Investment Governance in East Africa: Balancing Investment protection, State Interests and Community Rights

East African countries, particularly Kenya, Uganda, and Tanzania, have a comprehensive national legal and regulatory framework that governs foreign investment. These laws aim to create an environment that not only enables the attraction of foreign investment but also safeguards the sustainable development of the host state.

The national laws intertwined in the investment environment in East Africa are meant to achieve maximum benefits to the host state, ensure protection against expropriation for the investors, safeguard the environment and the citizens, and create cohesion and harmony by reducing cross-border barriers. This section, therefore, examines national laws regarding investment promotions, state benefits and protections, and the overall protection of local communities.

Investment Promotion and Investor Protection

Constitutional Protection.

The Constitutions of Kenya, Uganda, and Tanzania collectively protect against expropriation and allow state ownership of an investment property only upon fair compensation under Article 66, Article 26, and Article 24 of the respective constitutions.¹ These provisions safeguard private property, including property owned by locals and foreigners, which is fundamental for managing an investor-friendly environment.

Whereas the Constitutions of Uganda and Tanzania allow all citizens, including foreigners, to engage in economic activities under the provisions of the law, the Constitution of Kenya does not provide such an explicit provision.² However, several Articles in the Kenyan Constitution stipulate that the right to access information is fundamental, implying that Investors have a protected right to transparency in government investment processes.³

Foreign Investments Promotion Acts

Kenya, Uganda, and Tanzania also have specialised laws to promote foreign investment in their respective countries. Kenya, for instance, has the Foreign Investments Promotion Act and the Investment Promotion Act.⁴These acts seek to foster investment, ensure equality of local and foreign investors, offer incentives that attract further investments and provide a platform for dispute settlement. [6] ⁵

In addition, the Kenya Investment Authority (KenInvest), established under the Investment Promotions Act, provides a mechanism for dispute settlement at the initial stages of conflict.⁶Kenya also has an active trade and foreign investment policy that clearly outlines its commitment to an investor-friendly environment while supporting the role of public-private partnerships in encouraging large-scale development projects.⁷

The Investment Act, which replaced the Investment Code Act of Uganda,  provides a one-stop centre that simplifies investment processes such as setting up and operating a business in Uganda.⁸ Further, the Act offers incentives such as tax holidays, customs duty exemptions, and other allowances in key investment sectors, such as agriculture.

The Investment Act also assures investors of protection against expropriation while guaranteeing equal treatment.⁹ The Uganda Free-Zones Act is another statutory instrument establishing special economic zones where foreign investors are granted tax exemptions for up to ten years, among other benefits.¹⁰

Tanzania’s Free Trade Zones Act establishes provisions that grant tax exemptions and other benefits to investors who establish projects within designated zones.¹¹Free Trade Zones offer incentives for investors because they are allowed tax holidays, access to markets, and exemptions from Value Added Tax (VAT), among others.

Additionally, the Investment Act established the Tanzania Investment Centre (TIC) as the leading governmental agency responsible for investment promotions, including offering services such as business registrations and issuance of permits.¹²The Act also provides dispute resolution remedies, repatriation of profits and capital, and safeguards against expropriation and discrimination.¹³

Intellectual Property Protection Acts

Some foreign investors are concerned about host states infringing on their intellectual property rights by stealing patents, trademarks, and investment designs. There are laws to safeguard against the loss of intellectual property in East Africa. For instance, under the Industrial Property Act, Kenya protects local businesses and investors with protection for their investments, including trademarks and patents on technologies and machinery used.¹⁴

The Ugandan Registration Services Bureau (URSB) is the principal Authority protecting foreign investors against the loss of intellectual property.¹⁵Kenya, through the Kenya Industrial Property Institute (KIPI), also administers the registration of property rights as established under the KIPI Act.¹⁶Tanzania offers protection under the Business Registrations and Licensing Agency (BRELA), another excellent incentive for Foreign Investors in East Africa.¹⁷

Investment Regulation and State Interests

Foreign Investments support the host states’ economic growth and development. While laws protect investors, the host states must ensure that the country where the investment is made benefits.¹⁸Therefore, through various statutory instruments, Kenya, Uganda, and Tanzania have established various legal and regulatory provisions for running businesses and investment projects in the host states.

Business Operations and Employment by Foreign Investors

The Companies Acts of these countries govern companies’ incorporation, registration, and management. This is stipulated under the preambles of the Companies Acts of Kenya, Uganda, and Tanzania.¹⁹ In addition, the Acts allow for up to 100% foreign ownership in most sectors, with limitations on sensitive issues such as land ownership.²⁰ Overall, foreign investors can run investments if they comply with the company formation and operation provisions provided in these Acts. The Companies Acts safeguard the host states, ensuring that municipal law is adhered to, including paying necessary legal fees for the incorporation of companies and the operation of businesses in the countries.

Labour relations and other employment obligations are stipulated in various statutory instruments. The Labour Institutions Act in Tanzania establishes the minimum wage, working hours, and dispute resolution mechanisms.²¹ The Labour Relations Act of Kenya also requires that employees be provided with payments within the allowable minimum requirements.²²

Revenue Generation Acts

Kenya and Uganda have Value Added Tax (VAT) Acts.²³These Acts are state-focused because they stipulate the taxation of goods and services in the countries, requiring businesses to register if their annual turnover exceeds the set threshold.²⁴The Ugandan VAT Act further provides that foreign investors are subject to the exact tax requirements as local businesses, with provisions for refunds for investments in the energy and agriculture sectors.²⁵

The Income Tax of Kenya requires all businesses operating in Kenya to comply with income tax provisions related to employee salaries and withholding taxes.²⁶ Exemptions are provided to encourage investments. The Income Tax Act of Uganda has similar provisions on income, corporate, and withholding taxes.²⁷

Tanzania has the Tanzania Revenue Authority Act. ²⁸This act governs Tanzania’s entire taxation system, which requires compliance with the payment requirements of VAT, corporate, and withholding taxes. The Tanzania Revenue Authority is responsible for administering taxes, including incentives provided for in the act for foreign businesses.²⁹In addition, the Tax Administration Act enforces tax laws in Tanzania, providing a legal framework for assessing or collecting taxes and resolving tax disputes.³⁰ This Act has provisions on the requirements of income tax for foreign investors.

The Protection of Markets Acts

Kenya, Uganda, and Tanzania have various Acts protecting their markets, most of which have similar provisions protecting investors and the states. In Kenya, the Competition Act fosters a necessary competitive and fair market while prohibiting practices that deter competition, such as abuse of monopoly and price-fixing.³¹

Uganda has a Competition Act as well, prohibiting unfair pricing and abuse of the market.³²The Tanzania Competition Act also ensures fair competition, requiring foreign investors and domestic businesses not to violate anti-competition laws.³³This is beneficial to both local businesses and international companies entering the market.

Secondly, Kenya, Uganda, and Tanzania have a Public-Private Partnership Act, which provides a legal framework for encouraging partnerships between foreign investors and the state in large-scale projects.³⁴In the event of a partnership between an investor and a state, the Act stipulates the procurement process, contract management, and dispute resolution to ensure transparency and accountability for both parties.³⁵

The Tanzania Public-Private Partnership Act was amended in 2018 to emphasise the need for local participation and capacity building.³⁶All projects require feasibility studies, assessments, approvals, transparency and accountability.

Moreover, the Capital Markets Act aims to regulate securities and financial instruments, providing other investment avenues, such as stocks and bonds, as the overseer of such transactions.³⁷Kenya and Uganda have a Capital Markets Authority responsible for setting the requirements for participating in the Nairobi Stock Exchange (NSE) and the Uganda Securities Exchange (USE), respectively.³⁸

These Authorities also ensure compliance with disclosure requirements and the legal framework for issuing bonds, stocks, and other securities. ³⁹Tanzania has a Capital Markets and Securities Act. ⁴⁰ Like the ones in Kenya and Uganda, the Capital Markets and Securities Authority (CMSA) controls the securities market. It fosters investments and trading under the Dar Es Salaam Stock Exchange (DSE).⁴¹

Lastly, there is the Anti-Money Laundering Act, which is fundamental while working with international investors to protect the financing of terrorism and other illegal acts.⁴²Kenya, Uganda, and Tanzania all have Anti-Money Laundering Acts.

Local Communities Access to Justice and Investment Disputes

As established in this research, local communities involved in or affected by foreign investments are fundamental to the success of an investment in East Africa. Therefore, Kenya, Uganda, and Tanzania have national laws safeguarding local communities against infringing fundamental rights in investment and general developmental agendas. Since most communities’ rights are tied to environmental sustainability and resource management, below is an analysis of the most affected local communities’   rights and existing safeguards provisions.

Right to Free, Prior, and Informed Consent (FPIC)

Local Communities involved in international investment have a right to be consulted, informed, and updated on the project before its commencement. The information should include the project’s description, the time it will take to complete, its intended purpose, how it will likely affect the community, and the available remedies. Various legal provisions safeguard local communities’ right to FPIC.

National values like ensuring the participation of people and accountability are enshrined in the Kenyan Constitution.⁴³This right is also explicitly provided for in the Community Land Act, which requires FPIC from communities, especially for projects on community land.⁴⁴ In addition, Environmental Impact Assessments (EIAs) carried out before investment projects in Kenya mandate that consultations with local communities be conducted before development commencement.⁴⁵

In Uganda, the right to participation implies the requirement to acquire FPIC.⁴⁶ This is is also evident when ESIAs require public consultations before the commencement of an investment project. Tanzania also implies the requirement for FPIC through EIAs processes and the protection of village lands through consultation of village councils.⁴⁷

Right to Information.

The right to information differs from the FPIC. The right to information refers to the complete disclosure of all aspects of an investment, which is paramount, especially if an investment is harmful or poses risks to the local communities. The Constitutional provisions safeguarding the right to information in Uganda stipulate that citizens have access to information held by the state.⁴⁸ Article 35 of the Kenyan Constitution guarantees this right and safeguards it as a fundamental freedom.⁴⁹ The Tanzanian Constitution also provides the right to seek, receive and disseminate information under Article 19.⁵⁰

Other legislations safeguarding the right to information include the Access to Information Acts.⁵¹ In Uganda, citizens can request access to information from a public body within 21 days through a specific procedure. Kenyan citizens have a framework established in the Act outlining the information access procedures.⁵²

The Office of the Ombudsman, through the Commission on Administration of Justice (CAJ), is responsible for overseeing these processes and handling complaints.⁵³ The Access to Information Act of Tanzania provides access to information and stipulates obligations to disclose public information to the seekers, provided the due process is followed.⁵⁴

  Right to Public Participation and Representation

Once FPIC is attained, the local communities affected by a foreign investment can participate in ongoing decision-making processes, primarily if the project directly affects them. The Constitution of Kenya affirms the people’s sovereignty and right to participate in governance.⁵⁵ Other statutory instruments on the governance of the counties also require public participation in decision-making, especially in development and land use.⁵⁶

Similarly, the Ugandan Constitution allows the right to participate in activities that influence government policies. ⁵⁷ This is supported by other local government acts and statutory instruments empowering local councils to participate in land allocation and development decisions.⁵⁸Article 21 of the Tanzanian Constitution guarantees the right to participate directly or through representation.⁵⁹Various other local government acts also provide for community participation through village representatives, especially in decision-making on land and development matters.⁶⁰

Right to Land and Property

Customary land rights are prevalent in Africa, and most are respected and protected by the law, whether registered or unregistered. Any loss of these lands because of land grabbing and forced evictions violates the rights of the occupiers of the land. Firstly, the Kenyan Constitution stipulates that every individual has a right to own property, including Land. ⁶¹

The Ugandan and Tanzanian constitutions have the same property rights provision.⁶² Further, Kenya recognises community land as land held by people of the same interests, ethnicity or culture under the Constitution.⁶³This strongly supports many provisions of the Land Act and Community Land Act, which provide additional safeguards for customary land rights.⁶⁴

Investors interested in land owned by community members must respect customary land, including recognising land acquisitions. Tanzania’s protection of land acquisition is also captured under the Land Act and Village Land Act.⁶⁵ In addition, the Land Acquisition Act provides for compulsory acquisitions, which include a requirement for compensating local communities for displacement due to developmental projects. ⁶⁶

 Right to a Clean, Healthy Environment and Natural Resources

⁶⁷Pollution, biodiversity loss, extractivism of natural resources, and deforestation are some outcomes of large-scale investment projects. Local communities have laws protecting against projects considered harmful to the environment. Every human has a right to a clean and healthy environment, as envisioned in the Kenya, Uganda, and Tanzania Constitutions.⁶⁸ Specific stipulations, such as one captured in the Kenyan Constitution, also obligate a state to ensure the sustainable exploitation of natural resources.

Further, various Acts require meeting environmental standards before approving investment projects across East Africa. EIAs must be undertaken in Kenya, subject to the Environmental Act.⁶⁹ ESIAs must be conducted according to the National Environment Act of Uganda, and the same applies to EIAs in Tanzania.⁷⁰

There are numerous sector-specific Acts, such as the Mining Acts in the three countries.⁷¹These acts advocate for sustainable and environmentally friendly mining practices and provide for community involvement requirements, entering into community agreements, benefit sharing, and increased state participation.

The Ugandan Petroleum exploration industry is heavily regulated under the Petroleum (Exploration, Development and Production) Act.⁷²This includes provisions on the exploration, extraction, and management of all petroleum resources to avoid resource misuse, environmental degradation, and infringement of local community rights. ⁷³

Right to Livelihoods and Economic Benefits

Most local communities sustain traditional methods of livelihood, which include reliance on farming, fishing and pastoralism. Investments that drastically alter or affect the livelihoods of communities are prohibited by law in line with various legal frameworks. The Constitutions of Kenya and Uganda provide for the right to safeguard economic and social rights, which demonstrates the states’ determination to ensure that investments do not disrupt traditional livelihoods and contribute to community benefit.⁷⁴

While the Tanzanian Constitution does not provide an explicit and standalone provision on this right, the Village Land Act and other land laws safeguard the livelihoods of local communities, such as farming and pastoralism, while ensuring the protection of land tenure, among other rights.  Further, Tanzania through the Natural Wealth and Resources (Permanent Sovereignty) Act provides that all citizens, local communities notwithstanding, are required to benefit from exploitation of natural resources.⁷⁵ The need for community involvement in decisions affecting natural resources in Petroleum is also enshrined in the Act.⁷⁶

Right to Cultural Heritage and Identity

Foreign investors must respect the culture and traditions of a chosen investment locality. Destruction of these cultural practices is a violation of rights. The Constitution of Kenya explicitly covers this right and commits to acknowledge culture as the country’s foundation.⁷⁷The Tanzanian Constitution under objective XXIV reiterate the importance of promoting indigenous knowledge and culture.[86] ⁷⁸

Culture in African countries is an important part of daily livelihoods evidenced by the protection of cultural sites, objects, leadership systems, land use systems, indigenous knowledge, marital rites and many others. Each of the countries in this paper have a Museums and Heritage protection Act.⁷⁹Customary laws are therefore respected and safeguarded therefore an important area of discussion and consultation before and during developmental projects.  

Right to Access to Justice

Investors are required to remedy the situation if there is harm to local communities. This could be due to a breach of legal framework or causation of harm. Various legal provisions safeguard local communities and ensure access to justice and remedial measures. In Kenya, Article 22 of the Constitution allows claims to court for breach of constitutional rights.⁸⁰ This includes legal action to enforce the right to a clean and healthy environment. ⁸¹The Ugandan and Tanzanian Constitutions explicitly provide the right to seek legal redress in court.⁸²

Under these provisions, claims in the public interest can be instigated by any member of the public, either as a non-governmental organisation (NGO), association, activist group, or individual, on behalf of a community or a person whose rights are infringed upon, including those brought upon by investment projects. As most land cases are closely linked to other environmental factors, the Environmental Acts in Kenya, Uganda, and Tanzania provide for a special court that can hear disputes on investments that cause environmental and ecological degradation.⁸³

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FOOTNOTES

1. Constitution of Uganda 1995, art 38.Constitution of Kenya 2010; Constitution of Uganda 1995; Constitution of the United Republic of Tanzania 1977.Constitution of Uganda 1995, art 38.Constitution of Kenya 2010; Constitution of Uganda 1995; Constitution of the United Republic of Tanzania 1977. ↩︎
2. Constitution of Uganda 1995, art 40; Constitution of the United Republic of Tanzania 1977, art 26. ↩︎
3. Constitution of Kenya, 2010, arts 35 and 35 ↩︎
4. Kenya, Foreign Investments Protection Act (Cap 518); Kenya, Investment Promotion Act (No 6 of 2004). ↩︎
5. ibid ↩︎
6. Kenya, Investment Promotion Act (No 6 of 2004), s 14. ↩︎
7. Kenya, Trade and Foreign Investment Policy (2012). ↩︎
8.  Investment Act of Uganda, 2019. ↩︎
9.  ibid ↩︎
10. Uganda, Free Zones Act 2014 (Act 5 of 2014). ↩︎
11. Tanzania, Free Zones Act 2006 (Act No 4 of 2006). ↩︎
12. Tanzania, Investment Act 1997 (Act No 26 of 1997), s 4. ↩︎
13. ibid ↩︎
14. Kenya, Industrial Property Institute Act (Cap 509, 2001), Preamble ↩︎
15. Uganda, Uganda Registration Services Bureau Act 1999 (Act No 16 of 1999), s 2 ↩︎
16. Kenya, Industrial Property Act 2001 (No 3 of 2001), s 3. ↩︎
17. Tanzania, Executive Agencies (Business Registrations and Licensing Agency) Establishment Order, GN No 294 of 1999, made under the Executive Agencies Act 1997 (Act No 30 of 1997). ↩︎
18. Nicolás M Perrone, ‘Investment Treaty Law and Matters of Recognition: Locating the Concerns of Local Communities’ (2023) 24(3) Journal of World Investment & Trade 364. ↩︎
19. Kenya, Companies Act (No 17 of 2015), Preamble; Uganda, Companies Act (No 1 of 2012), Preamble; Tanzania, Companies Act (Cap 212, R.E. 2002), Preamble. ↩︎
20. ibid ↩︎
21. Tanzania, Labour Institutions Act 2004 (Act No 7 of 2004), s 39. ↩︎
22. Kenya, Labour Relations Act 2007 (Act No 14 of 2007), s 48. ↩︎
23. Kenya, Value Added Tax Act (Cap 476, 2013); Uganda, Value Added Tax Act (Cap 349, 1996). ↩︎
24. ibid. ↩︎
25. Uganda, Value Added Tax Act (Cap 349, 1996). ↩︎
26. Kenya, Income Tax Act (Cap 470, 2015) ↩︎
27. Uganda, Income Tax Act (Cap 340, 1997). ↩︎
28. Tanzania, Tanzania Revenue Authority Act (Cap 299, R.E. 2002). ↩︎
29. ibid, preamble ↩︎
30. Tanzania, Tax Administration Act (Act No 11 of 2015), Preamble. ↩︎
31. Kenya, Competition Act (No 12 of 2010). ↩︎
32. Uganda, Competition Act (No 1 of 2006). ↩︎
33. Tanzania, Competition Act (Cap 285, R.E. 2002). ↩︎
34. Kenya, Public-Private Partnerships Act (No 15 of 2013); Uganda, Public-Private Partnerships Act (No 7 of 2015). ↩︎
35. ibid ↩︎
36. Tanzania, Public-Private Partnerships Act (Act No 18 of 2010). ↩︎
37. Kenya, Capital Markets Act (Cap 485A, 2000). ↩︎
38. Kenya, Capital Markets Act (Cap 485A, 2000), s 5; Uganda, Capital Markets Authority Act (Cap 84, 1996), s 12. ↩︎
39. ibid ↩︎
40. Tanzania, Capital Markets and Securities Act (Cap 79, R.E. 2002). ↩︎
41. ibid ↩︎
42. Kenya, Proceeds of Crime and Anti-Money Laundering Act (No 9 of 2009); Uganda, Anti-Money Laundering Act (No 6 of 2013); Tanzania, Anti-Money Laundering Act (Act No 12 of 2006). ↩︎
43. The Constitution of Kenya, 2010 art 63 ↩︎
44. Kenya, Community Land Act 2016 (No 27 of 2016), s 28. ↩︎
45. Kenya, Environmental Management and Co-ordination Act 1999 (No 8 of 1999), s 58. ↩︎
46. Uganda, National Environment Act 2019 (Act No 5 of 2019), s 19. ↩︎
47. Tanzania, Village Land Act 1999 (Act No 5 of 1999), s 8. ↩︎
48. Constitution of Uganda 1995, art 41. ↩︎
49. Constitution of Kenya 2010, art 35. ↩︎
50. Constitution of Tanzania 1977, art 19. ↩︎
51. Kenya, Access to Information Act (No 31 of 2016); Uganda, Access to Information Act (No 6 of 2005); Tanzania, Access to Information Act (Act No 11 of 2016). ↩︎
52. Kenya, Access to Information Act (No 31 of 2016), s 11. ↩︎
53. ibid s 21 ↩︎
54. Tanzania, Access to Information Act (Act No 11 of 2016), s 9. ↩︎
55. Constitution of Kenya, 2010, Arts 1, 10,174, ↩︎
56. Kenya, County Governments Act 2012 (No 17 of 2012), s 87. ↩︎
57. Constitution of Uganda 1995, art 38. ↩︎
58. Uganda, Local Governments Act 1997 (Cap 243), s 72; Land Act 1998 (Cap 227), s 48; Land (Amendment) Act 2004 (Act No 10 of 2004), s 48; District Land Boards Regulations (Statutory Instrument No 39 of 2001), reg 4. ↩︎
59. Constitution of Tanzania 1977, art 21. ↩︎
60. Tanzania, Local Government (District Authorities) Act 1982 (Act No 7 of 1982), s 8; Land Act 1999 (Act No 4 of 1999), s 25; Village Land Act 1999 (Act No 5 of 1999), s 16; Urban Authorities (Urban Planning and Development) Act 2007 (Act No 8 of 2007), s 12. ↩︎
61. Constitution of Kenya 2010, art 40 ↩︎
62. Constitution of Uganda 1995, art 26; Constitution of Tanzania 1977, art 24 ↩︎
63. Constitution of Kenya 2010, art 63 ↩︎
64. Kenya, Land Act 2012 (No 6 of 2012), ss 5, 6 and 38; Community Land Act 2016 (No 27 of 2016), ss 5, 6 and 7. ↩︎
65. Tanzania, Land Act 1999 (Act No 4 of 1999), ss 3, 4, 6 and 156; Village Land Act 1999 (Act No 5 of 1999), ss 4, 8 and 18. ↩︎
66. Tanzania, Land Acquisition Act [Cap 118 R.E. 2002], s 11. ↩︎
67. Constitution of Kenya 2010, art 69(1)(a). ↩︎
68. Constitution of Kenya 2010, art 42; Constitution of Uganda 1995, art 39; Constitution of Tanzania 1977, art 27(1). ↩︎
69. Kenya, Environmental Management and Co-ordination Act (No 8 of 1999), s 58(1). ↩︎
70. Uganda, National Environment Act 2019, ss 110–117; Tanzania, Environmental Management Act 2004 (Act No 20 of 2004), ss 81–83. ↩︎
71. Kenya, Mining Act 2016 (No 12 of 2016); Uganda, Mining and Minerals Act 2022; Tanzania, Mining Act 2010 (Cap 123, R.E. 2019). ↩︎
72. Uganda, Petroleum (Exploration, Development and Production) Act 2013, Preamble. ↩︎
73. ibid ↩︎
74. Constitution of Kenya 2010, art 43; Constitution of Uganda 1995, Objectives XIV and XX. ↩︎
75. Tanzania, Natural Wealth and Resources (Permanent Sovereignty) Act 2017, s 9 (emphasising the obligation to ensure local communities’ benefit from the extraction of natural resources, including provisions for compensation, community development, and participation in natural resource projects). ↩︎
76. Tanzania, Petroleum Act 2015 (Act No 21 of 2015), s 9. ↩︎
77. Constitution of Kenya 2010, art 11. ↩︎
78. Constitution of Tanzania 1977, Objective XXIV. ↩︎
79. Kenya, National Museums and Heritage Act 2006 (No 6 of 2006); Tanzania, Antiquities Act Cap 333 R.E. 2002; Uganda, Historical Monuments Act Cap 46 (Cap 46, 1967). ↩︎
80. Constitution of Kenya 2010, art 22. ↩︎
81. ibid, art 70 ↩︎
82. Constitution of Uganda 1995, art 50; Constitution of Tanzania 1977, art 30(3). ↩︎
83. See Environmental Management and Co-ordination Act 1999 (Kenya), s 125 (establishing the National Environment Tribunal); National Environment Act 2019 (Uganda), s 29(1) (establishing the National Environment Tribunal); and Environmental Management Act 2004 (Tanzania), s 204 (providing for the Environmental Appeals Tribunal). ↩︎