Zambia is a landlocked country in southern Africa that shares a border with eight countries: Angola, Democratic Republic of the Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana, and Namibia. It has an estimated population of 17.86 million, GDP of $19.3 billion and GDP per capita of USD $1,086.
Zambia has been in a financial and economic crisis since at least 2020, when the country became the world’s first COVID-era default after Zambia missed a payment on $3 billion of outstanding Eurobonds. The Zambian economy contracted in 2020 by 3.0 percent and grew by a meager 1.0 percent in 2021. The IMF forecasts 2022 real GDP growth of only 1.1 percent. Zambia’s debt overhang remains a severe inhibitor of economic growth, effectively eliminating the government’s access to international capital markets and forcing it to finance a persistent budget deficit through domestic borrowing, which crowds out private sector access to capital and limits growth.
Despite broad economic reforms and debt relief under the World Bank’s Highly Indebted Poor Countries (HIPC) initiative in the early 2000s, Zambia has generally struggled to meet its full economic potential. A decade of democratic and economic backsliding under former President Edgar Lungu and the Patriotic Front resulted in widespread use of corruption and economic rent-seeking that has further damaged Zambia’s reputation as an investment destination. Cumbersome administrative procedures and unpredictable legal and regulatory changes continue to inhibit Zambia’s immense potential for private sector investment, compounded by insufficient transparency in government contracting, ongoing lack of reliable electricity, and a high cost of doing business due to poor infrastructure, high cost of capital, and the lack of skilled labor.
President Hakainde Hichilema achieved a resounding victory at the polls in August 2021 on a platform of democratic and economic reform and renewal. By December 2021, Zambia achieved staff-level agreement with the IMF on a $1.4 billion Extended Credit Facility that is expected to anchor macroeconomic and fiscal reforms and restore investor confidence. With the appointment of respected economists and technocrats to lead the Ministry of Finance and the central bank, the Hichilema administration has made significant strides reducing inflation, which has dropped from nearly 25.0 percent in July 2021 to 13.1 by the end of March 2022. The Hichilema administration is currently seeking debt restructuring under the auspices of the G-20 Common Framework, which would provide the basis for IMF board approval of Zambia’s Extended Credit Facility. A successful businessman and investor in his own right, President Hichilema has pledged to tackle fiscal and regulatory reforms aimed at strengthening Zambia’s investment climate.
Zambia remains highly dependent on its mining and extractives industry. It is Africa’s second-largest producer of copper and is an important source of several other critical minerals, including nickel and cobalt. According to the Extractives Industries Transparency Initiative, mining products accounted for 77 percent of Zambia’s total export earnings and 28 percent of government revenues in 2019. Investment in the mining sector fell substantially during the Lungu era due to multiple changes to Zambia’s minerals tax regime and an unstable regulatory environment. The Hichilema administration in its maiden budget introduced a key reform to Zambia’s minerals tax policy that is expected to attract new investment in the sector. The agriculture, healthcare, energy, financial services, and ICT sectors all offer potentially attractive opportunities for expanded U.S. trade and investment.
The U.S. Embassy works closely with the American Chamber of Commerce of Zambia (AmCham) to support its American and Zambian members seeking to increase two-way trade. Agriculture and mining remain headlining sectors for the Zambian economy. U.S. firms are present and are exploring new projects in tourism, power generation, agriculture, and services.
1. Openness To and Restrictions Upon Foreign Investment
Policies Towards Foreign Direct 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.
Limits on Foreign Control and Right to Private Ownership and Establishment
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.
2. Bilateral Investment and Taxation Treaties
Zambia has signed Bilateral Investment Treaties (BITs) with fifteen countries (six in force- France, Germany, Italy, Mauritius, the Netherlands, and Switzerland and nine not yet in force). Zambia has signed bilateral reciprocal promotional and protection of investment protocols with most of the member states of both the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC), and the African Continental Free Trade Area (AfCFTA).
In 2000, Zambia became a beneficiary of the African Growth and Opportunity Act (AGOA) market access treaty with the United States and was again found eligible for continuous benefits under AGOA in 2021. In 2001, COMESA, of which Zambia is a member, signed a Trade and Investment Framework Agreement with the United States. Zambia initiated market access through the Eastern and Southern Africa (ESA) interim Economic Partnership Agreement (IEPA) with the European Union on September 30, 2008. In completing these negotiations, the provisions of the trade in goods chapter and related annexes of the ESA IEPA now apply to Zambia. Zambia has signed protective agreements with Chinese, Nigerian, Libyan, and Indian investors.
3. Legal Regime
Transparency of the Regulatory System
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.
International Regulatory Considerations
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.
Legal System and Judicial Independence
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.
Laws and Regulations on Foreign Direct Investment
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.
Competition and Anti-Trust Laws
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.
Expropriation and Compensation
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.
ICSID Convention and New York Convention
Zambia is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, and party to the Convention of the Settlement of Investment Disputes between States and Nationals of Other States of 1965. These are enforced through the Investment Disputes Convention Act Chapter 42.
Zambia is a member state of the International Center for the Settlement of Investment Disputes (ICSID) Convention and a signatory to the United Nations Commission of International Trade Law (UNCITRAL Model Law). In 2002 Zambia ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).
Investor-State Dispute Settlement
Over the past ten years, U.S. specific investment disputes involved delayed payments from SOEs to U.S. companies for goods and services and the delayed deregistration of a U.S.-owned aircraft that was leased to a Zambian airline company that went bankrupt. Currently, a U.S. company is in dispute over the refusal of payment by its local joint venture partner that resulted from goods delivered to the government of Zambia. The case, however, has not officially reached Zambian courts.
Relatively few investment disputes involving U.S. companies have occurred since Zambia’s economy was liberalized following the introduction of multi-party democracy in 1991. The Zambian Investment Code stipulates that claimant must first file internal dispute claims with the Zambian High Court. Failing that, the parties may go to international arbitration. However, U.S. companies can encounter difficulties in receiving payments from the government for work performed or products and services rendered. This can be due to inefficient government bureaucracy or, more often, due to a lack of funds available to the government to meet its obligations.
International Commercial Arbitration and Foreign Courts
The Zambian Arbitration Act Number 19 of 2000 incorporates the UNCITRAL and the New York Convention on the recognition and enforcement of foreign arbitral awards. The Act applies to both domestic and international arbitration and is based on the UNCITRAL model law. Foreign lawyers cannot be used to represent parties in domestic or international arbitrations taking place in Zambia. There are no facilities that provide online arbitration, although the Zambia Institute of Arbitrators promotes and facilitates arbitration and other forms of ADR. The New York Convention on the recognition and enforcement of foreign arbitral awards has been domesticated into Zambian legislation by virtue of Section 31 of the Arbitration Act. Arbitration awards are enforced in the High Court of Zambia, and judgments enforcing or denying enforcement of an award can be appealed to the Supreme Court.
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.
Foreign Trade Zones/Free Ports/Trade Facilitation
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.
Performance and Data Localization Requirements
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 Rights
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
Capital Markets and Portfolio Investment
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.
Money and Banking System
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.
Foreign Exchange and Remittances
There are currently no restrictions or limitations placed on foreign investors converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, and lease payments) into freely usable currency and at a legal market-clearing rate. Investors are free to repatriate capital investments, as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia. Funds associated with investments can be freely converted into internationally convertible currencies. The BoZ pursues a flexible exchange rate policy, which generally allows the currency to freely float. Currency transfers are protected by IMF Article VII.
Over-the-counter cash conversion of the kwacha into foreign currency is restricted to a $10,000 maximum per transaction for account holders and $5,000 for non-account holders. No exchange controls exist in Zambia for anyone doing business as either a resident or non-resident. There are no restrictions on non-cash transactions. The exchange rate of the Zambian national currency is mostly determined by market forces; because the volume and value of exports from Zambia are overwhelmingly related to the extractive industries sector and the mining companies’ financial transactions play a major role in exchange rate determination.
There are no recent changes or plans to change investment remittance policies that tighten or relax access to foreign exchange for investment remittances. There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into freely usable currency at the legal market clearing rate. Foreign investors can remit through a legal parallel market, including one utilizing convertible, negotiable instruments such as dollar-denominated government bonds issued in lieu of immediate payment in dollars. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue and there is no evidence to show that Zambia manipulates the currency.
Sovereign Wealth Funds
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.
8. Responsible Business Conduct
The government in theory limits its direct involvement in business to strategic investments deemed critical for the delivery of public goods and services and seeks to maintain high standards of consumer protection. While Zambia is a high performer among low-income countries in terms of Responsible Business Conduct (RBC), it lacks clearly formulated or well-implemented RBC policies.
The government has sought to improve implementation of legislative and regulatory reforms that impact RBC. As an example, most investment ventures are required to create and submit environmental impact assessments as a prerequisite to the approval process. The government requires many investment sectors, such as insurance, banking, and financial services, to submit annual audited financial statements as a licensing condition. In the case of financial services, quarterly publication of financial statements is compulsory and rigidly enforced by the BoZ.
Zambia has ratified a number of international human rights conventions, such as the Convention against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment; the Convention on the Rights of the Child; and the Convention on the Rights of Persons with Disabilities. At the national level, the lead authority for upholding human rights norms is the Human Rights Commission (HRC), while the Industrial and Labor Relations Act addresses labor issues. The Act provides the legal framework for trade unions, employers’ organizations and their federations, the Tripartite Consultative Labor Council, and the Industrial Relations Court. The Employment Act, Chapter 268, is the basic employment law, while the Minimum Wages and Conditions of Employment Act makes provisions for the regulation of minimum wage levels and minimum conditions of employment. Currently, the average minimum wage per month for employees, starting with general or domestic workers, stands at 1,132 kwacha (~$62@04/2022), to include food and transportation.
The government supports measures that encourage responsible business conduct and has recognized the importance of adopting international practices. The main challenges include domesticating international practices and strengthening regulatory capacities. In many cases, the business sector is encouraged by the government to adopt practices that promote responsible business conduct on a “voluntary basis.” For example, the Institute of Directors Zambia (IODZ) actively advocated the introduction of “Board Charters” that set out good corporate standards (such as ethical conduct) with which business enterprises will be associated and will implement. The Citizens Economic Empowerment Commission (CEEC) is also promoting the adoption of “Sector Codes” by the business sectors that commit themselves to supporting citizens’ economic empowerment. In addition, a number of public institutions have established Integrity Committees that address the strengthening of internal policies and procedures for combating corruption, in compliance with the Anti-Corruption Act of 2012. The private sector is also encouraged to either establish similar Integrity Committees or to strengthen their corporate governance standards to effectively address corruption.
The Zambian government seeks to maintain high standards of consumer protection by, for example, following the United Nations Guidelines for Consumer Protection. The Competition and Consumer Protection Act of 2010 seeks to encourage competition in the economy, protect consumer welfare, strengthen the efficiency of production and distribution of goods and services, secure the best possible conditions for the freedom of trade, expand the base of entrepreneurship, and regulate monopolies and concentrations of economic power. Most local manufacturers of consumer products have submitted to voluntary product testing and certification by the Zambia Bureau of Standards (ZABS); ZABS certification is then embossed on the product labels as a “mark of quality” indicating the product’s suitability for consumption. Legislative measures have also been agreed with food processors and drug manufacturers that indicate product manufacturing and expiry dates.
A number of mining companies have acceded to the Extractive Industries Transparency Initiative (EITI), adapted in February 2009 for Zambian conditions, and allow independent audits of their operations and financial reporting. EITI audit results are available to the general public. Zambia has been an EITI compliant country since September 2012. The government receives revenue in the form of taxes and royalties from all extractive industries, including mining. The mining sector accounts for about 12 percent of GDP and around 70 percent of export revenue. All exploration and mining activities are governed by the Mines and Minerals Act of 2008 and other mining related regulations that include: the Petroleum Exploration and Production Act, the Explosives Act, and the Environmental Protection and Pollution Control Act. The GRZ, through the Ministry of Mines and Minerals, conducts open bidding and grants mining licenses to qualified bidders. The Zambian Revenue Authority collects all payments from mining companies and remits them to the Ministry of Finance. The Zambian Revenue Authority regularly publishes production volumes for copper, cobalt, and gold, and the names of companies operating in the country.
The Hichilema administration has made climate a priority with the establishment of a new Ministry of Green Economy & Environment. The new ministry consolidates several departments that were previously spread across multiple ministries, including the Forest Department, Climate Change Department, and the Zambia Environmental Management Agency. Zambia’s Nationally Determined Contribution (NDC) is pioneering metrics for resilience under its monitoring plan; however, the government has identified room for improvement in developing more qualitative indicators to support the quantitative indicators currently in place.
Zambia has policies, strategies and programs aimed at promoting the conservation of fauna and flora. The government has developed a National Biodiversity Strategy and Action Plan (NBSAP) that guides conservation and sustainable use of biodiversity. Zambia’s NBSAP has a monitoring and evaluation component with a monitoring matrix that includes key performance indicators and targets. Other relevant policies include the Climate Change Policy and the National Policy on Environment.
Zambia does not currently have a net-zero GHG emission target. According to the government’s NDC commitments, Zambia has made a conditional pledge to reduce GHG emissions by 25 percent (20,000 Gg CO2 eq.) by 2030 against a base year of 2010, with substantial international support. Zambia’s two-year tenure as the lead of the Africa Group of Negotiators started in November 2021.
Regulatory reform is needed to promote increasing access to modern energy, improve reliability of the existing energy supply, and the expand the proportion of renewable energy available and utilized, both on- and off-grid. The Zambian government says that it intends to use nature-based solutions for the sustainable management and use of natural resources to address climate change, water security, water pollution, food security, human health, biodiversity loss, and disaster risk management.
The Zambian government has implemented a zero-rated tax on the following components of solar energy equipment: solar panels, inverters, batteries, and charge controllers to encourage users of solar energy-based equipment. Customs duties and value added taxes are not charged on these components of solar energy equipment. The taxes remain in force on other equipment such as diesel generators.
Zambia’s anti-corruption activities are governed by the Anti-Corruption Act of 2012 and the National Anti-Corruption Policy of 2009, which stipulate penalties for different offenses. The Anti-Corruption Commission (ACC) is the supreme institution mandated to fight corruption in Zambia and works with partner institutions-Zambia Police, Drug Enforcement Agency and Intelligence Services. While legislation and stated policies on anti-corruption are adequate in theory, implementation often falls short due to limited technical capacity and suspected corruption within key government institutions. The Public Interest Disclosure (Protection of Whistleblowers) Act of 2010 provides for the disclosure of conduct adverse to the public interest in the public and private sectors. However, like with other laws and policies, enforcement is weak. Zambia lacks adequate laws on asset disclosure, evidence, and freedom of information. Although the ACC has the mandate to investigate corruption and sometimes prosecute, it lacks autonomy to fully prosecute cases, often requiring authorization to prosecute from the Director of Public Prosecution (DPP). This practice has been criticized as a conduit for shielding high level crime and corruption through the executive which is perceived as influencing the DPP as an appointing authority. In March 2019 Cabinet approved the Access to Information Bill (ATI), but the draft bill has not been made public or presented to Parliament as of March 2022. The bill aims to ensure the government is proactive and organized in disseminating information to the public. Versions of the ATI Bill have been pending since 2002.
In 2021, Zambia established a fast-track financial crimes court to prosecute public corruption cases. The Hichilema administration has dismissed several key civil service staff and arrested numerous former government officials on suspicion of corruption. Zambia maintained a ranking of 117 out of 180 countries in the 2021 Corruption Perception Index (CPI) report — a drop from 113 in the 2019 report. The legal and institutional frameworks against corruption have been strengthened, and efforts have been made to reduce red tape and streamline bureaucratic procedures, as well as to investigate and prosecute corruption cases, including those involving high-ranking officials. Most of these cases, however, remain on the shelves waiting to be tried while officials remain free, sometimes still occupying the positions through which the alleged corruption took place. In March 2018, Parliament passed the Public Finance Management Bill, which allows the government to prosecute public officials for misappropriating funds, something previous legislation lacked. The government published the implementing regulations in November 2020. Despite this progress, corruption remains a serious issue in Zambia, affecting the lives of ordinary citizens and their access to public services. Corruption in the police service has emerged as an area of particular concern (with frequency of bribery well above that found in any other sector), followed by corruption in the Road Transport and Safety Agency. The government has cited corruption in public procurements and contracting procedures as major areas of concern.
The Anti-Money Laundering Unit of the Drug Enforcement Commission (DEC) also assists with investigation of allegations of corruption and financial misconduct. An independent Financial Intelligence Center (FIC) was established in 2010 but does not have the authority to prosecute financial crimes. Zambia’s anti-corruption agencies generally do not discriminate between local and foreign investors. Transparency International has an active Zambian chapter.
The government encourages private companies to establish internal codes of conduct that prohibit bribery of public officials. Most large private companies have internal controls, ethics, and compliance programs to detect and prevent bribery. The Integrity Committees (ICs) Initiative is one of the strategies of the National Anti-Corruption Policy (NACP), which is aimed at institutionalizing the prevention of corruption. The NACP received the Cabinet’s approval in March 2009 and the Anti-Corruption Commission spearheads its implementation. The NACP targets eight institutions, including the Zambia Revenue Authority, Immigration Department, and Ministry of Lands. The government has taken measures to enhance protection of whistleblowers and witnesses with the enactment of the Public Disclosure Act, as well as to strengthen protection of citizens against false reports, in line with Article 32 of the UN Convention.
U.S. firms have identified corruption as an obstacle to foreign direct investment. Corruption is most pervasive in government procurement and dispute settlement. Giving or accepting a bribe by a private, public, or foreign official is a criminal act, and a person convicted of doing so is liable to a fine or a prison term not exceeding five years. A bribe by a local company or individual to a foreign official is a criminal act and punishable under the laws of Zambia. A local company cannot deduct a bribe to a foreign official from taxes. Many businesses have complained that bribery and kickbacks, however, remain rampant and difficult to police, as some companies have noted government officials’ complicity in and/or benefitting from corrupt deals.
Zambia signed and ratified the United Nations Convention against Corruption in December 2007. Other regional anti-corruption initiatives are the SADC Protocol against Corruption, ratified in 2003, and the AU Convention on Preventing and Combating Corruption, ratified in 2007. Zambia is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions but is a party to the Anticorruption Convention. Currently, there are no local industries or non-profit groups that offer services for vetting potential local investment partners. Normally, the U.S. Embassy provides limited vetting of potential local investment partners for U.S. businesses, when contracted as a commercial service.
Resources to Report Corruption
Contact at government agency or agencies are responsible for combating corruption:
Mr. Silumesi Muchula
Acting Director General, Anti-Corruption Commission
Kulima House, Cha Cha Cha Road, P.O. Box 50486, Lusaka
+260 211 237914
Contact at “watchdog” organization:
Mr. Maurice Nyambe
Executive Director, Transparency International Zambia
3880 Kwacha Road, Olympia Park, P.O. Box 37475, Lusaka
+260 211 290080
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.
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance Programs
The U.S. International Development Finance Corporation (DFC) is active in Zambia: several projects are already underway, and more opportunities exist in strategic sectors. OPIC and Zambia signed an agreement in June 1999 that provides for ongoing DFC support through the African Trade Insurance Agency. This institution, open to all African states that are members of the AU, provides exporters with insurance against receivables on export trade deals and political risk insurance for trade transactions. Zambia is also a signatory to MIGA, which guarantees foreign investment protection in cases of war, strife, disasters, other disturbances, or expropriation.
Host country currency exchange restrictions can affect the commercial viability of a project, making it difficult to convert and transfer profits. DFC inconvertibility coverage can ensure conversion and transfer of earnings, returns of capital, principal, and interest payments, technical assistance fees, and similar remittances pursuant to the bilateral agreement providing for the DFC program while giving priority for U.S. government expenses.
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)