Promotion and Regulation of Foreign Investment in Zambia- Training Guide for Zambian Investment Clubs

Investment Under The Zambia Development Agency Act

Zambia has now opened the doors for foreign investment both in terms of foreign direct investment and portfolio investment. In line with the economic reforms, Zambia is encouraging private investment in all major productive sectors including agriculture, mining, manufacturing, tourism and energy. It has introduced new economic policy measures, liberalised open market trade and investment conditions. Export processing zones have been established and applications for zoning are being encouraged. Zambia also has numerous opportunities for investment in the agro-industry (horticulture and floriculture, tobacco-processing, cotton-ginning, crop production for the processing industries); in industry (consumer goods); in tourism (holiday accommodation, managed safaris, licensed hunting safaris and organised holidays).

In a bid to encourage investment in Zambia, the Parliament has enacted a number of statutes that are meant to facilitate and promote investment within the Zambian economy. The primary legislation for investment in Zambia is the Zambia Development Agency Act, No. 11 of 2006 (ZDA Act).

The ZDA Act provides for the establishment of the Zambia Development Agency (the Agency). The Agency is pivotal to the economy in that it functions to foster economic growth and development by promoting trade and investment in Zambia, through an efficient, effective and coordinated private sector. The ZDA Act also aims at streamlining bureaucratic procedures and requirements faced by investors. It facilitates industrial infrastructure development and local services as well as, promotes greenfield investments through joint ventures and partnerships between local and foreign investors.

The Agency also ensures that the private sector takes advantage of the benefits from international and regional trade agreements.

There is a requirement under the ZDA Act for any person wishing to develop premises as a multi-facility economic zone,

export prescribed goods and services, invest in any business enterprise, register a micro or small business enterprise, education enterprise, skills training enterprise or rural business enterprise, or operate a business enterprise in a multi-facility economic zone, to apply in the prescribed manner, to the Agency for approval of such undertaking either by way of licence, permit or certificate of registration.

Incentives Available To Foreign Investors

In a bid to promote investment in Zambia, the ZDA Act provides for a number of substantial incentives available to both local and foreign investors. These incentives are valid for a period of five years from the time the licence or permit is granted by the Agency. The first form of incentive given under the Act involves taxation; an investor who invests not less than US$ 500,000 or the equivalent in convertible currency, in a priority sector or product, is entitled to incentives as specified by or under the Income Tax Act, Cap. 323 or the Customs and Excise Act, Cap. 322. Furthermore, any machinery or equipment acquired by a business enterprise conducting operations in a priority sector, priority products, or a rural enterprise will be entitled to exemption from customs duties as specified by the Customs and Excise Act.

Where a major investment occurs, the Finance minister may specify additional incentives for investment in an identified sector or product of not less than US$10,000,000, or the equivalent in convertible currency, in new assets that qualify for those incentives.

Protection From Compulsory Acquisition of Property- Foreign Ownership of Land

The ZDA Act also contains provisions which seek to not only promote foreign investment, but also protect investors.

This is especially true in matters involving an investor’s property. The Act states that an investor’s interest in or right over property will not be compulsorily acquired. However, in instances where there is a public purpose related to the acquisition, compulsory acquisition may be allowed provided that payment of compensation for such acquisition is made to the investor.

This compensation must be made promptly at the market value and shall be fully transferable at the applicable exchange rate in the currency in which the investment was originally made, without deductions for taxes, levies and other duties, except where those are due.

All land in Zambia vests in the President absolutely for and on behalf of the people of Zambia. The President may thus alienate land vested in him to any Zambian. However, the Lands Act, Cap. 184 places a number of restrictions on the allocation of land to foreigners by the President of the Republic. Under Section 3 (3) (b) holders of investment licenses may own land. The ZDA Act also makes provision for the ownership of land by investors. The Agency in consultation with the Ministry of Lands is empowered to assist an investor in identifying suitable land for investment, as well as assist that investor to apply to the responsible authorities for land, in accordance with established procedures.

Conversion and Transfer Policies

Investors are free to repatriate capital investments as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia without difficulty. There is no exchange control in Zambia for anyone doing business as either a resident or non-resident. Additionally, there are no restrictions on non-cash transactions. Over-the-counter cash conversion of the local currency, into foreign currency is restricted to a US$ 5,000 maximum per transaction per day for account holders and US$ 1,000 for non-account holders.

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