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GAMBIA: An Introduction to General Business Law

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GENERAL BUSINESS LAW PRACTICE AREA OVERVIEW

Country Information 

The current population of The Gambia is 2,519,217 as of Friday, January 7 2021, based on the latest United Nations data. Most of the population (57%) is concentrated around urban and peri-urban centres.

Economic Overview & Gross Domestic Product (GDP)

Economic growth was robust at 6% in 2019, supported by improved confidence and record tourist arrivals, with sound macroeconomic management helping to reduce the fiscal deficit, exit from debt distress, and increase international reserves closer to prudential levels. New businesses that add value may apply for a Special Investment Certificate which can grant them tax exemptions for up to five years.

The country’s immigration laws are quite strict and entry visas are required from non-ECOWAS and non-Commonwealth countries. There are significant numbers of foreigners engaged in business, mostly in the trade, tourism and export sectors. Non-Gambians may own land, and ownership of agricultural or industrial land or for tourism related activities by non-Gambians is not restricted.

Pressures from COVID-19 saw the deficit rise in the first half of 2020 although the tax authorities still managed to exceed their revised collection targets. Tax exemptions, although declining, continue to be sizable - without discretionary exemptions, the deficit in the first half of 2020 would have been reduced by 0.7 percent of GDP. Non-tax revenue has been boosted by one-off items such as the sale of assets, which partly compensated for the tax decline. Great improvements have been made in infrastructural development over the last few years, and the national power grid has been extended to many parts of urban areas. The country has one port and one international airport. While the road network is mainly around the capital and coastal areas, it is in the process of being extended to the south and north banks of the Gambia River, which bisects the country.

Headline inflation started increasing in January 2021, driven by food price increases, which is undermining household food security. However, it decelerated slightly to 6.9% y/y in August 2021. The dalasi has remained stable thanks to the prudent exchange rate policy of the central bank. International reserves increased substantially in 2019 and continue to rise in 2020. Private sector credit grew strongly in 2019 but stagnated in the first half of 2020. Credit to the construction and distributive trade sector grew strongly in 2020 but credit to the tourism sector collapsed by over 30 percent and credit to the agriculture sector contracted by 14 percent.

Trends and Developments 

Industry was the fastest-growing sector in 2019, expanding by 14.3 percent, compared to 2.0 percent in 2018. This was driven by growth in mining and quarrying (22.5 percent); electricity, gas, steam, and air conditioning (23.5 percent); and construction (19.9 percent). The mining and quarrying growth was due to licences being issued to British Petroleum (BP) and FAR Gambia Limited to prospect for oil. Improvements in the water and electricity supply also contributed to growth. Nevertheless, construction, as the largest industrial sub-sector, has been the main driver, adding 2 percentage points to GDP growth in 2019. This has been partially fuelled by the strong performance of remittances. Agriculture has continued to struggle, contracting by 1.3 percent in 2019. Erratic rainfall had severe impacts, especially on crops and livestock. Crops were also affected by the late supply and insufficient application of fertilizer, as well as farmers’ use of their own stored seeds, which are typically low quality. Hence, the crop sector continued to decline, falling by 16.7 percent in 2019. Livestock contracted by 1.7 percent, while forestry and logging fell by 24.3 percent.

Due to consistent substantial growth since 2015, fishing and aquaculture replaced crops as the largest primary sub-sector in 2019, following growth of 18.4 percent in that year. Overall, agriculture’s contribution to GDP fell from 21.6 percent in 2018 to 20.1 percent in 2019.

Remittances have been growing strongly, increasing by 22.6 percent in 2018 and 18.7 percent in 2019. As a result, net remittances increased by 48 percent in the first half of 2020. Nevertheless, remittances, which typically fund private construction, could mitigate the pandemic’s impact.

Political Context  

Presidential elections held in December 2021 could make implementation difficult for necessary reforms which may in turn exacerbate existing fiscal risks. Achieving macroeconomic stability will require improving spending efficiency and increasing tax revenues, as well as strengthening public financial management and SOE governance, combined with better service delivery for crucial infrastructure including energy, water, and telecommunications.

The Integrated Financial Management Information System project supports improvements in public resource management. The central government budget for fiscal year 2020 was prepared using a Comprehensive Budget Module System introduced through the project. The operation also helps advance reforms for state-owned enterprises (SOEs), with technical assistance in drafting the SOE Bill and performing a special audit of major SOEs. The project has helped pave the way for the design of an action plan to improve SOEs’ performance and governance and reduce fiscal risk.

Current economic conditions affecting clients and legal profession

The Gambia has a mixed legal system based on a tripartite system: English law, including the Common law and principles of Equity and Statute law; Customary law, which is administered by district tribunals; and Islamic/Shari’a law, which is administered by a Cadi Court system. The latter two systems apply only to indigenous Gambians and/or Muslims.

The legal profession is affected by poor funding to the Judiciary, the effects of COVID-19 and also poor court infrastructure. Businesses in The Gambia also fail to utilize the ADR system within the country. While this is perhaps a result of a lack of confidence in the system, it also has to do with a lack of awareness on the part of Gambian businesses that there are lawyers and community mediators in the country, many of whom practise corporate and business law, who are trained in settlement and other forms of ADR.

Labour force participation is low, at 53 percent, with an unemployment rate of 35 percent, with women, young people, and rural areas particularly affected. The services sector is the largest provider of regular employment. Tourism and agriculture are both highly seasonal, causing large fluctuations in employment over the course of the year. Half of all workers are classified as self-employed, reflecting the large informal sector, meaning they are unlikely to have access to benefits or pensions. They also tend to earn less than their counterparts in formal employment. Wages are relatively low, with under 4 percent of employees earning more than GMD10,000 per month (around US$200).