Investment Opportunities in Zambia for Investment Clubs in Zambia

Overview

The Government actively supports, facilitates and rewards new companies in all sectors of enterprise. This support is equally

available to indigenous and foreign-based companies without any discrimination whatsoever against offshore companies.

Large and small enterprises are equally welcome. The ZDA Act guarantees foreign investment against compulsory acquisition

or nationalization without compensation. Time-wasting procedures that may confront foreign investors elsewhere have been

greatly eliminated in Zambia and legal requirements have been reduced to an absolute minimum. Streamlined processing of

paperwork and rapid decisions, guided by the Agency, greatly facilitate all aspects of importation of equipment and export

of products. Prime growth sectors for investment are manufacturing, agriculture and agro-processing, tourism and mining.

Others offering potential investment opportunities include: construction, transportation, energy, telecommunications and

IT services.

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Agriculture

In the Fifth National Development Plan, agriculture remains the key priority in the growth and poverty reduction programme

of Zambia. The Government has been implementing institutional reforms aimed at liberalising the agricultural markets and

encouraging the private sector to take the lead in agricultural sector development. Under these institutional reforms, the

Government’s focus is on providing public goods that are needed for efficient sector growth, such as rural infrastructure,

research, extension and pest and disease control. Agri-business is also being encouraged to strengthen linkages with

smallholder farmers through increased private sector participation in agricultural service delivery, such as in input supply,

output marketing and agro-processing. Ownership of agricultural land will depend on the particular land registration

regime.

Ownership of land and dealings in agricultural land are restricted. As discussed above, the Lands Act prohibits ownership

of land by a foreigner unless the foreigner falls within the listed exceptions outlined in the Act. One such exception relates

to foreign investors. Basically, it allows a foreigner to own land if such foreigner is an investor.

Banking and Financial Services

The banking industry is governed by the Banking and Financial Services Act, Cap. 387 and the Bank of Zambia Act, Cap.

360. The banking industry is regulated by the Bank of Zambia. There are several commercial banks in Zambia and other

non-bank financial institutions like building societies. However, the banking industry is dominated by four (4) major banks

being Zambia National Commercial Bank Limited (a local bank which is a listed company), Barclays Bank Zambia Limited,

Standard Chartered Bank Zambia Limited which are subsidiaries of Barclays Bank Plc and Standard Chartered Bank Plc

respectively and Stanbic Bank Zambia Limited. A few international banks have established branches and subsidiaries in

Zambia. Zambia also has various Micro-finance institutions.

Opening and Operating Bank Accounts

There are no restrictions per se in opening or operating a bank account in Zambia other than complying with the relevant

bank’s own account opening requirements which follow international best practices. Documents that will generally be

required in order to open a bank account include incorporation documentation, introduction references, photographs

of authorised signatories, a copy of the Taxpayer Personal Identification Number and board resolutions authorising the

opening of the account.

The banking industry is governed by the Banking and Financial Services Act, Cap. 387 and the Bank of Zambia Act, Cap.

360. The banking industry is regulated by the Bank of Zambia. There are several commercial banks in Zambia and other

non-bank financial institutions like building societies. However, the banking industry is dominated by four (4) major banks

being Zambia National Commercial Bank Limited (a local bank which is a listed company), Barclays Bank Zambia Limited,

Standard Chartered Bank Zambia Limited which are subsidiaries of Barclays Bank Plc and Standard Chartered Bank Plc

respectively and Stanbic Bank Zambia Limited. A few international banks have established branches and subsidiaries in

Zambia. Zambia also has various Micro-finance institutions.

Opening and Operating Bank Accounts

There are no restrictions per se in opening or operating a bank account in Zambia other than complying with the relevant

bank’s own account opening requirements which follow international best practices. Documents that will generally be

required in order to open a bank account include incorporation documentation, introduction references, photographs

of authorised signatories, a copy of the Taxpayer Personal Identification Number and board resolutions authorising the

opening of the account.

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The Insurance Industry

There are approximately twenty (20) insurance companies and three (3) re-insurance companies operating in Zambia. The

governing statute for insurance matters is the Insurance Act, No. 27 of 1997.

Other Financial Sectors

Zambia has a few investment banks which are licensed and regulated by the Securities and Exchange Commission (SEC).

An example of an investment bank operating in Zambia is the Bank of China.

The Capital Markets

The primary legislation dealing with capital markets is the Securities Act, Chapter 354 of the Laws of Zambia. The SEC is

established under the Securities Act. SEC licenses securities exchanges, dealers, investment advisers and their respective

representatives and persons who are, according to the Securities Act, non-bank custodians or service registrars.

The Lusaka Stock Exchange (LuSE) was formed in 1993 with the help of the World Bank and the International Finance

Corporation and is a member of the African Stock Exchanges Association. The formation of LuSE was part of the Government’s

economic reform programme aimed at developing the financial and capital market in order to support and enhance private

sector initiative. Being the umbrella under which the entire securities market operates in Zambia, the Securities Act creates

and defines a central market in which both unlisted and listed securities can be traded.

Energy

Zambia has an abundance of energy resources. The most important source of energy is electricity, which is generated by

three major hydroelectric power stations. Other endowments in Zambia’s energy sector include coal, woodlands and forests

as well as other renewable energy forms such as solar and wind. Zambia has an estimated hydropower capacity of 6,000MW,

of which only about 1,640 MW has so far been installed. This represents only 30 percent of the total capacity. Hydroelectric

plants account for 92 percent of the total installed capacity and 99 percent of the total electricity generated in the country.

So far there are only two important inter-connectors to Zimbabwe and the Democratic Republic of Congo which are the

key electricity export grids. With the liberalisation of the economy, the Government has amended legislation affecting

generation, transmission, distribution and supply of electricity thus allowing private sector entry. Potential opportunities

identified are Kafue Gorge Lower Hydroelectric Project, Itezhi-tezhi Hydroelectric Project, Zambia-Tanzania Interconnector

and Zambia-Namibia Interconnector. Exploration potential for hydrocarbons (oil and gas) is one area that has not been fully

tapped - hydrocarbon source rocks are proven and are preserved in all basinal areas of Zambia. The Government welcomes

active participation from prospective investors with modern technological expertise.

Mining

Zambia has enormous reserves of copper-cobalt ore and the country is the fourth largest producer of copper metal. Gold,

nickel, lead-zinc, iron and manganese are also mined. In addition, Zambia is endowed with high quality gemstones

- emerald, amethyst, aquamarine, rubies, garnets and diamonds - which are still largely unexploited. With the privatisation

of the mining sector, potential opportunities have become very attractive.

Mining Legislation

The primary law governing the mining sector in Zambia is the Mines and Minerals Development Act, No. 7 of 2008 (Mines

Act). The Mines Act provides for mining rights, mining licences, large scale mining in Zambia, gemstone mining, safety,

health and environmental protection, geological services and analysis, royalties and charges as well as administration of the

mining sector in Zambia. All rights of ownership in, searching for, mining and disposing of, minerals in Zambia are vested

in the President on behalf of the Republic.

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Mining Rights and Licences

There is a strict requirement that a person shall not prospect for minerals or carry on mining operations or mineral processing

operations without the granting of a mining right or mineral processing licence under the Mines Act. Further, two kinds of

non-mining rights may be granted in Zambia: a mineral processing licence and a gemstone sales certificate.

In the case of a company, mining rights cannot be granted to a company which:

a. is in liquidation, other than liquidation which forms part of a scheme for the reconstruction of the company or for its

amalgamation with another company;

b. is not incorporated under the Companies Act; or

c. has not established an office in Zambia.

A prospecting permit, small-scale mining licence, small-scale gemstone licence and an artisan’s mining right cannot be

granted to a person who is not a citizen of Zambia or a company which is not a citizen-owned company.

Preference for Zambian Products

The Mines Act offers preferential treatment to Zambian products, materials and service agencies owned by Zambian citizens

in the conduct of operations under mining rights or mineral processing licences, and in the purchase, construction and

installation of facilities, to the maximum extent possible. Additionally, a licence or right holder is expected to give preference

in employment to citizens of Zambia to the maximum extent possible.

Royalties on Mineral Production

There is a requirement for licence holders to pay royalties under the Mines Act. It states that a holder of a large-scale mining

licence, large-scale gemstone licence, small-scale mining licence, small-scale gemstone licence or an artisan’s mining right

must pay a mineral royalty. There is also a requirement for persons who hold licences under the Mines Act to pay annual

charges to the Government. The amount varies and is calculated in a manner prescribed by a statutory instrument issued

by the Minister of Mines.

Duration and Tenure

Large-scale and small-scale mining licences are granted for a term not exceeding twenty-five years and ten years respectively,

and are renewable for further terms. Holders of mining licences are further required to obtain an operating permit annually

in order to conduct mining operations.

Tax Stability Agreements

Prior to the commencement of the Mines Act, investors were able to enter into development agreements with the

Government under which concessions were provided for generally, in the form of suspension or reduction of all main taxes

and tax stability periods.

Following the enactment of the mining act, however, the development agreements were outlawed and the Minister of

Mines could no longer enter into any agreement relating to the grant of a large scale mining licence or any other mining

right. Furthermore, the Mines Act now provides that existing development agreements ceased to bind the Republic.

Real Estate

There is currently a property boom in Zambia. More and more people are looking to buy or rent property and the demand

for apartments and houses has grown exponentially.

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The system of land registration which Zambia adheres to reflects every piece of land on a diagram (called a survey diagram)

and the ownership recorded in the Deeds Registry at the Ministry of Lands where documents are available for public

viewing. Zambia deeds registration systems are continually improved with investment in technology, an exceptional degree

of accuracy and security of tenure being guaranteed. Property can be owned individually, jointly in both divided and

undivided shares, or by an entity such as a company, close corporation or trust or similar entity registered outside Zambia.

Telecommunications

There have been major developments in the ICT sector in Zambia. The number of subscribers for mobile telephones has

increased remarkably. The number of internet service providers has also greatly increased. However, the telecommunications

sector has potential for more growth. The telecommunications sector in Zambia falls under the Ministry of Information and

Communications. The sector is primarily governed by the Information and Communications Technologies Act, No. 15 of

2009 (ICT Act). The ICT Act is basically intended to regulate the provision of telecommunication services to, from and

within Zambia through the Zambia Information and Communications Technology Authority (ZICTA), formerly called the

Communications Authority. ZICTA is a body corporate with a common seal and capable of suing and being sued. The Act

is intended to provide for the regulation of information and communication technology. It also facilitates the access to

information and communication technologies. The ICT Act further protects the rights and interest of service providers and

consumers. The ICT Act merges the former segments of telecommunications, information and information technology.

The mentioned segments have now become one in terms of both the delivery of infrastructure and consumer gadgets. For

instance, a cellular telephony which used to be a telecommunication device can now be used as a television/radio set as

well as a computer. ZICTA mainly regulates the provision of electronic communication services and products and monitors

the performance of the sector, including the levels of investment and the availability, quality, cost and standards of the

electronic communication services. One important aspect of the ICT Act is that in exercising the powers conferred upon it

under the ICT Act, ZICTA is required to have regard to the provisions of the International Telecommunications Convention

signed in November, 1982, or any other convention on, or relating to, telecommunication, to which Zambia is a party.

Licences

ZICTA is empowered to issue a network licence, to allow the holder to construct, own or make available an electronic

communications network, or to provide a network service; and a service licence, to allow the holder thereof to provide

one or more electronic communications services. Pursuant to the ICT Act, any person may apply for a telecommunications

licence, whether that licence is a service licence or a supplier’s licence. There are two classes of licences that can be issued by

ZICTA: an individual licence and a class licence. The transfer of a licence by a licensee is allowed as long as ZICTA’s consent

is obtained. In 2010, an amendment to the ICT Act was made with regards to tariffs for services offered by the licensee

holding a dominant position in the sector. Basically, the ICT Act states that a licensee that holds a dominant position in a

retail electronic communications market must submit to ZICTA in the prescribed manner and form, the tariffs the licensee

intends to charge, including the justification for such prices, prior to the introduction of the tariffs. ZICTA is then required

to approve or reject such an application within 14 days of the receipt of the application.

Recent Changes in Telecommunications Laws

Electronic Communication and Transaction Act, No. 21 of 2009 (ECT Act)

The Zambian legislature in 2009 enacted the ECT Act in order to develop a safe, secure and effective environment for

consumers, the business sector and the Government to conduct and use electronic communications. More importantly,

the ECT Act creates legal certainty and confidence, and encourages investment and innovation, in the electronic

communications industry by placing a number of legal rules and requirements that must be met in matters that relate to

electronic communications and transactions. It also facilitates the creation of secure communication systems and networks

and establishment of the Central Monitoring and Coordination Centre (CMCC).

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New Services by Mobile Phone Providers

Mobile phone providers are rolling out other services besides the provision of telephone services in order to attract and

retain their customers. Most notable is the provision of mobile banking; where a customer is able to use his SIM card to send

and receive money instantly. The mobile phone companies have also linked the service to some automated teller machines

thereby allowing the mobile users to easily withdraw funds. So popular is the service that some organisations are even using

it to pay utility bills as well as school fees. The transfer of funds using mobile phones remains largely unregulated since

there are no provisions under the existing legal framework dealing with its regulation. However, due to the large volumes

of funds that are being transferred using this method, there is growing concern that this new service needs to be regulated.

Tourism

The tourism sector is one of the most thriving and vibrant sectors in the country. Zambia’s potential as a one-stop

destination offers excellent prospects for advancement of this highly under-developed sector. With 19 national parks,

23 game management areas, the largest water-fall in the world, and 23 million hectares devoted to the conservation of

a spectacular variety of animals, the scope for an integrated quality tourism related investment is very attractive. Wildlife

such as elephants, leopards, lions, cheetahs, rhinoceroses, zebras, giraffes, hippopotamuses, crocodiles, buffaloes, impalas,

antelopes, baboons and a host of smaller creatures as well as over 700 species of birds can be seen. Opportunities to

promote adventure holidays, white-water rafting, canoeing, rock-climbing, hand-gliding, fishing, bungee jumping at

Victoria Falls including its unique walking safaris offer excellent tourism potential.

Tourism Act

The tourism industry in Zambia is regulated by the Tourism and Hospitality Act, No. 23 of 2007 of the laws of Zambia

(Tourism and Hospitality Act). The Tourism and Hospitality Act is intended to provide for the development of the tourism

industry; incentives for investors in the tourism industry; the control and regulation of hotels and the enforcement of

reasonable standards of cleanliness, sanitation and service; the authorisation and licensing of tourism enterprises and the

constitution of the hotel managers registration council.

Water

The major enactment relating to and governing the usage and maintenance of water is the Water Resources Management

Act, No. 12 of 2011. Through this Act, the Water Resources Management Authority was established. Its functions include

the identification, preservation and protection of potential and already existing sources of fresh water and the environment

in general.

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