Zambia: Investing

FDI in Figures

According to UNCTAD's World Investment Report 2023, FDI flows into Zambia rose to USD 116 million in 2022, compared to a negative inflow of USD 352 million one year earlier but still lower than the 2018-20 average (USD 504.3 million). At the end of the same period, the total stock of FDI was estimated at USD 15.2 billion, around 53.5% of the country’s GDP. FDI remains dominated by large mining investments from Canada, Australia, United Kingdom, China, and the United States, in addition to large infrastructure and other projects performed almost entirely by Chinese companies. Zambia's infrastructure, whose poor quality is a barrier to investment, should be strengthened by investments in the road network, railways, and the construction of power plants. In 2021, a USD 11 billion standard gauge railway project was announced in Zambia, involving U.S. capital, which would expand essential transport links with the outside world. Zambia was the first African participant in the Scaling Solar Programme, spearheaded by the World Bank. This initiative offers various guarantees and technical assistance and focuses on establishing sizable solar power facilities through competitive auctions.

As the country largely depends on the mining sector, the government is seeking to diversify the economy and to become less dependent on copper. To this extent, several tax incentives are granted to foreign investors (for more info, consult the Zambia Development Agency website). Moreover, the Zambia Development Agency (ZDA) unveiled its strategic plan for 2022-2026 on October 20th, 2023, with the goal of stimulating economic growth by attracting a total of USD 36 billion in Foreign Direct Investment (FDI) and Local Direct Investment (LDI). This plan is designed to align the agency with the economic transformation objectives outlined in the Eighth National Development Plan (8NDP), which serves as a cornerstone for achieving the Vision 2030. This vision aims to elevate Zambia into an industrialized, upper-middle-income nation by 2030. Generally, Zambian law does not restrict foreign investors in any sector of the economy, although there are some limitations (especially regarding land ownership, as there is no private land in the country, and specific sectors of national interest). However, the increase in taxes on mining companies, uncertainties concerning the tax framework (a revision of the mining code is underway), the high level of interest rates, and the disputed judicial liquidation of the Konkola mine could create an economic climate unfavorable to foreign investors in the years to come (however, in late 2023, Zambia's largest copper mine narrowly avoided liquidation and instead received a vital cash infusion of USD 1 billion from its parent company, resolving a prolonged legal dispute). The regulatory environment does not favor entrepreneurial activity, the requirements for commercial licenses being long and costly, and the application of regulations not being uniform. In addition, the protection of property rights and the enforcement of contracts are still weak by international standards. Zambia ranks 118th among the 132 economies on the Global Innovation Index 2023 and 152nd out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Zambia

Strong Points

• The Zambian Development Agency (ZDA) provides a variety of incentives for foreign direct investment
• Zambia has one of the most open trade environments in Africa and is a member of the Southern Africa Development Community (SADC) and the Common Markets for Eastern and Southern Africa (COMESA)
• Businesses in Zambia benefit from one of the lowest profit taxes in the region
• Increasing regional cooperation through multilateral organisations, including SADC and the African Union should continue to reduce the likelihood of interstate conflict

Weak Points

• Investments under USD10 million are not eligible for certain tax breaks and incentives
• Weaknesses in public finances and government expenditure act as a barrier to investment
• High levels of trade bureaucracy add significantly to shipping lead times to and from Zambia, hindering trade competitiveness
• Amendments to the Companies Act could see minimum quotas for domestic investment imposed in some industries in the future
• Corruption is still a worrying issue

Government Measures to Motivate or Restrict FDI

Some of the government incentives to FDI are:

• Dividends paid out on farming profits are exempt for the first five years of activity
• Initial allowance of 10% on capital expenditure incurred on the construction or improvement of an industrial building is deductible
• Foreign exchange losses of a capital nature incurred on borrowings used for the building and construction of an industrial or commercial building are tax deductible
• Income earned by companies in the first year of listing on the Lusaka stock exchange qualifies for a 2% discount on the applicable company tax rate in the particular sector. However, companies with more than 1/3 of their shareholding in the hands of Zambians qualify for a 7% discount
• Implements, machinery and plant used for farming, manufacturing or tourism qualify for wear and tear allowance of 50% of the cost per year in the first two years of activity.

Investors who invest at least USD250,000 in any sector or product not provided for as a priority sector or product, is entitled to non-fiscal incentives such as investment guarantees and protection against state nationalization and protection against non-commercial risks (Zambia is a signatory of Multilateral Investment Guarantee Agency).

For more info, consult the Investment Guide to Zambia by the ZDA.

Procedures Relative to Foreign Investment

Freedom of Establishment

In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are some limitations. For example, all land in Zambia is state land, thus there is no private land in the country (titles of land owned by foreigners are for 99 year state leases and ownership is not conferred); moreover, all internationally licensed firms operating a domestic cellular telephone network are obliged to offer 10% of shares on the Lusaka Stock Exchange prior to entering the market.
Foreign and domestic private entities have a right to establish and own businesses, as well as engage in all forms of remunerative activities, though investment board approval is required to transfer an investment license for a given enterprise to a new owner.

Acquisition of Holdings

An approval from the investment board is required to transfer an investment license for a given enterprise to a new owner.

Obligation to Declare

All investment proposals have to be screened by the ZDA board, who normally reaches a decision within 30 days. In case of refusal, applicants have the right to appeal the investment board's decisions.

Competent Organisation For the Declaration

Patents and Companies Registration Agency (PACRA)

Requests For Specific Authorisations

Immigration Headquarters are responsible for issuance of investors permits to deserving foreign investors.

Investment Opportunities

Investment Aid Agency

Zambia Development Agency

Tenders, Projects and Public Procurement

Online Tenders, Tenders in Zambia
Africa Gateway, Zambia Tenders
Tenders Info, Zambia Tenders

Other Useful Resources

Investment Guide to Zambia by the ZDA
U.S. Bureau of Economic and Business Affairs' Zambia 2018 Investment Climate Statements

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