1. Openness To, and Restrictions Upon, Foreign Investment
The United Republic of Tanzania welcomes foreign direct investment (FDI) as it pursues its industrialization and development agenda. On her inauguration in March 2021, President Samia Suluhu Hassan identified removing obstacles to inward foreign investment as a key priority, along with other measures to improve the overall business climate and rebuild trust between the private sector and government. This follows declining FDI and investor confidence over the past six years, with UNCTAD’s 2021 World Investment Report indicating around $1.0 billion in FDI for 2020, stagnant growth in recent years and well below 2015 levels. The development of a $3.5 billion 1,400 km oil pipeline to transport crude oil extracted in Uganda to the Tanzanian port of Tanga could sustain investment in both countries in the future. Investors and potential investors note the biggest challenges to investment include difficulty in hiring foreign workers, unfriendly and opaque tax policies, increased local content requirements, regulatory and policy instability, lack of trust between the GoT and the private sector, and mandatory initial public offerings (IPOs) in key industries. In 2020 and 2021, the GoT recognized many of these concerns’ impacts on both foreign and domestic investment and created task forces and working groups to engage the private sector to identify solutions. These efforts were expanded by President Hassan’s government.
The United Republic of Tanzania has framework agreements on investment and offers various incentives and the services of investment promotion agencies. Investment is mainly a non-Union matter (i.e., different laws, policies, and practices apply between mainland Tanzania and the semi-autonomous state of Zanzibar). Zanzibar updated its investment policy in 2019, while the mainland/Union policy dates from 1996. Efforts to update the Mainland Investment Policy and Investment Act are underway, but incomplete as of the date of this publication. International agreements on investment are covered as Union matters and therefore apply to both regions.
The Tanzania Investment Center (TIC) is intended to be a one-stop center for investors, providing services such as permits, licenses, visas, and land (view TIC’s portal). The Zanzibar Investment Promotion Authority (ZIPA) provides the same function in Zanzibar (view ZIPA).
The GoT has an ongoing dialogue with the private sector via the Tanzania National Business Council (TNBC). TNBC meetings are chaired by the President of the United Republic of Tanzania and co-chaired by the head of the Tanzania Private Sector Foundation (TPSF). President Hassan reinvigorated this formal mechanism during her first months in office. There is also a Zanzibar Business Council (ZBC), as well as Regional Business Councils (RBCs), and District Business Councils (DBCs).
Investors have found that technical expertise of their negotiating partners is a stumbling block to completing their investment plans. Investors should examine the level of sophistication of their negotiating partners at the onset of discussions to determine if outside expertise or training may be necessary. The U.S. government offers programs to develop expertise to facilitate investments and investors are encouraged to work with the Embassy’s economic and commercial sections to determine what, if any, programs may be available.
Foreign investors generally receive treatment equivalent to domestic investors, though limits persist in a number of sectors. There are no geographical restrictions on private establishments with foreign participation or ownership, no limitations on number of foreign entities that can operate in any given sector, and no sectors in which approval is required for greenfield FDI but not for domestic investment.
However, Tanzania discourages foreign investment in several sectors through limitations on foreign equity ownership or other activities, including aerospace; agribusiness (fishing); banking; insurance; construction and heavy equipment; travel and tourism; energy and environmental industries; information and communication; and publishing, media, and entertainment. In 2020, Tanzania relaxed but did not eliminate the foreign ownership limitations in the mining sector.
Specific examples include the following:
The Tourism Act of 2008 bars foreign companies from engaging in mountain guiding activities, and states that only Tanzanian citizens can operate travel agencies, car rental services, or engage in tour guide activities (with limited exceptions).
Per the Merchant Shipping Act of 2003, only citizen-owned ships are authorized to engage in local trade, a requirement that can be waived at the minister’s discretion. Furthermore, the Tanzania Shipping Agencies Act of November 2017 gives exclusive monopoly power to the Tanzania Shipping Agency Corporation (TASAC) to conduct business as shipping agent, shipping regulator, and licensor of other private shipping agencies. The Act also gives TASAC an exclusive mandate to provide clearing and forwarding functions relating to imports and exports of minerals, mineral concentrates, machinery and equipment for the mining and petroleum sector, products and/or extracts related to minerals and petroleum. arms and ammunition, live animals, government trophies, and any other goods that the minister responsible for maritime transport may specify. A 2019 amendment extended this exclusive mandate to additional imports, including fertilizers, sugar (both industrial and domestic), cooking oil, wheat, oil products, liquefied gas, and chemicals related to the products. As of May 2021, the extended mandate has yet to go into effect, following extensive objections for private sector stakeholders.
A 2009 amendment to the Fisheries Regulations imposes onerous conditions for foreign citizens to engage in commercial fishing and the export of fishery products, sets separate licensing costs for foreign citizens and Tanzanians, and limits the types of fishery products that foreign citizens may work with.
Foreign construction contractors can only obtain temporary licenses, per the Contractors Registration Act of 1997, and contractors must commit in writing to leave Tanzania upon completion of the set project. 2004 amendments to the Contractors Registration By-Laws limit foreign contractor participation to specified, more complex classes of work.
Foreign capital participation in the telecommunications sector is limited to a maximum of 75 percent.
All insurers require one-third controlling interest by Tanzania citizens, per the Insurance Act.
The Electronic and Postal Communications (Licensing) Regulations 2011 limits foreign ownership of Tanzanian TV stations to 49 percent and prohibits foreign capital participation in national newspapers.
Mining projects must be at least partially owned by the GoT and “indigenous” companies, and hire – or at least favor – local suppliers, service providers, and employees. (See Chapter 4: Laws and Regulations on FDI for details.). Gemstone mining is limited to Tanzanian citizens with waivers of the limitation at ministerial discretion. In February 2019, responding to low growth and investment in the sector, the government revised the 2018 Mining Regulations to reduce local ownership requirements from 51 percent to 20 percent.
Currently, foreigners can invest in stock traded on the Dar es Salaam Stock Exchange (DSE), but only East African residents can invest in government bonds. East Africans, excluding Tanzanian residents, however, are not allowed to sell government bonds bought in the primary market for at least one year following purchase.
There have not been any third-party investment policy reviews (IPRs) on Tanzania in the past several years, the most recent OECD report is for 2013. The World Trade Organization (WTO) published a Trade Policy Review in 2019 on all the East African Community states, including Tanzania.
The Business Registration and Licensing Agency (BRELA) issues certificates of compliance for foreign companies, certificates of incorporation for private and public companies, and business name registrations for sole proprietor and corporate bodies. After registering with BRELA, the company must: obtain a taxpayer identification number (TIN) certificate, apply for a business license, apply for a VAT certificate, register for workmen’s compensation insurance, register with the Occupational Safety and Health Authority (OSHA), receive inspection from OSHA, and obtain a Social Security registration number.
The Tanzania Investment Center (TIC) now sits under the Prime Minister’s Office (PMO), after being moved around several times in recent years. The TIC is a one-stop shop which provides simultaneous registration with BRELA, TRA, and social security for enterprises whose minimum capital investment is not less than USD 500,000 if foreign-owned or USD 100,000 if locally owned. Throughout 2021, TIC has streamlined its operations to facilitate the process of business registration.
The government has been slow to implement its May 2018 Blueprint for Regulatory Reforms to improve the business environment and attract more investors. The reforms seek to improve the country’s ease of doing business through regulatory reforms and to increase efficiency in dealing with the government and its regulatory authorities. The official implementation of the Business Environment Improvement Blueprint started in July 2019, though there have been few tangible changes or advancements. President Hassan’s government identified implementation of the Blueprint as a priority for her first term.
Tanzania does not promote or incentivize outward investment. There are restrictions on Tanzanian residents’ participation in foreign capital markets and ability to purchase foreign securities. Under the Foreign Exchange (Amendment) Regulations 2014 (FEAR), however, there are circumstances when Tanzanian residents may trade securities within the East African Community (EAC). In addition, FEAR provides some opportunities for residents to engage in foreign direct investment and acquire real assets outside of the EAC.
Tanzania has formal processes for drafting and implementing rules and regulations. Generally, after an Act is passed by Parliament, the creation of regulations is delegated to a designated ministry. In theory, stakeholders are legally entitled to comment on regulations before they are implemented. However, ministries and regulatory agencies frequently fail to provide adequate opportunity for meaningful input as there is no minimum period of time for public comment set forth in law. Stakeholders often report that they are either not consulted or given too little time to provide meaningful input. Ministries or regulatory agencies do not have the legal obligation to publish the text of proposed regulations before their enactment. Sometimes, it is difficult to obtain the final, adopted version of a bill in a timely manner nor is it always public information if and when the President signed the bill. Moreover, the government over the past few years used presidential decree powers to bypass regulatory and legal structures.
The 2016 Access to Information law in theory grants citizens more rights to information; however, some claim that the Act gives too much discretion to the GoT to withhold disclosure. Although information, including rules and regulations, is available on the GoT’s “Government Portal” (view the Government Portal), the website is generally not current and is incomplete. Alternatively, rules and regulations can be obtained on the relevant ministry’s website, but many offer insufficient information.
Nominally, independent regulators are mandated with impartially following the regulations. The process, however, has been criticized as being subject to political influence, depriving the regulator of the independence it is granted under the law.
Tanzania is part of both the East African Community (EAC) and the Southern African Development Community (SADC) and subject to their respective regulations. Notably in 2021, Tanzania ratified the EAC’s Sanitary and Phytosanitary (SPS) Protocol after a protracted period of deliberation.
Tanzania is a member of the International Organization for Standardization (ISO). The national standards body, the Tanzania Bureau of Standards, was established in 1975. It has been most active in promoting standards and quality in process technology, including agro-processing, chemicals and textiles, and engineering, including mining and construction.
Tanzania is a member of the World Trade Organization (WTO) and its National Enquiry Point (NEP) is the Tanzania Bureau of Standards (TBS). As the WTO NEP, TBS handles information on adopted or proposed technical regulations, as well as on standards and conformity assessment procedures. Tanzania does not notify all draft technical regulations to the WTO Committee on Technical Barriers to Trade (TBT).
Tanzania’s legal system is based on the English Common Law system. The first source of law is the 1977 Constitution, followed by statutes or acts of Parliament; and case law, which are reported or unreported cases from the High Courts and Courts of Appeal and are used as precedents to guide lower courts. The Court of Appeal, which handles appeals from Mainland Tanzania and Zanzibar, is the highest court, followed by the High Court, which handles civil, criminal and commercial cases. There are four specialized divisions within the High Courts: Labor, Land, Commercial, and Corruption and Economic Crimes. The Labor, Land, and Corruption and Economic Crimes divisions have exclusive jurisdiction over their respective matters, while the Commercial division does not claim exclusive jurisdiction. The High Court and the District and Resident Magistrate Courts also have original jurisdiction in commercial cases subject to specified financial limitations.
Apart from the formal court system, there are quasi-judicial bodies, including the Tax Revenue Appeals Tribunal and the Fair Competition Tribunal, as well as alternate dispute resolution procedures in the form of arbitration proceedings. Judgments originating from countries whose courts are recognized under the Reciprocal Enforcement of Foreign Judgments Act (REFJA) are enforceable in Tanzania. To enforce such judgments, the judgment holder must make an application to the High Court of Tanzania to have the judgment registered. Countries currently listed in the REFJA include Botswana, Lesotho, Mauritius, Zambia, Seychelles, Somalia, Zimbabwe, Swaziland, the United Kingdom, and Sri Lanka.
The Tanzanian constitution guarantees judicial independence. However, the degree of judicial independence has varied significantly in the past few years, and many perceive that political interference and corruption in the form of illicit payments to influence decisions in justice is a concern.
Regulations and enforcement actions are appealable, and they are adjudicated in the national court system.
Several laws and regulations enacted over the past six years affect the risk-return profile on foreign investments, especially those in the extractives and natural resources industries. The laws/regulations include the Natural Wealth and Resources (Permanent Sovereignty) Act 2017, Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Act 2017, Written Laws (Miscellaneous Act) 2017, and Mining (Local Content) Regulations 2019. These acts were introduced by the executive branch under a certificate of urgency, meaning that standard advance publication requirements were waived to expedite passage. As a result, there was minimal stakeholder engagement. Stakeholders continue to call for revision to these laws.
Investors, especially those in natural resources and mining, express concern about the effects of these laws. Two laws apply to “natural wealth and resources,” which are broadly defined and not only include oil and gas, but in theory, could include wind, sun, and air space. Investors are encouraged to seek legal counsel to determine the effect these laws may have on existing or potential investments. For natural resources, the new laws subject the contracts, past and present, to Parliamentary review. More specifically, the law states “Where [Parliament] considers that certain terms …or the entire arrangement… are prejudicial to the interests of the People and the United Republic by reason of unconscionable terms it may, by resolution, direct the Government to initiate renegotiation with a view to rectifying the terms.” Further, if the GoT’s proposed renegotiation is not accepted, the offending terms are automatically expunged. “Unconscionable” is defined broadly, including catch-all definitions for clauses that are, for example, “inequitable or onerous to the state.” Under the law, the judicial branch does not play a role in determining whether a clause is “unconscionable.” The Mining (Local Content) Regulations 2019 require that ‘indigenous’ Tanzanian companies are given first preference for mining licenses. An ‘indigenous Tanzanian company’ is one incorporated under the Companies Act with at least 20 percent of its equity owned by and 100 percent of its non-managerial positions held by Tanzanians (this is an improvement from the 2018 regulations which required 51 percent Tanzanian ownership). Furthermore, foreign mining companies must have at least five percent equity participation from an indigenous Tanzanian company and must grant the GoT a 16 percent carried interest. Lastly, foreign companies that supply goods or services to the mining industry must incorporate a joint venture company in which an indigenous Tanzanian company must hold equity participation of at least 20 percent.
The Tanzania Investment Center contains many relevant laws, rules, procedures, and reporting requirements for investors on its portal (view the portal), though it is not comprehensive.
Note: TIC and the GoT are currently in the process of reviewing several investment- and business-related regulations. Investors are encouraged to contact the U.S. Embassy or to seek legal counsel with a firm operating in Tanzania.
The Fair Competition Commission (FCC) is an independent government body mandated to intervene, as necessary, to prevent significant market dominance, price fixing, extortion of monopoly rent to the detriment of the consumer, and market instability. The FCC has the authority to restrict mergers and acquisitions if the outcome is likely to create market dominance or lead to uncompetitive behavior.
The constitution and investment acts require government to refrain from nationalization. However, the GoT may expropriate property after due process for the purpose of national interest. The Tanzanian Investment Act guarantees payment of fair, adequate, and prompt compensation; access to the court or arbitration for the determination of adequate compensation; and prompt repatriation in convertible currency where applicable. For protection under the Tanzania Investment Act, foreign investors require $500,000 minimum capital and Tanzanian investors require $100,000.
There are numerous examples of indirect expropriation, such as confiscatory tax regimes or regulatory actions that deprive investors of substantial economic benefits from their investments. This is another area that the GoT expected to address in 2021, though significant changes to tax-related laws and regulations have yet to be finalized.
Tanzania has a bankruptcy law which allows for companies to declare insolvency. The insolvency process includes the appointment of receiver managers, administrative receivers, or liquidators. In practice the process is very long and expensive. Preferential debts such as government taxes and rents, outstanding wages and salaries, and other employee compensation take priority over other claims, including those from creditors. Insolvent or illiquid companies may also seek the protection of the courts by seeking a compromise or arrangement as proposed between a company and its creditors, a certain class of creditors, or its shareholders.
Bankruptcy proceedings can take several years to conclude in Tanzania. The recovery rate for creditors on insolvent firms was reported at 20.4 U.S. cents on the dollar, with judgments typically made in local currency.
4. Industrial Policies
The Tanzania Investment Center (TIC) offers a package of investment benefits and incentives to both domestic and foreign investors without performance requirements. A minimum capital investment of $500,000 if foreign owned or $100,000 if locally owned is required. (At the time of this publication, the government was revising these incentives. Investors are advised to consult the TIC for up-to-date information.)
Current investment incentives include the following:
Discounts on customs duties, corporate taxes, and VAT paid on capital goods for investments in mining, infrastructure, road construction, bridges, railways, airports, electricity generation, agribusiness, telecommunications, and water services.
100 percent capital allowance deduction in the years of income for the above-mentioned types of investments – though there is ambiguity as to how this is accomplished.
No remittance restrictions. The GoT does not restrict the right of foreign investors to repatriate returns from an investment.
Guarantees against nationalization and expropriation. Any dispute arising between the GoT and investors may be settled through negotiations or submitted for arbitration.
Allowing interest deduction on capital loans and removal of the five-year limit for carrying forward losses of investors.
Investors may apply for “Strategic Status” or “Special Strategic Status” to receive further incentives. The criteria used to determine whether an investor may receive these designations are available on TIC’s website (view TIC’s website).
The government introduces waivers through the Public Finance Act with the aim of attracting investment in certain targeted sectors. In Financial year 2021/2022, the government introduced VAT exemption on entities with agreements with the GoT for the operation or execution of strategic projects, to the extent that the agreements provide for such exemption; a strategic project is defined as a project that has been so determined by the Cabinet of Ministers. The government also re-introduced VAT exemption for non-governmental organizations having agreements with the GoT, to the extent that the agreements provide for such exemption. The minister of finance may make regulations prescribing the manner of application, granting and monitoring of exemptions, which previously required the minister to appoint a technical committee for guidance on these matters.
The government does not currently offer any incentives for clean energy investments.
The Export Processing Zones Authority (EPZA) oversees Tanzania’s Export Processing Zones (EPZs) and Special Economic Zones (SEZs). EPZA’s core objective is to build and promote export-led economic development by offering investment incentives and facilitation services (view EPZA). Minimum capital requirements for EPZ and SEZ investors are $500,000 for foreign investors and $100,000 for local investors. Investment incentives offered for EPZs include the following:
An exemption from corporate taxes for ten years.
An exemption from duties and taxes on capital goods and raw materials.
An exemption on VAT for utility services and on construction materials.
An exemption from withholding taxes on rent, dividends, and interests.
Exemption from pre-shipment or destination inspection requirements.
SEZs offer similar incentives, excluding the ten-year exemption from corporate taxes.
The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar Free Economic Zones Authority (ZAFREZA) offer the following incentives:
Category “A” Free Economic Zone Developers: Development of Infrastructure
The developer of a Free Economic Zone shall benefit to the following incentives:
exemption from payment of taxes and duties for machinery, equipment, heavy duty vehicles, building and construction materials, and any other goods of capital nature to be used for purposes of development of the Free Economic Zone infrastructure.
exemption from payment of corporate tax for an initial period of ten years and thereafter a corporate tax, shall be charged at the rate specified in the Income Tax Act.
exemption from payment of withholding tax on rent, dividends ‘and interest for the first ten years.
exemption from payment of property tax for the first ten years.
remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation to and from the Free Economic Zone.
exemption from payment of stamp duty on any instrument executed in or outside the Free Economic Zone relating to transfer, lease or hypothecation of any movable or immovable property situated within the Free Economic Zone or any document, certificate, instrument, report or record relating to any activity, action, operation, project, undertaking, or venture in the Free Economic Zone;
treatment of goods destined into Free Economic Zones as transit goods; and
on site customs inspection of goods within Free Economic Zones.
Category “B” Free Economic Zones Operators: Approved Investors Producing for Sale into the Customs Territory
Approved Investors whose primary markets are within the customs territory shall be entitled to the:
remission of customs duty, value added tax and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
exemption from payment of withholding tax on interest on foreign sourced loan;
remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, one ambulances, firefighting equipment and firefighting vehicles and up to two buses for employees’ transportation into and from the Free Economic Zones;
exemption from pre-shipment or destination inspection requirements;
on site customs inspection of goods within Free Economic Zones;
access to competitive, modern and reliable services available within the Free Economic Zones; and
subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of:
(i) net profits or dividends attributable to the investment; (ii) payments in respect of loan servicing where a foreign loan has been obtained;
(ii) payments in respect of loan servicing where a foreign loan has been obtained; (iii) royalties, fees and charges for any technology transfer agreement;
(iii) royalties, fees and charges for any technology transfer agreement; (iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business;
(iv) the remittance of proceeds in the event of sale or liquidation of the licensed business or any interest attributable to the licensed business; and
(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the licensed business.
Category “C” Free Economic Zone Operators: Approved Investors Producing for Export Markets
Approved Investors producing for export markets in non-manufacturing or processing sectors shall be entitled to the:
subject to compliance with applicable conditions and procedures, accessing the export credit guarantee scheme;
remission of customs duty, value added, and any other tax charged on raw materials and goods of capital nature related to the production in the Free Economic Zones;
exemption from payment of corporate tax for an initial period of ten years and thereafter, a corporate tax shall be charged at the rate specified in the Income Tax Act;
exemption from payment of withholding tax on rent, dividends and interests for the first ten years;
exemption from payment of all taxes and levies imposed by the Local Government Authorities for products produced in the Free Economic Zones for a period of ten years;
exemption from pre-shipment or destination inspection requirements;
on site customs inspection of goods in the Free Economic Zones;
remission of customs duty, value added tax and any other tax payable in respect of importation of one administrative vehicle, ambulances, firefighting equipment and vehicles and up to two buses for employees’ transportation to and from the Free Economic Zones;
treatment of goods destined into Free Economic Zones as transit goods;
access to competitive, modern and reliable services available within the Free Economic Zones; and
subject to compliance with applicable conditions and procedures for foreign exchange and payment of tax whenever appropriate, unconditional transfer through any authorized dealer bank in freely convertible currency of:
(i) net profits or dividends attributable to the investment;
(ii) payments in respect of loan servicing where a foreign loan has been obtained;
(iii) royalties, fees and charges for any technology transfer agreement;
(iv) the remittance of proceeds in the event of sale or liquidation of the business enterprises or any interest attributable to the investment;
(v) payments of emoluments and other benefits to foreign personnel employed in Tanzania in connection with the business enterprise; twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;
twenty percent of total turnover is allowed to be sold to the local market and is subject to the payment of all taxes;
hundred percent foreign ownership is allowed; and
no limit to the duration that goods may be stored in the Freeport Zones.
2. For purposes of this section, investors licensed primarily for export markets are investors whose exports are more than eighty percent of total annual production.
Incentives and allowances outside Free Economic Zones
1. Approved investor investing outside Free Economic Zones, may be granted the:
exemption from payment of import duty, excise duty Value Added Tax and other similar taxes on machinery, equipment, spare parts, vehicles and other input necessary and exclusively required by that enterprise during construction period indicated in the Investment Certificate;
exemption from payment of business license fee for the first three months of trial operation;
corporate tax exemption for up to five years;
hundred percent foreign ownership;
hundred percent retention of all profits after tax;
hundred percent allowance Research and Development; and
hundred percent allowance for free repatriation of profit after tax.
2. Without prejudice to the provisions of paragraph 1 of this Part, approved investor investing in manufacturing sector may further be granted the:
exemption from payment of any tax on all goods produced for exports;
exemption from payment of trade levy for raw materials and industrial inputs procured from Tanzania mainland;
exemption from payment of import duty, VAT, and other similar taxes on raw and packaging materials during project operations;
exemption of Income Tax on interest on registered borrowed capital; and
hundred percent allowance investment deduction on capital expenditure within five years.
3. Without prejudice to the provisions of paragraph 1 of this Part, Approved Investor investing in real estate business may also be granted the:
exemption of income tax on interest on borrowed capital;
stamp duty exemption;
hundred percent allowance investment deduction on capital expenditure within five years; and
capital gains tax on properties sold or purchased.
Tanzania’s export processing zones (EPZs) and special economic zones (SEZs) are assigned geographical areas or industries designated to undertake specific economic activities with special regulations and infrastructure requirements. EPZ status can also be extended to stand-alone factories at any geographical location. EPZ status requires the export of 80 percent or more of the goods produced. SEZ status has no export requirement, allowing manufacturers to sell their goods locally. There are currently 14 designated EPZ/SEZ industrial parks, 10 of which are in development, and 75 stand-alone EPZ factories.
The Non-Citizens (Employment Regulation) Act of 2015 (see Section 12 Labor Policies and Practices below) requires employers to attempt to fill positions with Tanzanian citizens before seeking work permits for foreign employees, and to develop plans to transition all positions held by foreign employees to local employees over time. The Act was amended in June 2021 to extend the time limit for work permits of non-citizen employees from the initial five years to eight years; applications are now submitted through the Online Work Permit Application and Issuance System (OWAIS). The amendment also allows an investor who has been granted incentives and registered with the TIC and Export Processing Zone Authority (EPZA) to employ up to ten non-citizens. Prior to the amendment, an investor could employ up to five non-citizens during the initial period of investment.
Because the local content (LC) initiative cuts across all economic sectors, the government decided that oversight of LC development should take a multi-sector approach, rather than being confined to a single ministry or sector. In 2015, the government directed the National Economic Empowerment Council (NEEC) to oversee implementation of local empowerment initiatives. The objective of the local content policy is to put local products and services – delivered by businesses owned and operated by Tanzanians – in an advantageous position to exploit opportunities emanating from inbound foreign direct investments. In 2015, the GoT enacted The Petroleum Act and, subsequently, issued The Petroleum (Local Content) Regulations 2017. Similarly, in 2017, the GoT amended mining laws, issuing The Mining (Local Content) Regulations 2018. (See Chapter 4: Laws and Regulations on Foreign Direct Investment for more on recent local content laws.)
Bank of Tanzania (BoT) regulations require banks to physically house their primary data centers in Tanzania or face steep penalties.
The GoT launched a USD 94 million National Internet Data Center (NIDC) in 2016, which is operated by the GoT’s Tanzania Telecommunications Company Limited (TTCL). Under the Tanzania Telecommunications Corporation (TTC) Act 2017, the TTC plans, builds, operates and maintains the “strategic telecommunications infrastructure,” which is defined as transport core infrastructure, data center and other infrastructure that the GoT proclaims “strategic” via official public notice.
5. Protection of Property Rights
All land is owned by the government and procedures for obtaining a lease or certificate of occupancy may be complex and lengthy. Less than 15 percent of land has been surveyed, and registration of title deeds is handled manually, mainly at the local level. Foreign investors may occupy land for investment purposes through a government-granted right of occupancy (“derivative rights” facilitated by TIC), or through sub-leases from a granted right of occupancy. Foreign investors may also partner with Tanzanian leaseholders to gain land access.
Land may be leased for up to 99 years, but the law does not allow individual Tanzanians to sell land to foreigners. There are opportunities for foreigners to lease land, including through TIC, which has designated specific plots of land (a land bank) to be made available to foreign investors. Foreign investors may also enter into joint ventures with Tanzanians, in which case the Tanzanian provides the use of the land (but retains ownership, i.e., the leasehold).
Secured interests in property are recognized and enforced. Though TIC maintains a land bank, restrictions on foreign ownership may significantly delay investments. Land not in the land bank must go through a lengthy approval process by local-level authorities, the Ministry of Lands, Housing, Human Settlements Development (MoLHHSD), and the President’s Office to be designated as “general land,” which may be titled for investment and sale.
The MoLHHSD handles registration of mortgages and rights of occupancies and the Office of the Registrar of Titles issues titles and registers mortgage deeds. Title deeds are recognized as collateral for securing loans from banks. In January 2018, the GoT amended the land law, requiring that loan proceeds secured by mortgaging underdeveloped land be used solely to develop the specific piece of land used as collateral. The changes apply to general land managed by the MoLHHSD’s Commissioner for Lands, who must receive a report from the lender showing how loan proceeds will be used to develop the land. The law does not apply to village land allocated by village councils, which cannot be mortgaged to a financial institution.
The GoT’s Copyright Society of Tanzania (COSOTA) is responsible for registration and enforcement of copyrighted materials, while the Business Registrations and Licensing Agency (BRELA) within the Ministry of Trade administers trademark and patent registration. It is the responsibility of the rights holders to enforce their rights where relevant, retaining their own counsel and advisors. The Fair Competition Commission (FCC) promotes competition, protects consumers against unfair market conduct, and has quasi-judicial powers to determine trademark and patent infringement cases. The FCC is also tasked with combating the sale of counterfeit merchandise. However, the Tanzania Medicines and Medical Devices Authority (TMDA) handles counterfeit human medicines, cosmetics, and packaged food materials, and its mandate is stipulated in the Tanzania Food, Drugs, and Cosmetics Act (TFDCA) as per the amendment of 2019. Despite its efforts, limited resources make it difficult for the GoT to adequately combat counterfeiting.
Tanzania is not included in the United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.
Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly owned company. In 2013, the DSE launched a second-tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential. As March 2022, the total market capitalization was $7.076 billion, a 5.6 percent increase from March 2021 ($6.7 billion). The Capital Markets and Securities Authority (CMSA) Act facilitates the flow of capital and financial resources to support the capital market and securities industry. Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.
Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities. Only companies or citizens from EAC nations are permitted to participate in the government securities market. Even with this recent development allowing EAC participation, foreign ownership of government securities is still limited to 40 percent of each security issued.
Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE. Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval.
As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018. Currently, no mining companies are listed on the DSE.
Tanzania’s financial inclusion rate increased significantly over the past decade thanks to mobile phones and mobile banking. However, participation in the formal banking sector remains low. Low private sector credit growth and high non-performing loan (NPL) rates are persistent problems. The NPL ratios further deteriorated with the COVID 19 pandemic.
According to the IMF’s most recent Financial System Stability Assessment (view assessment), Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. The report found that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis.
The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market. The only U.S. bank operating in Tanzania is Citibank Tanzania Limited. Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks, however a special exemption is required from the Bank of Tanzania to open an account as a “foreign entity.” A foreign entity account is an account owned by a company without a registered, legal business presence in Tanzania.
The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report. Currently, there are two private credit bureaus operating in Tanzania: Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.
Tanzania does not have a sovereign wealth fund.
7. State-Owned Enterprises
Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, rail, telecommunications, insurance, aviation, and port sectors. SOEs generally report to ministries and are led by a board. Typically, a presidential appointee chairs the board, which usually includes private sector representatives. SOEs are not subjected to hard budget constraints. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees.
Specific details on SOE financials and employment figures are not publicly available.
The government retains a strong presence in energy, mining, telecommunication services, and transportation. The government is increasingly empowering the state-owned Tanzania Telecommunications Corporation Limited (TTCL) with the objective of safeguarding the national security, promoting socio-economic development, and managing strategic communications infrastructure. The government also acquired 51 percent of Airtel Telecommunication Company Limited and became the majority shareholder. In the past, the GoT has sought foreign investors to manage formerly state-run companies in public-private partnerships, but successful privatizations have been rare. Though there have been attempts to privatize certain companies, the process is not always clear and transparent. The GoT currently has 20 companies/assets awaiting privatization.
10. Political and Security Environment
Since gaining independence, Tanzania has enjoyed a relatively high degree of peace and stability compared to its neighbors in the region. Tanzania has held six national multi-party elections since 1995, the most recent in October 2020 which saw the ruling party’s candidates win by vast majorities. There were serious doubts about the credibility of the October 2020 elections on the mainland and Zanzibar, as there were for byelections in 2018 and 2019. Zanzibar, particularly experienced political violence several times since 1995, including in 2020.
Following the untimely death of President Magufuli (elected in October 2020) in March 2021, a peaceful transfer of power to Vice President Samia Suhulu Hassan took place in accordance with constitutionally mandated procedures. President Hassan continues to follow the CCM ruling party’s manifesto and has begun to lay out her own priorities, which include a reset on international relations and an effort to revive the private sector and attract foreign investment.
Tanzania is generally free from violent conflict, however, there are ongoing concerns about insecurity spilling over from neighboring countries, particularly religious extremism from the Tanzania-Mozambique border. There are a significant number of refugees from crisis and conflicts in neighboring Democratic Republic of the Congo and Burundi, and the continuing violence in neighboring Mozambique has resulted in Mozambican citizens seeking refuge across the border in southern Tanzania.
11. Labor Policies and Practices
Despite Tanzania’s large youth population, there is a shortage of skilled labor and gaps remain in professional training to support industrialization. Only 3.6 percent of Tanzania’s 20-million-person labor force is highly skilled. On the regional front, Tanzania, Uganda, Rwanda and Kenya have committed to the EAC’s 2012 Mutual Recognition Agreement of engineers, making for a more regionally competitive engineering market.
In Tanzania, labor and immigration regulations permit foreign investors to recruit up to ten expatriates with the possibility of additional work permits granted under specific conditions. The Non-Citizens (Employment Regulation) Act 2015 introduced stricter rules for hiring foreign workers. Under the Act, the Labor Commissioner must determine if “all possible efforts have been explored to obtain a local expert” before approving a non-citizen work permit. In addition, employers must submit “succession plans” for foreign employees, detailing how knowledge and skills will be transferred to local employees. The Act was amended in 2021, increasing the period of work permit validity from five years to eight years, with applications to be renewed every 24 months. The non-citizens quota shall not preclude the investor from employing other non-citizens provided that such employment complies with the employment ratio of one non-citizen to ten local employees and that the investor has satisfied the Labor Commissioner that the nature of the business necessitates such number of non-citizens. Foreign investors may be granted ten-year work permits which may be extended if the investor is determined to be contributing to the economy and wellbeing of Tanzanians. In April 2021, the government introduced a simplified online system of applying and issuing work permit which reduces the waiting period from 33 days to less than a week.
Mainland Tanzania’s minimum wage, which has not changed since July 2013, is set by categories covering 12 employment sectors. The minimum wage ranges from TZS 100,000 ($43.20) per month for agricultural laborers to TZS 400,000 ($172.79) per month for laborers employed in the mining sector. Zanzibar’s minimum wage is TZS 300,000 ($129.59).
Mainland Tanzania and Zanzibar governments maintain separate labor laws. Workers on the mainland have the right to join trade unions. Any company with a recognized trade union possessing bargaining rights can negotiate in a Collective Bargaining Agreement. In the public sector, the government sets wages administratively, including for employees of state-owned enterprises.
Mainland workers have the legal right to strike, and employers have the right to a lockout. The law restricts the right to strike when doing so may endanger the health of the population. Workers in certain sectors are restricted from striking or subject to limitations. In 2017, the GoT issued regulations that strengthened child labor laws, created minimum one-year terms for certain contracts, expanded the scope of what is considered discrimination, and changed contract requirements for outsourcing agreements.
The labor law in Zanzibar applies to both public and private sector workers. Zanzibar government workers have the right to strike as long as they follow procedures outlined in the Employment Act of 2005, but they are not allowed to join Mainland-based labor unions. Zanzibar requires a union with 50 or more members to be registered and sets literacy standards for trade union officers. An estimated 40 percent of Zanzibar’s workforce is unionized.
The Integrated Labor Force Survey of 2020/21 indicates that employment in the informal sector has increased from 22 percent in 2014 to 29.4 percent in 2020/21, with the most significant increase in rural areas. The informal sector operates outside of the legal system with no formal contracts, leaving workers vulnerable to precarious working conditions, limited social protection, and low earnings.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
* Source for Host Country Data: host country data not publicly available.
Table 3: Sources and Destination of FDI
There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).
According to the Bank of Tanzania, the top sources for inward foreign investment into Tanzania are South Africa, Canada, Nigeria, Netherlands, United Kingdom, Mauritius, Kenya, United States, Vietnam, and France.
Data on outward direct investment is not available.
Table 4: Sources of Portfolio Investment
There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).
1. Openness To and Restrictions Upon Foreign Investment
In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below. Foreign Direct Investment (FDI) continues to play an important role in Zambia’s economy. The Zambia Development Agency (ZDA) is charged with attracting more FDI to Zambia, in addition to promoting trade and investment and coordinating the country’s private sector-led economic development strategy.
Zambia has undertaken certain institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses the cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses issues relating to transparency and good governance. However, frequent government policy changes have created uncertainty for foreign investors.
The ZDA does not discriminate against foreign investors, and all sectors are open to both local and foreign investors. Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activities, and no business ventures are reserved solely for the government. Although private entities may freely establish and dispose of interests in business enterprises, investment board approval is required to transfer an investment license for a given enterprise to a new owner.
Currently, all land in Zambia is considered state land and ownership is vested in the president. Land titles held are for renewable 99-year leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities. The government began reviewing the current land policy in earnest in March 2017; though shorter terms continue to be suggested, no changes have been adopted to date.
Foreign investors in the telecom sector are required to disclose certain proprietary information to the ZDA as part of the regulatory approval process. Further information regarding information and communication regulation can be found at the website of the Zambia Information and Communication Technology Authority at http://www.zicta.zm
The ZDA board screens all investment proposals and usually makes its decision within 30 days. The reviews appear to be routine and non-discriminatory, and applicants have the right to appeal investment board decisions. Investment applications are screened, with effective due diligence to determine the extent to which the proposed investment will help to create employment; the development of human resources; the degree to which the project is export-oriented; the likely impact on the environment; the amount of technology transfer; and any other considerations the Board considers appropriate.
The following are the requirements for registering a foreign company in Zambia:
At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company. At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
There must be at least one documentary agent (a firm, corporate body registered in Zambia, or an individual who is a resident in Zambia).
A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
The Registration Fee of K5,448.50 (~ USD 320.00) must be paid.
The issuance and sealing of the Certificate of Registration marks the end of the process for registration.
Zambia has not undergone any third-party investment policy reviews since 2012 through a multilateral organization such as the OECD, WTO, UNCTAD. However, domestic investment policies and legislation have been revised periodically, whenever impediments to investment laws are identified.
The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support more transparent policymaking and to encourage competition. The impact of these progressive policies, however, has been undermined by persistent fiscal deficits, struggling economy, high cost of doing business and widespread corruption. Business surveys, including TRACE International, generally indicate that corruption in Zambia is a major obstacle for conducting business in the country.
The Zambian Business Regulatory Review Agency (BRRA) manages Regulatory Services Centers (RSCs) that serve as a one-stop shop for investors. RSCs provide an efficient regulatory clearance system by streamlining business registration processes; providing a single licensing system; reducing the procedures and time it takes to complete the registration process; and increasing accessibility of business registration institutions by placing them under one roof.
The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:
The Companies Act No. 10 of 2017 was operationalized through a statutory instrument (June 2018) and implementing regulations (February 2019) aimed at fostering accountability and transparency in the management of companies. Companies are required to maintain a register of beneficial owners, and persons holding shares on behalf of other persons or entities must now disclose those beneficial owners.
In order to facilitate improved access to credit, the Patents and Company Registration Office (PACRA) established the collateral registry system, a central database that records all registrations of charges or collaterals created by borrowers to secure credits provided by lenders. This service allows lenders to search for collateral offered by loan applicants to see if that collateral already an existing claim has registered against it. Creditors can also register security interests against the proposed collateral to protect their priority status in accordance with the Movable Property (Security Interest) Act No. 3 of 2016. Generally, the first registered security interest in the collateral has first priority over any subsequent registrations.
Parliament passed the Border Management and Trade Facilitation Act in December 2018. The Act, among other things, calls for coordinated border management and control to facilitate the efficient movement and clearance of goods; puts into effect provisions for one-stop border posts; and simplifies clearance of goods with neighboring countries. While one-stop border posts have existed for several years and agencies are co-located at some border crossings, the new law seeks to harmonize conflicting regulations and processes within the interagency.
There are no incentives for outward investment.
3. Legal Regime
Proposed laws and other statutory instruments are often insufficiently vetted with interest groups or are not released in draft form for public comment. Proposed bills are published on the National Assembly of Zambia website (http://www.parliament.gov.zm/) for public viewing and to facilitate public submissions to parliamentary committees reviewing the legislation; however, these are frequently issued with little advanced notice. Hard copies of the documents are delivered by courier to the stakeholders’ premises/mailboxes.
Opportunities for comment on proposed laws and regulations sometimes exist through trade associations and policy thinktanks such as the Zambia Institute for Policy Analysis and Research, Centre for Trade Policy and Development, Zambia Chamber of Commerce and Industry, Zambia Association of Manufacturers, Zambia Chamber of Mines, and the American Chamber of Commerce in Zambia. The government established the Business Regulatory Review Agency (BRRA) in 2014 with the mandate to administer the Business Regulatory Act. The Act requires public entities to submit for Cabinet approval a policy or proposed law that regulates business activity, after the policy or proposed law has BRRA approval. A public entity that intends to introduce any policy or law for regulating business activities should give notice, in writing, to the BRRA at least two months prior to submitting it to Cabinet; hold public consultations for at least 30 days with relevant stakeholders; and perform a Regulatory Impact Assessment (RIA). The BRRA works in collaboration with the Ministry of Justice, which does not approve any proposed law to regulate business activity without the approval of BRRA. While this framework exists on paper, the BRRA and the consultative process is still relatively new and unknown even by other government officials, and in some cases, it appears that the BRRA was informed after the Ministry of Justice had already approved a law.
While there are clear public procurement guidelines, transparency remains a concern for potential investors and bidders. To enhance the transparency, integrity, and efficiency of Zambia’s procurement system, the GRZ launched the Electronic Government Procurement (e-GP) in July 2016. President Hichilema has made public procurement reform a key priority for his administration, introducing a new financial crimes fast track court and strengthening the mandate of key investigative institutions.
Zambia is a member of several regional and international economic groupings, including the COMESA and SADC Free Trade Areas. Zambia was also an active participant in the establishment of the Tripartite Free Trade Area between COMESA, SADC, and the East African Community (EAC). The top five intra-COMESA exports from Zambia include tobacco, sugar, wire, refined copper, and cement. Trade among SADC member states is conducted on reciprocal preferential terms. Rules of Origin define the conditions for products to qualify for preferential trade in the SADC region. Products have to be “wholly produced” or “sufficiently processed” often warranting change in tariff heading in the SADC region to be considered compliant with the SADC Rules of Origin, which are product-specific and not generic.
COMESA, EAC, and SADC member states agreed in October 2008 to negotiate a Tripartite Free Trade Area (TFTA) covering half of Africa. The TFTA was launched in June 2015 in Egypt; to date, Zambia is one of the 22 out of the 26 member states which have signed the agreement. The Agreement will enter into force once it has been ratified by 14 Member States-with 10 Members (Botswana, Burundi, Egypt, Eswatini, Kenya, Namibia, Rwanda, Uganda, South Africa and Zambia) ratified.
According to OECD trade facilitation indicators, Zambia performs better than the average sub-Saharan African and lower middle-income countries in the areas of information availability, involvement of the trade community, appeal procedures, and automation. Zambia’s performance for internal border agency co-operation and governance and impartiality is below average for sub-Saharan African and lower middle-income countries.
In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA) and in February 2021 it deposited the instruments of ratification with the African Union, making Zambia the 36th member to fully accede to the agreement. The trade agreement among 54 African Union member states creates in theory a continent-wide single market, with plans for free movement of people and a single-currency union.
At the multilateral level, Zambia has been a WTO member since 1995. Zambia’s investment incentives program is transparent and has been included in the WTO’s trade policy reviews. The incentive packages are also subject to reviews by the Board of the ZDA and to periodic reviews by the Parliamentary Accounts Committee. Zambia is a signatory to the WTO Trade Facilitation Agreement (TFA), but still faces major challenges in expediting the movement, release, and clearance of goods, including goods in transit, which is a major requisite of the TFA. The new administration has committed to implement a robust infrastructure development for roads and bridges which form a backbone of Zambia’s transport network and regional connectivity. Zambia has benefited from duty-free and quota-free market access to the EU through its Everything but Arms FTA, and to the United States via the Generalized System of Preferences (GSP) and AGOA agreements.
Zambia has a dual legal system that consists of statutory and customary law enforced through a formal court system. Statutory law is derived from the English legal system with some English Acts of Parliament still deemed to be in full force and effect within Zambia. Traditional and customary laws, which remain in a state of flux, are generally not written or codified, although some of them have been unified under Acts of Parliament. No clear definition of customary law has been developed by the courts, and there has not been systematic development of this subject.
Zambia has a written commercial law. The Commercial Court, a division of the High Court, deals with disputes arising out of commercial transactions. All commercial matters are registered in the commercial registry and judges of the Commercial Court are experienced in commercial law. Appeals from the Commercial Court, based on the amended January 2016 constitution, now fall under the recently established Court of Appeals, comprised of eight judges. The Foreign Judgments (Reciprocal Enforcement) Act, Chapter 76, makes provision for the enforcement in Zambia of judgments given in foreign countries that accord reciprocal treatment. The registration of a foreign judgment is not automatic. Although Zambia is a state party to international human rights and regional instruments, its dualist system of jurisprudence considers international treaty law as a separate system of law from domestic law. Domestication of international instruments by Acts of Parliament is necessary for these to be applicable in the country. Systematic efforts to domesticate international instruments have been slow but continue to see progress.
The courts support Alternative Dispute Resolution (ADR) and there has been an increase in the use of arbitration, mediation, and tribunals by litigants in Zambia. Arbitration is common in commercial matters and the proceedings are governed by the Arbitration Act No. 19 of 2000. The Act incorporates United Nations Commission on International Trade Law (UNCITRAL) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Zambian courts have no jurisdiction if parties have agreed to an arbitration clause in their contract. The establishment of the fee-based judicial commercial division in 2014 to adjudicate high-value claims has helped accelerate resolution of such cases.
The courts in Zambia are generally independent, but contractual and property rights enforcement is weak and final court decisions can take a prohibitively long time. At times, politicians have exerted pressure on the judiciary in politically controversial cases. Regulations or enforcement actions are appealable, and adjudication depends on the matter at hand and the principal law or act governing the regulations.
The major laws affecting foreign investment in Zambia include:
The Zambia Development Agency Act of 2006, which offers a wide range of incentives in the form of allowances, exemptions, and concessions to companies.
The Companies Act of 1994, which governs the registration of companies in Zambia.
The Zambia Revenue Authority’s Customs and Excise Act, Income Tax Act of 1966, and the Value Added Tax of 1995 provide for general incentives to investors in various sectors.
The Employment Code Act of 2019, Zambia’s basic employment law that provides for required minimum employment contractual terms.
The Immigration and Deportation Act, Chapter 123, regulates the entry into and residency in Zambia of visitors, expatriates, and immigrants.
The Zambian economy operates under free market norms with a fairly developed competition and regulatory framework. There is freedom of pricing, currency convertibility for a small currency basket, freedom of trade, and free use of profits. A fairly strong institutional framework is provided for strategic sectors, such as mining and mining supply industries, and large-scale commercial farming. The Competition and Consumer Protection Commission (CCPC) is a statutory body established with a unique dual mandate to promote competition in the economy, curtail restrictive business practices and protect consumer rights. The CCPC’s mandate implemented through the CCPC ACT cuts across all economic sectors in an effort to eliminate abuse of dominant position of market power, anti-competitive mergers and acquisitions, and cartels, and to enhance consumer protection and safeguard competition.
In 2016 the CCPC published a series of guidelines and policies that included adoption of a formal Leniency Policy intended to encourage persons to report information that may help to uncover prohibited agreements. In certain circumstances the person receives immunity from prosecution, imposition of fines, or the guarantee of a reduction in fines. The policy also calculates administrative penalties. In addition, the CCPC in 2016 published draft Settlement Guidelines, which provide a formal framework for parties seeking to engage the CCPC to reach a settlement.
The CCPC Act, Chapter 417, prevents firms from distorting the competitive process through conduct or agreements designed to exclude actual or potential competitors, and applies to all entities, regardless of whether private, public, or foreign. Although the CCPC largely opens investigations when a complaint is filed, it can also open investigations on its own initiative. Zambian competition law can also be enforced by civil lawsuits in court brought by private parties, while criminal prosecution by the CCPC is possible in cartel cases without the involvement of the Director of Public Prosecution under the Competition and Consumer Protection Act (CCPA) No. 24 of 2010. However, the general perception is that the Commission may be restricted in applying the competition law against government agencies and State-Owned Enterprises (SOEs), especially those protected by other laws.
Zambia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank and other international agreements. This guarantees foreign investment protection in cases of war, strife, disasters, and other disturbances, or in cases of expropriation. Zambia has signed bilateral reciprocal promotional and protection of investment protocols with a number of countries. The ZDA also offers further security for investments in the country through the signing of the Investment Promotion and Protection Agreements (IPPAs).
Investments may only be legally expropriated by an act of Parliament relating to the specific property expropriated. Although the ZDA Act states that compensation must be at a fair market value, the method for determining fair market value is ill-defined. Compensation is convertible at the current exchange rate. The ZDA Act also protects investors from being adversely affected by any subsequent changes to the Investment Act of 1993 for seven years from their initial investment.
Leasehold land, which is granted under 99-year leases, may revert to the government if it is determined to be undeveloped after a certain amount of time, generally five years. Land title is sometimes questioned in court, and land is re-titled to other owners.
There is no pattern of discrimination against U.S. persons by way of an illegal expropriation by the government or authority in the country. There are no high-risk sectors prone to expropriation.
The Bankruptcy Act, Chapter 82, provides for the administration of bankruptcy of the estates of debtors and makes provision for punishment of offenses committed by debtors. It also provides for reciprocity in bankruptcy proceedings between Zambia and other countries and for matters incidental to and consequential upon the foregoing. This applies to individuals, local, and foreign investors. Bankruptcy judgments are made in local currency but can be paid out in any internationally convertible currency. Under the Bankruptcy Act, a person can be charged as a criminal. A person guilty of an offense declared to be a felony or misdemeanor under the Bankruptcy Act in respect of which no special penalty is imposed by the Act shall be liable on conviction to imprisonment for a term not exceeding two years.
Zambia has made strides in improving its credit information system. Since 2008, the credit bureau, TransUnion, requires banks and some non-banks to provide loan requirement information and consult it when making loans. The credit bureau eventually captures data from other institutions, such as utilities. However, the bureau’s coverage is still less than ten percent of the population, the quality of its information is suspect, and there it lacks clarity on data sources and the inclusion of positive information.
4. Industrial Policies
Under the Income Tax Act, Chapter 323, or the Customs and Excise Act, Chapter 322, investors (local and foreign) who invest not less than USD 50,000 in a Multi-Facility Economic Zones (MFEZ), an industrial park, a priority sector (among them manufacturing, agro processing, energy and tourism), or who invest in a Rural Enterprise under the ZDA Act, are entitled to the following fiscal incentives:
Zero corporate tax for five years from commencement of operations.
Taxation on only 50 percent of profits in year six through year eight from commencement of operations and only 75 percent for years nine and ten.
Five-year exemption on dividend taxes following the first year of declaration.
Five-year customs duties exemption on imported machinery and equipment.
Improvement allowance of 100 percent of capital expenditure on improvements or upgrading of infrastructure.
An investor may apply to establish and operate a bonded factory under Section 65 of the Customs and Excise Act. The GRZ created MFEZs in 2007, providing investors with waivers on customs duty on imported equipment, excise duty, and value added tax, among other concessions. It is currently unclear if the government will maintain these incentives (see Investment Incentives section).
There are four MFEZs currently operating: the Chambishi MFEZ in Copperbelt Province, the Lusaka South MFEZ which houses a mix of multi-national firms, and the Lusaka East MFEZ located near Lusaka’s Kenneth Kaunda International Airport and Chibombo MFEZ in Central Province which are heavily (if not exclusively) dominated by Chinese-owned enterprises. Foreign-owned firms enjoy the same investment opportunities as domestic firms in MFEZs. The ZDA Act is the primary legislation for investment in Zambia. An investor, foreign or local, is free to identify and suggest any other location in the country deemed economical for MFEZ development, although the government has prioritized designated areas in Lusaka, Chibombo, Ndola, Mpulungu, Chembe, Nakonde, Kasumbalesa, and Mwinilunga. Investors are encouraged to provide local employment and skills transfer to local entrepreneurs and communities. Investors are also encouraged to utilize local raw materials and intermediate goods and engage in technology transfer to qualify to operate in an MFEZ.
Zambia is active in several key regional organizations that promote regional trade and regulatory harmonization. COMESA launched its FTA in October 2000 and established a customs union in June 2009.
Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled. Foreign contractors bidding on infrastructure projects are required by law to give 20 percent of works to Zambian small contractors. Outside of infrastructure projects, no requirements currently exist for local content, equity, financing, employment, or technology transfers. However, in January 2018 the government issued a Statutory Instrument (SI) instructing all industries to transport 30 percent of their cargo by rail. The Data Protection Bill, which was signed into law in March 2021, mandates data localization for sensitive personal data, but also outlines conditions for the cross-border transfer of other kinds of personal data. The government does not impose offset or local content requirements or preconditions for permission to invest in a specific geographic area, but investors are encouraged to employ local nationals. There is no legal definition of local content, and the most comprehensive local content legislation is contained in the Mines and Minerals Development Act of 2008. The Citizens Economic Empowerment Act of 2006 and Statutory Instrument of 2008 also contain local content provisions.
The GRZ encourages employment of local workers for unskilled labor as well as for skilled middle or senior management workers. Under the ZDA Act, any foreign investor who invests a minimum of $250,000 or its equivalent and employs a minimum of 200 employees at certain technical or managerial levels is entitled to a self-employment permit or resident permit.
The GRZ encourages investors where possible to use domestic content in goods or technology if available. Government through the Ministry of Commerce has developed the Local Content Strategy (launched 2018) to promote inclusive and sustainable growth through increased use of locally available goods and services in development sectors. The Strategy will be implemented through a law currently under formulation in a Bill and will compels businesses to use a predetermined local content percentage of local inputs and products in the production and provision of goods and services.
Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance. The telecommunications sector is governed by the Information and Communications Technology Act No. 15 of 2009 (ICT Act) and falls under the Ministry of Technology & Science and regulated by the Zambia Information and Communications Technology Authority (ZICTA).
Government is committed to ensuring compliance and consistency with multilateral obligations through Trade Related Investment Measures (TRIMs) requirements. Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.
5. Protection of Property Rights
Property rights and the regulation of property are well defined in principle, but face problems in implementation. Contractual and property rights are weak. Courts are often inexperienced in commercial litigation and are frequently slow in reaching their decisions. The ZDA Act ensures investors’ property rights are respected. Secured interests in property, both movable and real, are recognized and enforced. Property can be owned individually, jointly in undivided shares, or by an entity such as a company, close corporation or trust, or similar entity registered outside Zambia. The ZDA Act provides for legal protection and facilitates acquisition and disposition of all property rights such as land, buildings, and mortgages. The Lands and Deeds Registry Act of Zambia states that a mortgage is only to operate as security and not a transfer or lease of the estate or interest mortgaged. There are two types of mortgages in Zambia, a legal and an equitable mortgage. A legal mortgage is created in respect to a legal estate by deed. An equitable mortgage does not convey legal title to the mortgage, and no power of sale vests in the mortgagee.
The president holds all land on behalf of the people of Zambia, which he may give to any Zambian, but the process is set in law. The Lands Act, Chapter 184, places a number of restrictions on the president’s allocation of land to foreigners. The ZDA Act makes provision for leasehold tenure of land by investors. The ZDA, in consultation with the Ministry of Lands, assists an investor in identifying suitable land for investment, as well as assisting the investor to apply through the Ministry of Lands. While land is technically owned by the president, it is worth noting that traditional chiefs have jurisdiction over traditional, or customary, land, which makes up roughly 70 percent of Zambia.
The Commissioner of Lands verifies that properties can be transferred after checking if ground rent has been paid and by conducting due diligence on the purchaser. Land held under customary tenure has no title, but where a sketch plan of the area exists, the chief can give written consent to an investor and a 14-year lease can be obtained for traditional land.
Despite Zambia’s abundant land for agriculture and other purposes, the process of land acquisition and registration is a major obstacle for investors in part due to extensive traditional ownership. Its acquisition involves negotiations with traditional leaders, who have to balance the demands of their subjects against the pressure to convert land for commercial purposes. Most available land has not been surveyed or mapped and, where this has been done, records are often outdated or difficult to retrieve from the Ministry of Lands.
The Ministry of Lands is centralized in Lusaka and faces problems with poor record keeping and slow processing of title deeds. To address these challenges the government, with the support of donor partners, has been working to reform land policy, including modernization of the Lands Department at Ministry of Lands, establishment of Land Banks, establishment of a Land Development Fund, demarcation of MFEZs and industrial parks, and development of farming blocks.
Intellectual property laws in Zambia cover domain names, traditional knowledge, transfer of technology, trademarks, patents, and copyrights, etc. Zambia is party to several international intellectual property agreements. The legal framework for trademark protection in Zambia is adequate; however, enforcement of intellectual property rights (IPR) is weak, and courts have little experience with commercial litigation. Copyright protection is limited and does not cover computer applications. Of the many pirated and counterfeit goods in Zambia, the main ones are DVDs, CDs, audio-visual software, infant milk, pharmaceuticals, body lotions, motor vehicle spare parts (such as tires and brake pads), beverages, cigarettes, toothpaste, electrical appliances, fertilizer, pesticides, and corn seed. Small-scale trademark infringement occurs in connection with some packaged goods utilizing copied or deceptive packaging. The Industrial Designs Act encourages the creation of designs and development of creative industries through enhanced protection and utilization of designs, and it provides for the registration and protection of designs and the rights of proprietors of registered designs. The Protection of Traditional Knowledge, Genetic Resources, and Expressions of Folklore Act provides a transparent legal framework for the protection of, access to, and use of, traditional knowledge, genetic resources, and expressions of folklore and guarantees equitable sharing of benefits and effective participation of holders.
The Zambia Police Service Intellectual Property Unit (IPU) carries out raids in shops and markets to confiscate counterfeit and pirated materials. The IPU tracks and reports on seizures of counterfeit goods but no consolidated record is available. There are fines for revealing proprietary business information, but they are not large enough to adequately penalize possible disclosures. 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 patent searches are not performed, 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 Convention and Bern Convention, as well as the Universal Copyright Convention of UNESCO. Zambia is also a member of the African Regional Industrial Property Organization (ARIPO). The country is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which is an international legal agreement between all the member nations of the World Trade Organization.
The Ministry of Commerce, Trade, and Industry and the Patents and Companies Registration Agency (PACRA) are the leading institutions responsible for the implementation of IPR laws in Zambia. The industrial property registration system at PACRA underwent an upgrade that linked its electronic documentation management system to WIPO’s WIPOScan, which provides for digitization of IPR records.
Zambia is not included in USTR’s Special 301 Report nor its Notorious Markets List. For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.
6. Financial Sector
Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market. Banking supervision and regulation by the Bank of Zambia (BoZ) has improved slightly 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 of and incentives for bank supervisors. High domestic lending rates, a lack of dollar and foreign exchange liquidity, and the limited accessibility of domestic financing have constrained business for several years. High returns on government securities encourage commercial banks to invest heavily in government debt to the exclusion of financing productive private sector investments, particularly for SMEs.
The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations. There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds. Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas.
The financial sector is comprised of three sub-sectors according to financial sector supervisory authorities. The banking and financial institutions sub-sector is supervised by the BoZ, the securities sub-sector by the SEC, and the pensions and insurance sub-sector by the Pensions and Insurance Authority. The Banking and Financial Services Act, Chapter 387, and the Bank of Zambia Act, Chapter 360, govern the banking industry. Zambia’s banking sector is considered relatively well-developed in the African context, but the sector remains highly concentrated. There are currently 19 banks in Zambia with the largest four banks holding nearly two-thirds of total banking assets. The dominance of the four largest banks in deposits and total assets has been diluted by increased market capture of smaller banks and new industry entrants, an indication of growing competitive intensity in this segment of the banking market. Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market. There continued to be a steady increase in electronic banking and related services over the last few years.
The BoZ’s current policy rate as of March 2022 is 9.0 percent. Commercial lending rates averaged 25.65 percent in 2021, among the highest in the region, making the cost of capital for investment unattractive. One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) have continued to decline, closing the 2021 financial year at 5.82 percent compared to 11.63 percent in 2020. The government contributes to this problem, with arrears to government contractors estimated at $1.3 billion.
Banking officials acknowledge the need to upgrade the risk assessment and credit management skills of their institutions to better serve borrowers but note widespread financial illiteracy limits borrowers’ ability to access credit. Banks provide credit denominated in foreign currencies only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.
To operate a bank in Zambia, the bank must be licensed by the Registrar of Banks, Financial Institutions, and Financial Businesses (“the Registrar”) whose office is based at the BoZ. The decision to license banks lies with the Registrar. Foreign banks or branches are allowed to operate in country as long as they fulfill BoZ requirements and meet the minimum capital requirement of $100 million for foreign banks and $20 million for local banks. According to the BoZ, many banks in the country have correspondent banking relationships.
Generally, all regulatory agencies that issue operating licenses have statutory reporting requirements that businesses operating under their laws and regulations must meet. For example, the Banking and Financial Services Act has stringent reporting provisions that require all commercial banks to submit weekly returns indicating their liquidity position. Late submission of the weekly returns or failure to meet the minimum core liquidity and statutory reserves incur punitive penalty interest and may lead to the placement of non-compliant commercial banks under direct supervision of BoZ, closure of the undertaking, or the prosecution of directors.
All companies listed under the Lusaka Stock Exchange (LuSE) are obliged to publish interim and annual financial statements within three months after the close of the financial year. Listed companies are also required to disclose in national print media any information that can affect the value of the price of their securities. According to the Companies Act, Chapter 388, company directors need to generate annual account reports after the end of each financial year. The annual account, auditor’s report or reports on the accounts, and directors’ report should be sent to each person entitled to receive notice of the annual general meeting and to each registered debenture holder of the company. A foreign company is required to submit annual accounts and an auditor’s report to the Registrar.
The Non-Bank Financial Institutions (NBFIs) are licensed and regulated in accordance with the provisions of the Banking and Financial Services Act of 1994 (BFSA) and related Regulations and Prudential Guidelines. As key players in the financial sector, NBFIs are subject to regulatory requirements governing their prudential position, consumer protection, and market conduct in order to safeguard the overall soundness and stability of the financial system. The NBFIs comprise eight leasing and finance companies, three building societies, one credit reference bureau, one savings and credit institution, one development finance institution, 80 bureaux de change, one credit reference bureau, and 34 micro-finance institutions.
Private firms are open to foreign investment through mergers and acquisitions. The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission. Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.
Zambia does not have a sovereign wealth fund.
7. State-Owned Enterprises
There are currently 34 state-owned enterprises (SOEs) operating in different sectors in Zambia including agriculture, education, energy, financial services, infrastructure, manufacturing, medical, mining, real estate, technology, media and communication, tourism, and transportation and logistics. Most SOEs are wholly owned, or majority owned by the government under the Industrial Development Corporation (IDC) established in 2015. Zambia has two categories of SOEs: those incorporated under the Companies Act and those established by particular statutes, referred to as statutory corporations. There is a published list of SOEs in the Auditor General’s annual reports; SOE expenditure on research and development is not detailed. There is no exhaustive list or online location of SOEs’ data for assets, net income, or number of employees. Consequently, inaccurate information is scattered throughout different government agencies/ministries. The majority of SOEs have serious operational and management challenges.
In theory, SOEs do not enjoy preferential treatment by virtue of government ownership, however, they may obtain protection when they are not able to compete or face adverse market conditions. The Zambia Information Communications Authority Act has a provision restricting the private sector from undertaking postal services that would directly compete with the Zambia Postal Services Corporation. Zambia is not party to the Government Procurement Agreement (GPA) within the framework of the WTO, however private enterprises are allowed to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations such as licenses and supplies.
SOEs in Zambia are governed by Boards of Directors appointed by government in consultation with and including members from the private sector. The chief executive of the SOE reports to the board chairperson. In the event that the SOE declares dividends, these are paid to the Ministry of Finance. The board chair is informally obliged to consult with government officials before making decisions. The line minister appoints members of the Board of Directors from within public service, the private sector, and civil society. The independence of the board, however, is limited since most boards are comprised of a majority of government officials, while board members from the private sector or civil society that are appointed by the line minister can be removed.
SOEs can and do purchase goods or services from the private sector, including foreign firms. SOEs are not bound by the GPA and can procure their own goods, works, and services. SOEs are subject to the same tax policies as their private sector competitors and are generally not afforded material advantages such as preferential access to land and raw materials. SOEs are audited by the Auditor General’s Office, using international reporting standards. Audits are carried out annually, but delays in finalizing and publishing results are common. Controlling officers appear before a Parliamentary Committee for Public Accounts to answer audit queries. Audited reports are submitted to the president for tabling with the National Assembly, in accordance with Article 121 of the Constitution and the Public Audit Act, Chapter 378.
In 2015, the government transferred most SOEs from the Ministry of Finance to the revived Industrial Development Corporation (IDC). The move, according to the government, was to allow line ministries to focus on policy making thereby giving the IDC direct mandate and authorization to oversee SOE performance and accountability on behalf of the government. The IDC’s oversight responsibilities include all aspects of governance, commercial, financing, operational, and all matters incidental to the interests of the state as shareholder.
There were no sectors or companies targeted for privatization in 2021. The privatization of parastatals began in 1991, with the last one occurring in 2007. The divestiture of state enterprises mostly rests with the IDC, as the mandated SOE holding company. The Privatization Act includes the provision for the privatization and commercialization of SOEs; most of the privatization bidding process is advertised via printed media and the IDC’s website (www.idc.co.zm). There is no known policy that forbids foreign investors from participating in the country’s privatization programs.
10. Political and Security Environment
Zambia has benefited from almost 30 years of largely peaceful multi-party politics, with 3 peaceful transfers of executive power. Zambia does not have a history of large-scale political violence. National elections in 2021 were largely peaceful and former President Edgar Lungu conceded defeat to Hakainde Hichilema. The rise in street crime remains a significant concern as the Zambian economy struggles to create meaningful employment opportunities for young people.
11. Labor Policies and Practices
About a third of Zambia’s employed population works in the formal sector. While an abundance of unskilled labor exists in Zambia, investors complain that the supply of skilled and semi-skilled labor is inadequate, while labor-management relations vary by sector. Zambia’s population is estimated to be around 17.86 million, the majority being of employable age. Zambia’s 2020 Labor Force Survey reported that the working-age population (i.e., 15 years or older) was 9,905,071. Labor demand, however, does not match supply and Zambia has high rates of unemployment, youth unemployment, and underemployment while living costs have risen steadily. The government adheres closely to International Labor Organization (ILO) conventions and has ratified all eight ILO core conventions. The government has continuously sought to revise labor laws and improve compliance, but there are still gaps in law and practice. Strikes are not uncommon in the public sector and often are related to the government’s failure to pay salaries or allowances on time, but lawful strikes are very difficult to hold due to several restrictions and conditions.
Labor laws provide for extremely generous severance pay, leave, and other benefits to workers, which can impede investment. Such rules do not apply to personnel hired on a short-term basis. As such, the vast majority of Zambian employees are hired on an informal or short-term basis. In September 2018, the Minimum Wage and Conditions of Employment Act 276 of the laws of Zambia were revised following issuance of Statutory Instrument (SI) number 69 of 2018 covering domestic workers. This revision doubled the minimum wage of certain classes of low-wage workers. The Employment Code Act No. 3 of 2019, which went into effect in May 2020, furthers the employees’ protections and expands severance and gratuity payments, whether the employee is terminated or come to an end of contract, regardless of who employs them.
The Employment Act, Chapter 268 covers employment and labor related issues. While the law recognizes the right of workers to form and join independent unions, conduct legal strikes, and bargain collectively, there are statutory restrictions limiting these rights. Police officers, military personnel, and certain other categories of workers are excluded from exercising these rights. No trade union can be registered if it claims to represent a class of employees already represented by an existing trade union. At least 25 members are required, and registration may take up to six months. The government has discretionary power to exclude certain categories of workers, including prison staff, judges, registrars of the court, magistrates, and local court justices from labor law provisions. The law also gives the labor commissioner the power to suspend and appoint an interim executive board of a trade union, as well as to dissolve the board and call for a new election.
The government generally protects unions’ right to conduct their activities without interference. Trade unions are independent of government, but the Ministry of Labor and Social Security is ultimately responsible for employment exchange services and enforcing labor legislation. An employer is allowed to terminate a contract of service on grounds of redundancy; however, the Employment Act requires the employer fulfill certain conditions before terminating a contract of service on such grounds. One of these conditions is notifying the employee’s trade union. The Act makes a clear distinction between layoffs and severance. In the event an employee is summarily dismissed, he/she shall be paid upon dismissal the wages and allowances due up to the date of such dismissal. The government formally permits employment of expatriate labor only in sectors where there is scarcity of local personnel, but investors promoting large scale investments can negotiate the number of work permits that they can obtain from the Department of Immigration to employ expatriates.
The law does not limit the scope of collective bargaining, but it allows either party, in certain cases, to refer a labor dispute to court or arbitration. The law also allows for a maximum period of one year from the day on which the complaint is filed within which a court must consider the complaint and issue its ruling. The law provides for the right to strike if recourse to all legal options is first exhausted. The law prohibits workers engaged in a broadly defined range of essential services from striking. Under Zambian law, essential services are defined as any activity relating to the generation, supply, or distribution of electricity; the supply and distribution of water and sewage removal; fire departments; and the mining sector. Employees in the Zambian Defense Forces, judiciary, police, prison, and the Zambia Security Intelligence Service (ZSIS) personnel are also considered essential. The government has power to add other services to the list of essential services, in consultation with the tripartite consultative labor council.
The process of exhausting the legal alternatives to a strike is lengthy. The law also limits the maximum duration of a strike to 14 days, after which, if the dispute remains unsolved, it is referred to the court. A strike can be discontinued if the court finds it not to be “in the public interest.” Workers who engage in illegal strikes may be dismissed by employers. The Industrial and Labor Relations Act, Chapter 269, Part IX covers the settling of labor disputes. Aggrieved parties may report the matter to a labor officer, who would take steps deemed fit to affect a settlement between the parties and would encourage the use of collective bargaining facilities where applicable. In the event of a collective dispute between an employer and a trade union regarding the terms and conditions of employment, claims and demands must be put in writing and both parties must have held at least one meeting with a view to reaching a settlement. Such disputes are referred to a conciliator or board of conciliators to be appointed by both parties to the dispute. If the conciliator fails to resolve the problem, the conciliator will inform the Labor Commissioner, who will call on the Minister of Labor to appoint a conciliator who will again call the parties to consider dispute resolution. If all efforts to resolve the matter fail, it is then taken to the Industrial Relations Court for arbitration.
Other internationally recognized fundamental labor rights, including the elimination of forced labor, child labor employment, discrimination, minimum wage, occupational safety and health, and weekly work hours are all recognized under domestic law, but enforcement is often weak. The government has supported the development of programming to empower adolescent girls and reduce child labor in rural areas. However, children in Zambia continue to engage in the worst forms of child labor, including in the production of tobacco, and in commercial sexual exploitation, sometimes as a result of human trafficking. Gaps remain in the legal framework related to children; for example, the Education Act does not include the specific age to which education is compulsory, which may leave children under the legal working age vulnerable to the worst forms of child labor. In addition, law enforcement agencies lack the necessary human and financial resources to adequately enforce laws against child labor. There is no documented number of children in Zambia who are engaged in child labor, but studies point to a yearly increase in the number of these children, who work primarily in the agriculture and mining sectors. Cotton, tobacco, cattle, gems, and stones are included on the U.S. Government’s List of Goods Produced by Child Labor or Forced Labor in Zambia.
The Department of Labor and the Department of Occupational Safety and Health of the Ministry of Labor and Social Security monitor labor abuses, as well as health and safety standards in low-wage assembly operations such as construction. Two primary labor stakeholders, the Zambian Congress of Trade Unions (ZCTU) and the Zambian Federation of Employers (ZFE), assist with Ministry of Labor enforcement. The worker and employer organizations are consulted at tripartite gatherings on any proposed policy document or legislation, and they participate in labor inspections. The Ministry of Labor produces annual inspection reports, which are made available to social partners. In December 2015, Parliament passed, and the president signed a suite of amendments to the Employment Act that prohibit casual labor and increase protections for unskilled workers. Zambia has benefited from duty-free and quota-free market access from the GSP in the U.S. market under AGOA.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source*
USG or international statistical source
USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Host Country Gross Domestic Product (GDP) ($BM USD)