The developing African countries have relied on foreign direct investment as the principle method of effecting capital and technology transfers from the developed countries. U.S. corporations seeking to protect established markets or to develop new ones to avoid tariff barriers and exchange rate fluctuations, to take advantage of inexpensive labor, or to gain access to raw material supplies have set up operations in African countries. Most laws prohibit foreign investment in certain sector like transportation, communication, retail trade, etc. Most laws offer preferential treatment for certain kinds of business activity.
Many laws require varying degrees of local private or public equity participation.
Some laws provide for stabilization of the legislative regime under which the investment is made. Most laws encourage the development of local inputs, such as employment, training, use of local materials and development of local industries. There are a number of possible forms of business organizations from which the foreign investor can choose. One form is the formation of either a foreign branch of the domestic parent or a U.S. subsidiary as a corporation under the host country s laws. In countries utilizing statutes modeled after the English Company s Act, the foreign investor can form a closely held private company or a public company.