolese and foreign companies and investors, free management and free movement of capital for foreign investors and respect for private property.
The majority of incentives are given to the companies in the export free zones, including a tax exemption for the first 10 years (and a rate of 15% from the eleventh year); exemption from all duties and taxes when exporting products imported or manufactured in the free zone, and on import of raw materials as well as machinery and plant equipment; preferential tariffs on utility services (electricity, water, telephone); free transfer of capital; tax exemption on dividends during the first ten years for non-Togolese shareholders; protection against nationalisation of the property of foreign investors; etc.
The Togolese government created the Business Climate Unit (CCA) in 2017. It aims to coordinate economic reforms and play a key role in improving the business climate for the private sector.