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Zambia


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2008 Investment Climate Statement - Zambia

Overview

Zambia has a generally positive investment climate, although progress toward a more open economy has been intermittent over recent years. During the 1990s, Zambia opened its doors to foreign investment, reduced government intervention in commercial activities, privatized over 250 enterprises, and eliminated many market distortions. The impact of these progressive policies, however, was undermined by persistent fiscal deficits and widespread corruption at all levels of government. This led many Zambians to lose confidence in the efficacy of economic liberalization. These doubts provide partial explanation for the Zambian government's decision in 2002 and 2003 to seek alternatives to privatization of the national railroad and the national electricity and telecommunications utilities. Beginning in 2003, the Zambian government increased dialog with the private sector and placed a new emphasis on attracting investment. This change in emphasis continued through 2007.

Zambia experienced positive economic growth for the ninth consecutive year in 2007 with a GDP of USD 10.9 billion and a real growth rate of six percent (according to preliminary IMF estimates). The rate of inflation dropped from 30 percent in 2000 to a single digit inflation of 8.9 percent by December 2007 due to fiscal and monetary discipline and the growth of the domestic food supply.

For thirty years, copper production declined steadily from a 1973 high of 700,000 metric tons to a 2000 low of 226,192 metric tons. The decline was the result of poor management of state-owned mines and lack of investment. With the privatization of the mines in April 2000, the downward trend in production and exports was reversed as a result of investments in plant rehabilitation, expansion, increased exploration, and high copper prices on the international market. Copper production rose to 515,000 metric tons in 2006, and a similar level is estimated for 2007. The 2002 pullout of Anglo-American Corporation, the major shareholder in Zambia’s largest mine, Konkola Copper Mines (KCM), raised doubts about the future of the Zambian copper sector but also opened the way for new investors. In 2004, Vedanta Resources (Great Britain) replaced AAC as the majority shareholder in KCM. Other leading investors in Zambia's mining industry are Glencore International (Switzerland), First Quantum Minerals (Canada), Equinox Minerals (Canada and Australia) and Non-Ferrous China (NFC) Africa (China). Fresh capital investment from these and other sources has increased Zambia's copper production.

In April 2005, the International Monetary Fund (IMF) and the World Bank’s International Development Association (IDA) provided Zambia significant debt service relief and debt forgiveness under the Heavily Indebted Poor Countries (HIPC) initiative. Zambia was the 17th country to reach the HIPC completion point and has benefited from approximately USD 6 billion in debt relief. In July 2005, the G-8 agreed on a proposal to cancel 100 percent of outstanding debt of eligible HIPC countries to the IMF, African Development Fund, and IDA. Zambia is among the beneficiaries of this additional multilateral debt relief. Zambia also completed a Poverty Reduction and Growth Facility (PRGF) arrangement with the IMF in 2007 and the Government has not yet determined whether it will seek another PRGF program or pursue a different arrangement with the Fund, a Policy Support Instrument (PSI), which would not involve additional lending.

Zambia began implementing its Millennium Challenge Account (MCA) Threshold Program in July 2006. USAID and its implementing partners are working closely with the Zambian government over a two year period to implement a USD 24.3 million program that will target three important areas, namely:

  • to address administrative corruption by helping to simplify and streamline business processes at the Ministry of Lands, the Department of Immigration, and the Zambia Revenue Authority;
  • to improve the environment for doing business in Zambia, by helping the newly-created Zambia Development Agency to simplify business registration, licensing, and inspection procedures, and to rationalize the economic regulatory framework, and by supporting Provincial offices of the Patent and Companies Registration Office (PACRO) to facilitate greater business and investment creation outside of the capital.
  • to facilitate trade by helping to increase the efficiency of procedures at the borders, through building capacity in modern customs techniques and integrating border control and management.

Openness to Foreign Investment

The Zambian Government actively seeks foreign investment through the Zambia Development Agency (ZDA), which was established on January 1, 2007 by consolidating a number of trade and investment promotion entities to be a one-stop resource for international investors interested in Zambia. The ZDA board screens all investments for which incentives are requested and usually makes its decision within thirty days. The reviews appear routine and non-discriminatory, and applicants have the right to appeal investment board decisions.

Investors in communications, banking, tourism, transport, mining, health, education, and aviation sectors must also comply fully with additional regulatory requirements and receive approval from relevant authorities in those sectors. For example, investment projects located in a Game Management Area require a permit issued by the Zambia Wildlife Authority, tourism investments require a Tourist Authorization License, and hotel investments require hotel licenses. The Bank of Zambia issues banking licenses for banks and non-bank financial institutions. The Communications Authority of the Ministry of Transport and Communications issues radio and telecommunications licenses. The Ministry of Mines and Mineral Resources issues a wide range of permits and licenses relating to investment in the mining sector.

In addition to complying with Companies Act No. 26 of 1994, a foreign company must, within 28 days of establishing operations in Zambia, provide the Registrar of Companies with a list of its directors, a copy of its constitution, and the name of its local representative.

There is no distinction in law between foreign and domestic investors. In the privatization process, foreigners are eligible to bid on state-owned companies that are advertised for sale. Foreigners may also invest in the Lusaka Stock Exchange without restriction, and on comparable terms to Zambians. Companies seeking licenses or concessions or investors bidding for privatized companies are encouraged to commit to local participation. It is not clear how such commitments are weighed when decisions are made.

A Citizens' Empowerment Act (CEA) that was passed into law in September 2006 aims to provide opportunities for disadvantaged citizens to participate in business activities. The Act is broadly worded and gives the President latitude in defining the targets and beneficiaries of the Act. During 2007, the Citizens' Economic Empowerment Commission (CEEC) was established to help implement the Act. The GRZ appointed a Chairman and interim director general. One of the first accomplishments of the CEEC was the harmonization of a number of government empowerment funds into the Citizens Economic Empowerment Fund, designed to be a revolving fund that supports broad based economic empowerment programs. In a December 31, 2007 statement, CEEC Chairman Jacob Sikazwe encouraged the revision of the Zambian Development Act and the National Tender Board Act to align with the objectives of the CEA. He also stated that the CEEC drafted guidelines for the development of Sector Codes that establish targets for the economic sectors of Mining, Financial Services, Agriculture, Tourism, Manufacturing, and Information and Communications Technology. It is not clear what the targets will include, but they could be used to influence employment, procurement and even shareholding decisions of investors in Zambia. For example, the Minister of Labour and Social Security cited the CEA and CEEC in early January 2008 when telling a major mining venture to reverse its decision to award a contract for cleaning and catering services to a foreign company, after a Zambian service provider failed to perform adequately (the company in question clarified that the successful bidders had registered companies in Zambia, in compliance with rules governing the venture). Chairman Sikazwe also mentioned that preferential procurement is an important pillar of the empowerment process, and the CEEC expects that by 2013 "50 percent of all Government and private sector procurement will go to empowered companies, and that 30 percent of these supplier companies should be controlled by women, youths and people living with disabilities." He added that procurement legislation will be amended to provide preferential treatment to "citizens empowered companies."

The judicial system has a mixed record in upholding the sanctity of contracts. The judicial process is lengthy and time-consuming. Many magistrates lack experience in commercial matters. Government will establish a Small Claims Court in 2008 to settle disputes in the small scale business sector which will be faster than regular courts.

Conversion and Transfer Policies

Investors are free to repatriate capital investments, as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer/remit wages earned in Zambia without difficulty. There is no exchange control in Zambia for anyone doing business as either a resident or non-resident. Additionally, there are no restrictions on non-cash transactions.

Over-the-counter cash conversion of kwacha into foreign currency is restricted to a $5,000 maximum for account holders and $1,000 for others per transaction.

Expropriation and Compensation

Investments may only be expropriated by an act of Parliament relating to the specific property expropriated. The law states compensation must be at a fair market value, although the method for determining fair market value is ill-defined. Compensation shall be convertible at the current exchange rate. In addition, investors are guaranteed that investments will not be adversely affected by any changes in the Investment Act for a period of seven years.

Land, which is held under 99-year leases, may revert to the government if it is ruled to be undeveloped. So far, no privately held land has reverted.

Dispute Settlement

There have been relatively few investment disputes since the MMD government took office in 1991. The investment code stipulates that disputants must first resort to the Zambian High Court for internal dispute settlement. Failing that, the parties may go to international arbitration, which the state recognizes to be binding. Zambia is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the United Nations Commission of International Trade Law (UNCITRAL).

Previous disputes involved delayed payments from state-owned enterprises for goods and services and the delayed deregistration of a US-owned aircraft despite contractual obligations.

Disputes have arisen over issuance of game management area permits and awards of hunting concessions, and investors have complained that procedures in this sector lack transparency.

The courts in Zambia are reasonably independent, but contractual and property rights are weak and final court decisions can take a long time. Slow courts and inadequate law enforcement procedures resulted in the unjustified jailing of a U.S. businessman in 1998. The issue was resolved after protracted legal proceedings.

There is no bankruptcy law in Zambia. Secured interests in property are possible and recognized, but fairly rare. There is no system for recording these interests.

Performance Requirements and Incentives

Currently, there are no requirements for local content, equity, financing, employment, or technology transfers but the situation might change with the enactment of the Citizensٰ Empowerment Act, depending on how it is enforced (see para 11). The ZDA Act provides incentives for investments in rural enterprises, farming, and non-mineral exports (see below). Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled. For example, the government requires that all international firms licensed to operate a cellular telephone network offer 10 percent of shareholding on the local stock exchange, per commitments made when entering the market

General Incentives and Taxation: Foreign investors receive national treatment under the tax system. Income from farming is taxed at a rate of 15 percent, below the standard corporate tax rate of 35 percent. In addition, that portion of income that is determined by the Commissioner of Taxes to originate from the export of non-traditional products is taxed at a rate of 15 percent (traditional exports are all mineral exports of copper, cobalt, lead, zinc, gold, and silver).

Work Permit Requirements: Notwithstanding the provisions of the Immigration and Deportation Act, a foreign national who invests a minimum of USD 250,000 or equivalent in convertible currency and who employs a minimum of ten persons is entitled to a self employment permit or resident permit. Investors operating in Zambia must obtain a permit (the ZDA provides assistance in obtaining this), in addition to other licenses/certificates, which may be required, depending on the sector (timber, tourism, and mining are some examples of sectors requiring special permits). With an approved investment license, an investor is eligible for up to five expatriate work/resident permits, but in practice companies have had difficulty securing these. Smaller-scale investors report additional difficulties in obtaining work permits.

Capital Allowances: Manufacturing, mining, and hotel structures qualify for a depreciation allowance of 5 percent per year plus an initial allowance of 10 percent of the cost in the year in which the building was first used. Equipment, machinery, and plants used exclusively for farming, manufacturing, and tourism qualify for a depreciation allowance of 50 percent. Capital expenditures on farm improvements qualify for a farm improvement allowance of 20 percent per year for the first five years. Capital expenditure allowance on the growing of coffee, tea, bananas, citrus fruits, or similar plants qualifies for a development allowance of 10 percent per year up to the first year of production. A farm work allowance of 100 percent applies to expenditure on farmland such as stumping, clearing, prevention of soil erosion, boreholes, wells, water conservation, and aerial or geographical surveys. The depreciation allowance for non-commercial vehicles is 20 percent (straight-line depreciation). Expenditure on other assets used in creating income qualifies for a depreciation allowance of 25 percent (straight-line depreciation).

Special Incentives: Investors who qualify in one of the five categories below shall be entitled, in addition to the general incentives, to an exemption from customs duties and sales duties on all machinery and equipment (excluding motor vehicles) required for the establishment, rehabilitation, or expansion of that enterprise:

  • Exporters of non-traditional products which result in net foreign exchange earnings;
  • Producers of products for local agricultural use and the production of agricultural commodities or other agriculture-related products for export;
  • Businesses engaged in tourism resulting in foreign exchange earning in excess of 25 percent of the gross annual earnings of the business unit;
  • Businesses engaged in an import substitution industry using a significant proportion of local raw materials resulting in net foreign exchange savings;
  • Businesses located in a rural area.
  • Additional investment incentives for qualified investors include:
  • Suspension of customs duty for a period of five years on all machinery, fixtures and equipment, tools, and parts used in the assembly of motor vehicles, motorcycles and bicycles;
  • Reduction of customs duty on computer parts, which was 15 percent to zero percent;
  • Suspension of customs duty for a period of five years on inputs used in the textile and clothing industry such as grey fabrics including loom stead, machinery, sewing threads, sewing machine spare parts and trimmings;
  • Removal of customs duty on printed board-paper used in the packaging of Ultra High Temperature (UHT) milk;
  • Reduced excise duty on liquefied petroleum gas (LPG) from 30 percent to 15 percent;
  • Removal of customs duty for a period of five years on materials used in the manufacture and packaging of cement;
  • Removal of customs duty for a period of five years on imported materials used in the manufacture of roofing sheets and;
  • Removal of customs duty for a period of five years on machinery and equipment acquired by business enterprises that will operate in the Multi-Facility Economic Zone, in priority sector or rural enterprise.

In his announcement of the 2007 National Budget, the Minister of Finance and National Planning promised several reforms and programs that would improve the business climate in Zambia and provide additional investment incentives. He hailed two Multi-Facility Economic Zones (MFEZ) projects that will diversify the economy and promote exports. The Japanese International Cooperation Agency hired a Malaysian company to develop a MFEZ in Lusaka, and the Chinese government will develop a zone in Chambishi in the Copperbelt. Businesses located in the MFEZs will enjoy special incentives, including duty free imports of raw materials, capital goods and machinery for five years. In addition, the Minister noted that the GRZ will establish Patents and Companies Registration Offices (PACRO) in Eastern, Southern, and Copperbelt provinces. The 2008 National Budget, which will be announced on January 25, 2008, is expected to include additional incentives.

Right to Private Ownership and Establishment

There is a right to private ownership of business enterprises and no business ventures are reserved solely for the government. In practice, however, the national telecommunications parastatal ZAMTEL maintains a monopoly on the international gateway, due to the high fee (USD 12 million) charged for an international gateway license, on "security" grounds. GRZ commitments to liberalize the gateway have not yet been realized. Private entities may freely establish and dispose of interests in business enterprises, but investment board approval is required to transfer an investment license for a given enterprise to a new owner. Private enterprises have occasionally complained that the playing field is not level when they compete with public enterprises for licenses or concessions.

A subsidiary of a foreign company is regarded as a Zambian company. The legal liability of the parent company is limited to the amount of capital committed, together with any guarantees provided.

Protection of Property Rights

The ZDA Act assures investors that property rights shall be respected. No investment of any description can be expropriated unless Parliament has passed an act relating to the compulsory acquisition of that property. Also, in the case of expropriation, full compensation shall be made at fair market value and shall be convertible at the then current exchange rate.

The legal framework for trademark protection is adequate. There are fines for revealing business proprietary information, but fines are not large enough to penalize disclosure adequately. Copyright protection is limited and does not cover computer applications.

Zambia's patent laws conform to the requirements of the Paris Convention for the Protection of Industrial Property, to which Zambia is a signatory. It takes a minimum of four months to patent an item or process. Duplicative searches are not done, but patent awards may be appealed on grounds of infringement.

Zambia is a signatory to a number of international agreements on patents and intellectual property, including the World Intellectual Property Organization (WIPO), Paris Union, Bern Union, African regional Industrial Property Organization (ARIPO), and the Universal Copyright Convention of UNESCO. National laws are generally adequate in protecting intellectual property rights, and there has been effective recent enforcement against pirated musical and video recordings as well as software. Small-scale trademark infringement occurs for some packaged goods through copied or deceptive packaging.

Enforcement of property rights is weak in Zambia, and courts have little experience with commercial litigation. Planned legal reforms include the strengthening of commercial law and property rights.

Transparency of the Regulatory System

The government has made strides toward introducing transparent policies to foster competition, but complaints arise from time to time. Questions have arisen in recent years regarding the award of Game Management Areas, the enforceability of existing development agreements, and the fairness of competition between state-owned enterprises and private firms. In the agricultural sector, Zambian government interventions, through the purchase of maize (corn) at subsidized prices and the distribution of subsidized fertilizer, undercuts the private sector’s capacity to enter these markets. The unpredictability of import and export bans on commodities, especially maize, is a deterrent to private sector participation in commodity markets.

Labor laws provide extremely generous severance pay and other benefits to workers, which can impede investment. Some businesses try to circumvent the rules by hiring on short-term contract basis. Government is also capitalized in some places but not in others by making changes to limit minimum wage benefits and conditions of service to a more narrowly- defined disadvantaged segment of the workforce.

Although the Zambia Development Agency seeks to serve as a "one-stop shop" for investors, in practice red tape associated with licenses and permits presents problems. In some cases, scores of licenses are required to run a business. As mentioned in paragraph six, the government is working to streamline numerous licensing requirements and administrative procedures.

Proposed laws are usually not published in draft form for public comment. Instead, there are opportunities for stakeholder consultations during which proposed new regulations can be discussed.

Although the underpinnings for an efficient system to handle court disputes exist, Zambian courts are relatively inexperienced in the area of commercial litigation. This, coupled with the large number of pending commercial cases in the system, keeps the regulatory system from being prompt and transparent. Some measures to promote resolution of disputes by mediation have been implemented in an attempt to clear the backlog. The courts support alternative dispute resolution, including a mechanism for binding arbitration. In 2004, the High Court established a commercial division to adjudicate high-value claims. This fee-based system has accelerated resolution of such cases.

Capital Markets and Portfolio Investment

A) Banking Sector

Government policy generally encourages the establishment of free market financial institutions. Banking supervision and regulation by the Bank of Zambia (BoZ), the central bank, has improved over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training and incentives of bank supervisors. On October 1, 2007, the statutory reserve requirement was reduced to 8 percent from 14 percent, injecting additional liquidity into the banking system.

Although some improvements have been registered in recent years, credit to the private sector is expensive and readily available only for extremely low-risk investments. One factor inhibiting lending is a culture of tolerating loan default, which many view as a minor transgression. In addition, until recently, high returns on government securities encouraged commercial banks to invest heavily in government debt, to the exclusion of financing productive private sector investments. Banking officials readily acknowledge that they need to upgrade the risk assessment and credit management skills within their institutions in order to better serve private sector investors. Some financial institutions restrict credit to Zambian-registered companies, but foreign ownership does not disqualify a loan applicant. Banks provide credit denominated in foreign currency only for investments aimed at producing goods for export. Banks provide services on a fee-based model, which means that banking charges are generally high.

B) Lusaka Stock Exchange

The Lusaka Stock Exchange (LuSE) opened in February 1994 and is structured to meet the G-30 recommendations for clearing and settlement system design and operations. Since its inception, the LuSE has offered trading in equity securities, and in March 1998, the LuSE became the official market for trading in government bonds. Investors intending to trade in a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the 1993 Securities Act, and enforced by the Securities and Exchange Commission.

The market capitalization of the LuSE for 16 listed companies increased to Kw 19 trillion in 2007, compared to Kw 13 trillion in 2006. In U.S. dollar terms, the stock market's size grew from USD 3.18 billion to USD 4.82 billion, an increase of over 50 percent. The growth in market capitalization is attributed to the performance of stocks and the economy as a whole. The number of trades also increased by more than two-thirds, from 3,662 trades in 2006 to 6,199 trades in 2007. Net foreign portfolio investment flows stood at USD 12 million in 2007, compared to USD 8 million in 2006.

There are no restrictions on foreign participation in the LuSE and foreigners may invest in stocks on the same terms as Zambians.

Political Violence

Zambia has no recent history of significant political violence. Civil wars in the neighboring countries of the Democratic Republic of the Congo and Angola occasionally led to cross-border incidents in the past, but these occurred in remote areas and their impact was limited to rural populations. Tripartite elections held in September 2006 were generally peaceful, although the announcement of Presidential election results sparked sometimes-violent demonstrations in Lusaka and the Copperbelt, which resulted in injuries and property damage. Infrequent student protests sometimes generate violence.

Corruption

During the 1990s, corruption undermined the economic stability of Zambia. The problem pervaded Zambia, from the top down, ranging from senior government officials abusing the privatization process to local policemen committing extortion. The current administration has launched a campaign to uncover past abuses, punish perpetrators, and recover assets, with mixed results. Petty corruption, remains common, as low salaries for government employees undermine efforts at reform, and extensive regulations create opportunities for bribes. The issuance of land titles has been singled out as particularly susceptible to corruption, and the Zambian government is targeting administrative corruption in the Ministry of Lands, as well in the Immigration Department and the Zambia Revenue Authority as part of its Millennium Challenge Threshold Program. As a result, Ministry of Lands' land records and Department of Immigration permit application processes have been computerized.

The Anti-Corruption Commission investigates allegations of misconduct. In 2002, the government formed a Task Force on Corruption to spearhead efforts to hold accountable high level officials from the previous administration. At the President's urging, Parliament lifted former President Frederick Chiluba's immunity from prosecution, and he is among those charged with various offenses. In October 2006, the Task Force secured a conviction against former managing director of Zambia National Commercial Bank, Samuel Musonda, for 44 counts of abuse of office. Two other convictions were secured in 2007 against Dr. Kashiwa Bulaya, former permanent Secretary in the Ministry of Health for abuse of office and former Zambia National Service Commandant Brig. Gen. Wilford Funjika for abuse of office.

Zambia ratified the Southern African Development Community protocol against corruption in 2003. In 2007, Zambia became a party to the United Nations Convention Against Corruption (which entered into force in 2005) and ratified the African Union Convention on the Prevention and Combating of Corruption. Transparency International has an active Zambian chapter.

Bilateral Investment Agreements

Zambia has signed bilateral reciprocal promotional and protection of investment protocols with most of the Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Community (SADC) member states. In November 2001, COMESA signed a Trade and Investment Framework Agreement with the United States. On October 2, 2000, Zambia became a beneficiary of the African Growth and Opportunity Act (AGOA), a framework for U.S. trade, investment, and development policy for sub-Saharan Africa. Zambia is also party to the Cotonou Agreement, which gives rise to new opportunities that allow foreign investors preferential access to the EU markets for a range of exported products from Zambia.

OPIC and Other Investment Insurance Programs

The Overseas Private Investment Corporation (OPIC) is a U.S. government agency that provides project financing and investment insurance for U.S. investors. The OPIC/Zambia agreement was signed in June 1999. Zambia is also a signatory to the Multilateral Investment Guarantee Agency (MIGA), which guarantees foreign investment protection in cases of war, strife, disasters, other disturbances, or expropriation. In June 2001, the World Bank extended credit in the amount of USD 5 million for starting the African Trade Insurance Agency (ATI). This institution, which is open to all African states that are members of the African Union, provides exporters with insurance against receivables on export trade deals and political risk insurance for trade transactions.

The Embassy uses approximately USD 14.5 million in Zambian kwacha per year. Kwacha are purchased at the market exchange rate, which ranged between 4280 and 3715 kwacha to the U.S. dollar over the course of 2007.

Labor

There is an abundance of unskilled labor and an adequate supply of semi-skilled labor. Skilled and professional workers are in short supply. Wages are not controlled. The government adheres closely to ILO conventions and has revised labor laws to conform to international practice. Labor-management relations vary by sector. Strikes are not uncommon in the public sector, and often are related to the government’s failure to pay salaries or allowances on time. For example, in August 2006 nurses and health workers went on strike demanding that government pay them outstanding housing allowances.

Foreign Trade Zones/Free Trade Zones

An investor may apply to be appointed and licensed by the Commissioner General to establish and operate a bonded factory under Section 65 of the Customs and Excise Act. The Export Processing Zones Authority, which was charged with the responsibility of promoting and implementing Export Processing Zones, ceased to exist on December 31, 2006 and was merged with other agencies into the Zambia Development Agency in January 2007. The GRZ in early 2007 announced the creation of multi-facility economic zones (MFEZ) where foreign firms will enjoy a waiver on customs duty on imported equipment, excise duty and value added tax, among other concessions.

On October 31, 2000, the Common Market for Eastern and Southern Africa Free Trade Area (COMESA FTA) was launched. Zambia and eight other participating countries in the region are working toward a monetary union to reduce transaction costs and to make the region more competitive. COMESA FTA members intend to launch a customs union in December 2008. In 2001, the Zambia Revenue Authority implemented a zero tariff for the COMESA FTA.

Foreign Direct Investment Statistics

The ZDA compiles data on investment commitments from investors who obtain investment licenses at ZDA. Investors in mining projects do not invest through ZDA but instead work with the Ministry of Mines and Mineral Development. The ZDA data are therefore incomplete, and do not show actual FDI flows or stocks, and should not be considered an accurate measure of investment. However, these are the only FDI data available in Zambia.

Investment Commitments by Sector (USD), as provided by the ZDA, (January to November 2007)

Sector 2006 2007 (Jan to Nov)
Agriculture 59,455,495 66,788,687
Construction 140,428,266 21,241,800
Manufacturing 425,141,239 843,235,627
Transport 1,186,680 23,497,500
Mining 43,473,000 441,500,000
Service 4,576,065 25,890,627
Tourism 19,958,969 78,771,759
Health 1,382,000 1,281,000
Education - 4,127,000
Financial - 2,000,000
ICT - 275,140,000
Real Estate - 18,100,000
Chambishi MFEZ - 900,000,000
Total 695,601,714 2,975,780,892

(Note: Chambishi MFEZ is Chambishi Multi-Facility Economic Zone run by the Chinese)

Number of projects approved by promoters from various countries including Zambia between January and November 2007

Country Number
of
projects
Australia 1
Australia/others 1
Britain 5
Zambia 12
Zambia/others 27
Malawi 2
Botswana 2
Sweden 2
Lebanon 3
Oman 1
South Africa 9
South Africa/others 4
China 22
Korea 1
Greece 1
India 8
India/others 2
France 1
USA 1
Singapore 1
Japan/China 1
Germany 1
New Zealand 1
Kenya 2
Zimbabwe 1

A total number of 145 projects were considered by the ZDA during the period January to December, out of which 125 were approved by the Board. Major investments recorded are Chambishi Multi-Facility Economic Zone with USD 900 million, Lafarge (Chilanga Cement) Plc with USD 110 million, Jicuan Mining with USD 220 million, Zambia Telecommunication Company Limited (Zamtel) with USD 122 million, Zambia Sugar with USD 185 million, Universal Mining and Chemicals with USD 120 million, and Koza Telecoms with USD 150 million. The ZDA also recorded a major joint venture between ZESCO and Elsweedy Electrical of Egypt to manufacture transformers and electric energy meters.

Much of Zambia's foreign direct investment is in the mining sector, particularly as a result of the privatization of mines previously operated by the government-owned Zambia Consolidated Copper Mines, ZCCM. U.S. companies are not among the large investors in copper, gold and gem mines. However, Allied Energy Corporation of Alabama recently signed a Memorandum of Understanding to acquire a mine producing tin, tantalite, and mica, in Choma, Southern Province from an Australian company, Starfield Mine. The issuance of all prospecting, retention, and mining licenses is the responsibility of the Mines Development Department of the Ministry of Mines and Mineral Development. Data on mining investment is not readily available from official sources, but the following paragraphs describe some of the major investments, based on publicly available reports and articles.

Konkola Copper Mines (KCM)

On March 31, 2000, South Africa's Anglo American Corporation (AAC) acquired the Konkola and Nchanga copper mines and the Nampundwe pyrite mine from Zambia Consolidated Copper Mines (ZCCM), through a new subsidiary called Konkola Copper Mines. In late January 2002, AAC informed the government that it would divest from KCM. AAC cited financial losses linked to declining world copper prices and its failure to secure funding for the Konkola Deep Mining Project, which was the main basis for its investment in Zambia.

Following an upturn in global copper prices, Vedanta Resources Plc, which has its principal operations in India and is based in Great Britain, acquired a 51 percent stake in KCM for USD 48.2 million in August 2004. KCM announced that an estimated USD 400 million will be used to expand its smelter and improve underground operations. The improvements in KCM’s production capacity will push underground ore production to six million tons per annum from the current levels of two million tons. The smelter plant will be ready by June 2008. KCM is developing the Konkola Deep Mining Project, which will double total company production to 400,000 tons by 2009.

Mopani Copper Mine (MCM)

MCM started off as a joint venture between Glencore International (46 percent) of Switzerland and First Quantum (44 percent) of Canada, with Zambia Consolidated Copper Mines (ZCCM) holding the balance (10 percent). Glencore later assumed complete control of the operation by increasing its shareholding to 73.1 percent. The MCM Mufulira Deep and Nkana mines have been in operation since 1933 and 1932, respectively. Glencore has been rebuilding, upgrading and setting up new facilities in order to increase production. MCM spent USD 280 million on new projects in 2004 and another USD 205 million on capital expenditure in 2005 and planned a further USD 250 million on upgrades and new plants in 2006-2007. Some of the work includes a new primary smelting furnace, a matte-settling furnace, a sulphuric acid plant, an oxygen plant, and upgrades of the associated infrastructure. The expansion work should bring copper production capacity up to 380,000 tons. The Mufulira Copper smelter was expanded in a phased approach from a previous treatment capacity of 650,000 tons to 800,000 tons by the end of 2007. Mopani produced 135,000 tons of copper in 2005, and has not reached production targets that exceeded 200,000 tons in 2006 or 2007.

Kansanshi Copper-Gold Mine

Kansanshi Copper Mine is located about 15 kilometres north of Solwezi, in the Northwestern Province of Zambia. First Quantum Minerals holds 80 percent of the project and Zambia Consolidated Copper Mines (ZCCM) holds the remaining 20 percent. During the commissioning stage (November 2004 to April 2005), Kansanshi production totaled 6,792 tons of copper in concentrates and 1,941 tons of finished copper cathodes. In 2006, production went up to 127,179 tons of copper and 2007 production was expected to reach 145,000 tons. First Quantum has obtained a USD 120 million loan facility for the development of Kansanshi Mine, which will boost production. The mine undertook a third expansion of its treatment capacity in 2006.

Lumwana Copper Mine

Lumwana Mine is located in the North Western province, 220 kilometers northwest of the Copperbelt region. It is one of the largest undeveloped copper projects in the world. Lumwana is 100 percent owned by First Equinox, of Canada and Australia. The mine is very large, with a low-grade copper resource containing 901 million tons of 0.7 percent copper. Lumwana mine is one of the largest copper mines in Zambia and is expected to produce its first copper in the first half of 2008. Equinox Minerals Limited signed a debt facility in December 2006 with a group of financial institutions to provide a total of USD 583.8 million for the completion of development and construction of the Lumwana copper project. The mine has employed 4,500 people representing 14 nationalities. The town development activities are on course with all main infrastructures progressing well and some 320 houses completed for occupancy. With all development of course, commissioning is scheduled for mid 2008 and initial production is forecast to be about 170,000 tons per year. The company has made significant progress on the establishment of a uranium plant at the mine and is hoping to be granted a license to mine uranium soon (see para 65). According to a statement made by CEO Harry Michael in December 2007, construction work at Lumwana copper mine is progressing well and work is 75% complete. Equinox has so far spent $500 million on the mine, Michael reported,

Kagem

Zambia produces approximately 20 percent of the world's emeralds and foreign investment has played a vital part in building up the industry. Kagem Mining Limited is the largest gemstone mining operation in Zambia and is 75 percent owned by the Israeli-Indian consortium known as Hagura--which has put millions of dollars into the venture--and 25 percent by the Zambian government. In order to promote more foreign investment and mine development, Hagura Mining Limited awarded a management contract to Gemfields Resources Plc to manage and operate the Kagem Emerald Mine.

Gemfields Resources Plc

Gemfields Resources Plc is a gemstone mine development and gemstone prospecting company mainly focused on emeralds. The company currently owns five Zambian emerald mining licenses, including the Kamakanga, Pamodzi, Mbuva-Chibolele, and Arinus concessions. The company also holds prospecting licenses covering a substantial part of the prospective emerald-yielding areas in Ndola Rural Emerald Restricted Area (NRERA), together with a 50 percent interest in Kariba Minerals, which operates the largest Zambian amethyst mine. The quality of the Zambian emerald is almost at par with the Colombian emerald. In Zambia, deep green and valuable emeralds are currently sourced from the NRERA. During the fiscal year which end June 2007, Gemfields held two emerald sales from its Mbuva-Chibolele Mine. The company sold 992,997 carats of emeralds valued at USD 1.8 million.

Uranium Mining

Uranium deposits have been found in Southern, Lusaka, and Northwestern provinces of Zambia. The Minister of Mines and Mineral Development is consulting with the United Nations International Atomic Energy Agency (IAEA) to formulate a policy to allow uranium mining in Zambia. Canadian-owned Equinox Limited has said that the Lumwana copper deposit contains 22 million pounds of U308 (8462 t U). African Energy Resources Limited, an Australian-owned mining outfit is drilling in Kariba on the southern border with Zimbabwe.

Albidon Limited

Albidon Zambia Limited, owned by Australia is constructing an underground nickel mine which is scheduled to produce its first concentrates mid 2008. Albidon which is listed on London Stock Exchange has an initial life span of 10 years and is due to cost about USD 100 million, including initial working capital costs. The annual nickel production is said to be 8,500 tons per year in nickel concentrates rising to 9,000 tons in subsequent years, 15,000 ounces of platinum group metals, 1400 tons of copper and more than400 tons of cobalt. Albidon has signed an agreement with Chinese state-owned Jianchuan Group Limited to buy the mine’s output. In 2007, Albidon spent USD 5 million on mineral exploration and additional USD 10 already spent on the project.

Kabwe Zinc Mine

Alberg Mining and Exploration of South Africa will re-open the Kabwe zinc and lead mine, one of the oldest mines in Zambia which was shutdown in 1994 due to poor management and lack of capital. GRZ will retain 20 percent stake in the mine.

Chinese Investment

China has become the third largest investor in Zambia after South Africa and Great Britain. Foreign direct investment pledges reported by Chinese companies in 2006 amounted to USD 208,968,180. According to the Chinese Investment Center, Chinese firms' cumulative investments exceeded USD 316 million by the end of 2006. China Non-Ferrous Metal Company's (CNMC) USD 150 million investment in NFC Africa Mining in Chambishi is China's largest copper mining investment. Copper production by Chinese-owned mines in Zambia is estimated at between 25,000 and 30,000 metric tons per annum. CNMC and another smaller Chinese copper firm signed a deal in 2006 to invest USD 220 million to build a 150,000-ton copper smelting plant, which should be operational in 2008. Chinese-owned firm CBMI Construction has been contracted by France's Lafarge to construct a new USD 120 million cement plant in Lusaka, to be commissioned in 2008. The new plant will produce 2,000 tons (80,000 50-kilogram bags) per day. China is setting up a USD 900 million Multi-Facility Economic Zone in Chambishi, Copperbelt, underwritten by the Chinese business community and Government. Zambia is the first African country to have a Chinese multi-facility economic zone.

Major U.S. investments in Zambia include:

  • Cargill Cotton Ginners Limited: a wholly-owned subsidiary of Cargill of Minneapolis, Minnesota, worth over USD 18 million.
  • Dunavant Cotton: a wholly-owned subsidiary of Dunavant Cotton of Tennessee, worth approximately USD 25 million.
  • National Milling Corporation: a wholly-owned subsidiary of Seaboard Corporation of Kansas, representing an initial investment of over USD 20 million.
  • Metal Fabricators of Zambia (ZAMEFA): a vertically integrated manufacturing company owned by Phelps Dodge International Corp, of Arizona, which was acquired in 2007 by Kentucky-based General Cable Corporation.
  • Lilayi Housing Estates: Nevada-based Houses for Africa, Pangaea Partners of Wisconsin, and Zambian partner City Investments Limited are together investing in a project to build 3,700 houses in southern Lusaka.



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