Foreign direct investment (FDI) in Chad

FDI in Figures

According to UNCTAD World Investment Report 2022, in oil exporting Chad, FDI inflows slightly increased from USD 558 million in 2020 to USD 562 million in 2021. Furthermore, the stock of FDI ammounted to an estimated USD 7.6 billion that same year. The majority of FDI in the country goes toward oil exploration and infrastructure development. The services sector has also been attracting a significant ammount of foreign investment, mostly through telecommunications and banking sectors. The country's main investors are Nigeria, France, the United Kingdom and South Korea.

Although Chad is open to investments, the lack of diversification of the economy added to difficulty of starting new businesses and complicated tax procedures are major constraints. There are also the poor state of infrastructures, a narrow domestic market and shortage of skilled labour. Nevertheless, the government has set reforms aimed at boosting business climate. It also planned to halve property registration cost. Although the country is open to investments, it is difficult to invest in Chad due to the relatively unfavourable business climate. Still, Chad has improved in reducing the time needed to transfer property and thus, accelerating property registration. Most of the funds invested in the country are absorbed by the oil and gas sector, despite efforts in the infrastructure sector. Insecurity, political instability and poor infrastructure, as well as a limited domestic market and a shortage of skilled labour remain major obstacles to investment. Protection of private property is inadequate, and fraud is common in property transactions. In 2021, the British oil company Savannah Energy acquired both Petronas's and ExxonMobil's assets in Chad for USD 626 million, gaining control over the companies' oil fields in southern Chad, as well as a major pipeline transporting oil to a marine terminal for exportation in Cameroon.

What to consider if you invest in Chad

Strong Points

Among the factors that make Chad an attractive destination for FDIs there are:
the country’s membership of the Central African Economic and Monetary Community (CEMAC) common market and of the Organization for the Harmonization of Business Law in Africa (OHADA),
incentives to foreign companies, including a tax exemption of up to five years,
the fact that the government is currently implementing effective laws to foster competition and establish clear rules based on Uniform Acts produced OHADA,
the country’s potential in the oil sector, with new oil fields exploitation being planned,
the approval in 2017 of a USD 9 billion National Development Plan (NDP) with the objective of boosting the private sector and improving the business climate (focusing on mining and agricultural sectors).

Weak Points

Several factors hinder FDIs inflows to Chad, including:
-regional instability (due to terrorist attacks by Boko Haram and an influx of refugees along the Chad-Sudan-Central African Republic (CAR) border

-the geographical isolation of Chad
-the fact that the country is too heavily reliant on the oil sector (about 20% of GDP and 60% of exports)
-high poverty rate (40% of the population in 2019 according to the World Bank)
-high level of corruption and weak contract enforcement
-the poor business climate (in 2018, the World Bank ranked Chad 181st out of 190 countries for ease of doing business)
-poor transport infrastructure, a lack of skilled labour, and unreliable energy supply.

Government Measures to Motivate or Restrict FDI

The government of Chad is implementing several policies in an effort to boost private investments and FDIs influx. The Chadian tax code offers incentives to new business start-ups, new activities, or substantial extensions of existing activities, provided that the companies are active in some specific sectors (industrial, mining, agricultural, forestry, and real estate) and that they do not compete with existing enterprises already operating in a satisfactory manner (art. 16 and 118 of the National Investment Charter). Suitable companies can obtain a five-year exemption from several taxes (like the corporate income tax and the individual income tax, real estate levies on developed and undeveloped land, the flat rate levy and the apprenticeship levy, etc.). A preferential tax regime applies to contractors and sub-contractors for major oil projects.
Furthermore, normally foreign investors may also carry on investment-specific negotiations directly with the government of Chad in order to obtain other incentives (such as permissions to import labour or agreements to work with specific local suppliers). Investors may address inquiries about possible incentives directly to the Ministry of Industrial and Commercial Development and Private Sector Promotion, or the Ministry of Petroleum and Energy. However, there have been reports where the government has changed the terms of contracts or applied new laws with retroactive effect also to companies that had pre-existing agreements.
Chadian law protects businesses from nationalization and expropriation, except in cases where expropriation is in the public interest.