Foreign direct investment (FDI) in Chad

FDI in Figures

According to UNCTAD's World Investment Report 2024, FDI inflows to Chad increased by 48.7% to USD 913 million in 2023, from USD 614 million one year earlier. At the end of the same period, the total stock of FDI amounted to USD 9.28 billion, around 53.1% of the country’s GDP. The majority of FDI in the country goes toward oil exploration and infrastructure development. The services sector has also been attracting a significant amoununctad.org/system/files/official-document/wir2024_en.pdft of foreign investment, mostly through the telecommunications and banking sectors. The country's main investors are Nigeria, France, the United Kingdom and South Korea.

Although Chad welcomes investments, significant constraints include the lack of economic diversification, hurdles in initiating new businesses, complex tax procedures, inadequate infrastructure, a small domestic market, and a scarcity of skilled labour. Despite these challenges, the government has initiated reforms to improve the business environment. The majority of investments in the country are directed towards the oil and gas sector, despite efforts in infrastructure development. Insecurity, political instability, poor infrastructure, limited domestic market, and a shortage of skilled labour continue to pose significant barriers to investment. Additionally, insufficient protection of private property and prevalent fraud in property transactions further deter investment. Chad's legal framework fosters FDI, with minimal formal constraints on foreign trade and investment. According to Chadian law, both foreign and domestic entities have the right to establish and possess business ventures. The only restriction on foreign ownership pertains to companies considered to have implications for national security. Additionally, the National Investment Charter ensures that foreign entities and individuals have the same rights as Chadian counterparts in privatization procedures. Chad’s National Agency for Investment and Exports (ANIE, Agence Nationale des Investissements et des Exports) facilitates foreign investment. Nevertheless, despite these efforts, political instability remains a significant concern. In February 2024, Chad experienced a self-coup, resulting in the death of opposition leader Yaya Dillo. Such events have heightened concerns about governance and the rule of law, potentially deterring foreign investors. Chad ranks 158th among the 180 economies on the Corruption Perception Index 2024 and 133rd out of 184 countries on the latest Index of Economic Freedom.

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.