2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report

Openness To, and Restrictions Upon, Foreign Investment

The GRZ actively seeks foreign investment through the Zambia Development Agency (ZDA), which was established in January 2007 through the consolidation of a number of trade and investment promotion entities into a one-stop resource for international investors interested in investing in Zambia.

The major laws affecting investment 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 Act also provides for investment threshold that investors have to meet to qualify for fiscal and non-fiscal incentives.

--The Companies Act of 1994, which governs the registration of companies in Zambia.

--General incentives to investors in various sectors are provided in various legislations that govern the Zambia Revenue Authority (ZRA), including the Customs and Excise Act, Income Tax Act of 1966 and the Value Added Tax Act of 1995.

--The Employment Act Cap 268 is Zambia’s basic employment law and provides for required minimum employment contractual terms.

--The Immigration and Deportation Act Cap 123 regulates the entry into and residency in Zambia of visitors, expatriates, and immigrants.

The Zambian judicial system has a mixed record in upholding the sanctity of contracts. The judicial process is lengthy and inefficient. Many magistrates lack experience in commercial matters.

There is no distinction in Zambian law between foreign and domestic investors. Investors are free to invest in any sector of the economy and are entitled to incentives per the ZDA Act of 2006 (discussed later in this report). In the privatization process, foreign investors are eligible to bid on state-owned companies. Non-Zambians may also invest in the Lusaka Stock Exchange without restriction and on terms comparable to those Zambians receive. Companies seeking licenses or concessions or investors bidding for privatized companies are encouraged to seek local partners, although it is not clear how such commitments are weighed when decisions are made by the ZDA.

The ZDA board screens all investments for which incentives are requested and usually makes its decision within 30 days. The reviews appear routine and non-discriminatory, and applicants have the right to appeal investment board decisions. The ZDA board is comprised of sixteen members, including representatives from various government and private sector stakeholders

An investment can be subject to review for determination of sector or value and filing is mandatory. An investment application is subjected to screening mechanism, among other things, to determine the extent to which the proposed investment will lead to the creation of employment opportunities and the development of human resources; the degree to which the project is export oriented; the impact the proposed investment is likely to have on the environment and, where necessary, the measures proposed to deal with an adverse environmental consequence in accordance with the Environmental Protection and Pollution Control Act; the possibility of the transfer of technology; and any other considerations that the Board considers appropriate.

The possible outcome of the review could be prohibition or imposition of additional requirements, especially where adverse environmental issues arise. The reviews are generally completed in a timely manner.

An investor may, within fourteen days of receiving a Board decision, can appeal the decision to the Minister of Finance and National Planning. Within thirty days of receiving the appeal, the Minister may confirm, set aside or amend the decision of the Board. An investor dissatisfied with the decision of the Minister, may within thirty days appeal to the High Court of Zambia against the decision. No negative reports have been received from U.S. firms concerning this process.

The ZDA Act does not discriminate against foreign investors, and all sectors are open to both local and foreign investors. The GRZ plans to issue a Statutory Instrument in the first quarter of 2011 that will give preference of procurement of Government contracts to Zambian-owned companies. The Citizens Economic Empowerment Commission is working with the Zambia Public Procurement Authority to implement preferential procurement that would support Zambian-owned based firms.

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Measure

Year

Index/Ranking

TI Corruption Index

2010

3.0

Heritage Economic Freedom

2010

58.0

World Bank Doing Business

2011

76

MCC Gov’t Effectiveness

2011

0.23 / 69%

MCC Rule of Law

2011

0.45 / 77%

MCC Control of Corruption

2011

0.27 / 77%

MCC Fiscal Policy

2011

-2.0 / 58%

MCC Trade Policy

2011

82.4 / 95%

MCC Regulatory Quality

2011

0.24 / 69%

MCC Business Start Up

2011

0.969 / 81%

MCC Land Rights Access

2011

0.631 / 55%

MCC Natural Resource Mgmt

2011

64.40 / 58%

Conversion and Transfer Policies

There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, 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 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, the Kwacha, into foreign currency is restricted to a USD 5,000 maximum per transaction for account holders and USD 1,000 for non-account holders. There are no changes or plans to change remittance policies affecting foreign exchange for investment remittance.

Expropriation and Compensation

Investments may only be 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 after initial investment.

Leasehold land, which is granted under 99-year leases, may revert to the government if it is ruled to be undeveloped after a certain amount of time (generally five years). Land title is sometimes questioned and land is re-titled to other owners.

There has been no expropriatory action in the recent past or policy shifts which would lead the Mission to believe there may be expropriatory actions in the near future. The GRZ does not discriminate against investors or U.S. investments, companies or representatives in expropriation.

Dispute Settlement

There have been relatively few investment disputes involving U.S. companies since the Movement for Multi-party Democracy (MMD) government took office in 1991. The Zambian Investment Code stipulates that claimants must first file internal dispute settlements with the Zambian High Court. Failing that, the parties may go to international arbitration, which the state recognizes as binding. Zambia is a member of the International Center for the Settlement of Investment Disputes (ICSID) and the United Nations Commission of International Trade Law (UNCITRAL).

Previous disputes involved delayed payments to U.S. companies from state-owned enterprises 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.

The courts in Zambia are somewhat independent, but contractual and property rights enforcement is weak, and final court decisions can take a prohibitively long time. The Foreign Judgments (Reciprocal Enforcement) Act Chapter 76 of the Laws of Zambia (cited as the Act) makes provision for the enforcement in Zambia of judgments given in foreign countries which accord reciprocal treatment. The registration of a foreign judgment is not automatic. In 2010 a Lusaka High Court Judge ruled that a London civil judgment against former president Chiluba could not be registered in a Zambian court despite precedent.

There is no bankruptcy law in Zambia. Secured interests in property are possible and recognized but fairly rare.

The Zambian Arbitration Act No. 19 of 2000 applies to both domestic and international arbitration and is based on the UNCITRAL Model Law. Arbitration agreements must be in writing. Parties may appoint an arbitrator of any nationality, gender or professional qualifications. 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 there is an arbitral institution, the Zambia Institute of Arbitrators. 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. On average, it takes about 14 weeks to enforce an arbitration award rendered in Zambia, from filing an application to a writ of execution attaching assets. It takes about 18 weeks to enforce a foreign award. Contracts involving state entities commonly rely upon arbitration as a dispute resolution tool.

Zambia is Party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, which entered into force on 7th June 1959 and Party to the Convention of the Settlement of Investment Disputes between States and Nationals of Other States of other States of 1965 and entered into force on 14 October 1966. These are being enforced through the Investment Disputes Convention Act Cap 42 of the Laws of Zambia.

Performance Requirements and Incentives

The GRZ strives to be consistent with Trade Related Investment Measures (TRIMs) requirements and generally abides by the WTO’s TRIMs obligation.

The ZDA Act of 2006 offers a wide range of incentives in the form of allowances, exemptions and concessions for companies, which are applied uniformly to both local and foreign investments. Investors who invest at least USD 10 million in an identified sector or product are entitled to negotiation with the government for additional incentives other than what they might already qualify for under the ZDA Act.

Investors who invest at least USD500,000 in a Multi Facility Economic Zone (MFEZ) and /or in a sector or product provided as for as a priority sector or product under the ZDA Act, in addition to being entitled to the general incentives, are entitled to:

--Zero percent tax rate on dividends for five years from year of first declaration of dividends

--Zero percent tax on profits for five years from the first year profits are made. For year six to eight, only 50 percent of profits are taxable and year nine and ten, only 75 percent of profits are taxable.

--Zero percent import duty on raw materials, capital goods, machinery including trucks and specialized motor vehicles for five years.

--Deferment of VAT on machinery and equipment including trucks and specialized motor vehicles.

Priority sectors and products under the ZDA Act include:

--Agriculture

--Manufacturing

--Mining

--Tourism

Priority products are:

--Floriculture

--Horticulture

--Processed foods

--Beverages and stimulants

--Production and processing of textiles

--Manufacturing of engineering products

--Mini-hydro stations

--Education and skills training

--Production of fertilizers, cement, leather and timber products

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

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

Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled. No requirements currently exist for local content, equity, financing, employment, or technology transfers. Government does not impose ‘offset’ requirements or impose conditions on permission to invest in specific geographical area or local content, but investors are encouraged to employ local nationals.

Government requires that all international firms licensed operating a domestic cellular telephone network offer ten percent of shares on the Lusaka Stock Exchange, per commitments made by agreement prior to entering the market. Investors are required to disclose proprietary information to ZDA as part of the regulatory approval process.

Work Permit Requirements: Notwithstanding the provisions of the Immigration and Deportation Act of 1994, a foreign national who invests a minimum of USD 250 thousand or equivalent in convertible currency is entitled to a self-employment permit and employment permits for up to five (5) expatriates. However, in practice some foreign companies have had difficulty securing these permits, especially smaller-scale investors.

Import restrictions are in force on poultry products and genetically modified products for environmental, health and security reasons. Import licensing is required for most agricultural products and Zambia does not currently apply trade sanctions. Food imports must satisfy the provisions of the Food and Drugs Act of September 1978 which requires packaging and labeling requirement to be in English. A consignment of assorted food products which were labeled in Chinese were destroyed at Chirundu Border post for not meeting the packaging and labeling requirements.

Right to Private Ownership and Establishment

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. Private enterprises have occasionally complained that the playing field is not level when they compete with public enterprises for licenses or concessions.

Protection of Property Rights

The ZDA Act assures investors that property rights shall be respected. Secured interests in property, both movable and real are recognized and enforced.

The ZDA Act provides for legal protection and facilitates acquisition and disposition of all property rights such as land, buildings and mortgages. Currently the ZDA is working with the Commissioner of Lands to develop a fast tracking system for identifying land for investment in the priority sectors.

The legal framework for trademark protection in Zambia is adequate. There are fines for revealing business proprietary information; however, they are not large enough to penalize disclosure adequately. Copyright protection is limited and does not cover computer applications. Enforcement of intellectual property rights is weak in Zambia, and courts have little experience with commercial litigation.

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

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

Transparency of the Regulatory System

The government has made strides toward introducing transparent policies to foster competition, although complaints arise from time to time. Questions have arisen in recent years regarding the process of awarding Game Management Areas by the Zambia Wildlife Authority, the enforceability of existing mine development agreements, which gave mine owners the right to compensation if government failed to comply with agreed tax stability guarantees, and the fairness of competition between state-owned enterprises and private firms. In the agricultural sector, Zambian government interventions, through the purchase of maize (corn) at subsidized prices and the distribution of subsidized fertilizer, undercut the private sector’s capacity to enter these markets. The unpredictability of import and export bans on commodities, especially maize, is a deterrent to private sector participation in commodity markets.

Labor laws provide 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.

Although the ZDA seeks to serve as a "one-stop shop" for investors, in practice red tape associated with licenses and permits presents problems for potential investors. In some cases, dozens of licenses are required to establish and run a business. The GRZ is working to streamline numerous licensing requirements and administrative procedures. The 2011 World Bank Doing Business Report ranked Zambia 76th out of 183 countries.

Proposed laws are usually not published in draft form for public comment. Opportunities for comment on proposed laws and regulations exist through trade associations such as the Zambia Chamber of Commerce and Industry (ZACCI), Zambia Association of Manufacturers (ZAM), Zambia Chamber of Mines and Zambia Business Forum.

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

Efficient Capital Markets and Portfolio Investment

Government policies generally facilitate the free flow of financial resources to support the flow of resources in the product and factor market. Banking supervision and regulation by the Bank of Zambia (BoZ), the central bank, has improved over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training and incentives of bank supervisors. In 2010, the BoZ instituted overnight lending facilities to inject further liquidity into the market.

Although some improvements have been registered in recent years, credit to the private sector is expensive and readily available only for low-risk investments. One factor inhibiting lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. In addition, high returns on government securities have historically encouraged commercial banks to invest heavily in government debt, to the exclusion of financing productive private sector investments. Banking officials acknowledge that they need to upgrade the risk assessment and credit management skills within their institutions in order to better serve borrowers. At the same time, they argue that widespread financial illiteracy limits borrowers’ ability to access credit. Banks provide credit denominated in foreign currency 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.

The 15-year old Lusaka Stock Exchange (LuSE) is structured to meet international recommendations for clearing and settlement system design and operations. 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 in 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 of Zambia. The secondary trading of financial instruments in the market is very low or non-existent in some areas. At the end of 2010, 21 companies were listed on the LuSE.

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

Zambia’s largest banks include Zambia National Commercial Bank (Zanaco), Barclays Bank Zambia, Standard Chartered Bank Zambia, and Stanbic Zambia Limited. In 2009, Barclays Bank estimated total assets were USD 926,261with 450,611 depositors. The bank’s loan portfolio has continued to grow and accounted for 36.6 percent of the total loans in the sector. Zanaco estimated total assets are USD 638,286 with 482,160 depositors. Zanaco’s loan portfolio accounted for 44 percent of the total loans in the banking sector. The third largest bank, Stanbic Bank Zambia’s estimated total assets are USD 396,164 with 344,257 depositors while loans accounted for 13.8 percent of the sector’s total loans.

Although the banking system is generally sound, sector officials estimate that about 15 percent of the total sector loan portfolio is non-performing. In December 2010, the Bank of Zambia took possession of Zambia’s sixth largest bank, Finance Bank Limited Zambia, the first time the BOZ has intervened in more than a decade. The Governor of the Central Bank announced that take-over was necessary due to serious breaches of the provisions of the Banking and Financial services Act and ongoing unsafe and unsound banking practices that compromised the viability of the bank and threatened to destabilize the sector.

Private firms are open to foreign investment through mergers and acquisitions. The Competition Consumer Protection Commission (CCPC) reviewed and handled 43 mergers and acquisitions in 2010, including Bharti Airtel’s purchase of Zain/Celtel Zambia, the purchase through privatization of Zamtel by LAP Green, and the acquisition of Chevron’s assets in Zambia by Engen Petroleum.

Competition from State-Owned Enterprises (SOEs)

There are few state-owned enterprises (SOEs) remaining in Zambia, and all have serious operational and management challenges. ZESCO Ltd is responsible for generation, transmission, and distribution of electricity in Zambia. Two private entities are contracted to supply electricity to some mines. Copperbelt Energy Corporation supplies electricity to mining companies on the Copperbelt while North-Western Energy Company supplies power to Lumwana (Equinox) Mine in Solwezi.

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. Zambia has a pipeline of privately developed hydro-power projects, but few have attracted financing.

The SOEs are governed by Boards of Directors that are appointed by Government with consultations and participation of 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 Ministry of Finance and National Planning. The Board Chairperson is informally obligated to consult with government officials before making decisions. Zambia does not have a Sovereign Wealth Fund.

Zambian SOE’s are audited by the Auditor General’s Office as required by law and using international reporting standards. The audited reports are submitted to the President for tabling in the National Assembly in accordance with the provisions of Article 121 of the Constitution of Zambia and the Public Audit Act Cap 378 of the Laws of Zambia. The audits are carried annually, but delays in finalizing and publishing results are common.

Corporate Social Responsibility

The concept of corporate social responsibility (CRS) has recently gained traction in Zambia. There is a general awareness of corporate social responsibility among both producers and consumers. Some local and foreign enterprises tend to follow generally accepted CSR principles, such as the OECD Guidelines for multinational enterprises while other foreign firms ignore complex issues such as labor rights, environmental protection, bribery, corruption and human rights. The firms who pursue CSR are viewed favorably by the government and the communities.

Political Violence

Zambia does not have a history of significant political violence. Infrequent student protests sometimes turn violent, but they are generally confined to small areas in and around universities. The presidential by-election in October 2008 following the death of President Levy Mwanawasa was carried out peacefully and in accordance with the constitution. In December, a Lusaka High Court nullified a parliamentary by-election held Mufumbwe, Northwestern Province in April 2010 citing extreme violence, intimidation and destruction of property. Recent upticks in violence during by-elections are becoming a source of concern for the government and the general public. Presidential and parliamentary elections are scheduled to be held in 2011.

Corruption

Zambia has the Anti-Corruption Act of 2010 and the National Anti Corruption Policy of 2009, which stipulate penalties for different offences serve to guide the government’s anti-corruption activities. While legislation and stated policies on anti-corruption are adequate, implementation sometimes falls short. Zambia lacks adequate whistleblower protection, asset disclosure, evidence, and freedom of information laws.

The Anti-Corruption Commission (ACC) is the agency mandated to spearhead the fight against corruption in Zambia. The Anti-Money Laundering Unit of the Drug Enforcement Commission (DEC) also assists with investigation of allegations of misconduct. An independent Financial Intelligence Unit (FIU) was formed in 2010, but has not yet developed the capacity to take the lead in investigating financial crimes. Zambia’s anti-corruption organs generally do not discriminate between local and foreign investors.

Zambia signed and ratified the United Nations Convention Against Corruption in December 2007. Zambia is also Party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Other regional anti-corruption initiatives are the Southern African Development Community (SADC) Protocol Against Corruption ratified on July 8, 2003 and the African Union (AU) Convention on Preventing and Combating Corruption ratified on March 30, 2007.

U.S. firms have identified corruption as an obstacle to foreign direct investment. Corruption is most pervasive in government procurement, performance requirement and dispute settlement. Giving and accepting a bribe by a private, public or foreign official is a criminal act and is liable to a fine or a prison tern not exceeding five years if found guilty.

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.

Transparency International has an active Zambian chapter. The GRZ encourages companies to establish internal codes of conduct that among other things, prohibit bribery of public official. 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 was approved by the government in March, 2009 and its implementation is spearheaded by the Anti-Corruption Commission. There are eight institutions that were targeted such as the Zambia Revenue Authority, Immigration Department and Ministry of Lands. Most companies have an effective internal controls, ethics and compliance programs to detect and prevent bribery.

Bilateral Investment Agreements

Zambia has signed bilateral reciprocal promotional and protection of investment protocols with most of the Common Market for Eastern and Southern Africa (COMESA) and the SADC member states. In November 2001, COMESA signed a Trade and Investment Framework Agreement with the United States. On October 2, 2000, Zambia became a beneficiary of the African Growth and Opportunity Act (AGOA). Zambia has initialed market access offer 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 trade in goods chapter and related annexes of the ESA IEPA now apply to Zambia. Zambia has signed protective agreements with Chinese investors, Nigerian, Libyan and Indian investors.

Zambia does not have a bilateral investment treaty or a bilateral taxation treaty with the United States.

OPIC and Other Investment Insurance Programs

An OPIC/Zambia agreement was signed in June 1999. Zambia is also a signatory to the Multilateral Investment Guarantee Agency (MIGA), which guarantees foreign investment protection in cases of war, strife, disasters, other disturbances, or expropriation. In June 2001, the World Bank extended credit in the amount of USD five million for starting the African Trade Insurance Agency (ATI). This institution, which is 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.

The Embassy uses approximately USD 8.6 million in Zambian Kwacha per year. Kwacha was purchased at the average market exchange rate of K4,830 to the U.S. dollar in 2010. Zambia’s foreign exchange rates track closely with international copper prices. As such, when copper prices rise, the Kwacha generally appreciates in value.

Labor

Although there is an abundance of unskilled labor in Zambia, investors complain that there is an inadequate supply of skilled and semi-skilled labor. The government adheres closely to International Labor Organization (ILO) conventions. Labor-management relations vary by sector. Strikes are not uncommon in the public sector and often are related to the government’s failure to pay salaries or allowances on time. The minimum monthly entitlement for any permanent employee including general workers is approximately Kwacha 268,000 (USD 53).

Foreign Trade Zones/Free Ports

An investor may apply to be appointed and licensed by the Commissioner General to establish and operate a bonded factory under Section 65 of the Customs and Excise Act. In early 2007, the GRZ announced the creation of multi-facility economic zones (MFEZ) where investors enjoy waivers on customs duty on imported equipment, excise duty and value added tax, among other concessions.

On October 31, 2000, the COMESA Free Trade Area (FTA) was launched. COMESA launched a customs union in June 2009, during the 13th Summit of the COMESA Heads of State and Government. The top five intra-COMESA exports from Zambia include tobacco, raw sugarcane, wire, refined copper and cement.

The SADC Trade Protocol Member States Southern African Development Community (SADC), a regional grouping of 13 African states came into force in 2008. The protocol promotes regional integration through trade development and to develop their natural and human resources for the mutual benefit of their people. Trade between the SADC member states is being conducted on reciprocal preferential terms and 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’ in the SADC region to be considered compliant with Rules of Origin. The Rules of Origin for SADC are product specific and not generic like the ones for COMESA.

Foreign Direct Investment Statistics

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

Below are U.S. Investment Pledges by Sector for 2009 and 2010.

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Sector

2009 (USD)

January/November 2010 (USD)

Agriculture

251,125,000

Construction

3,422,999

550,000

Education

2,500,000

Manufacturing

1,756,000

30,585,000

Real Estate

2,000,000

Service

1,000,000

Tourism

500,000

1,024,850

Total

260,303,999

34,159,850

Investment Pledges by Sector and Nationality in USD for the period January-November 2010.

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Investment by Country

Sector

Value in USD

American

Construction

Manufacturing

Real Estate

550,000

30,000,000

500,000

American British

Tourism

1,024,850

American/British/South Africa

Manufacturing

585,000

American/Zambian

Real Estate

1,500,000

Australian/Zambian

Manufacturing

553,000

Brazilian/South African

Mining

350,000,000

British

Agriculture

Energy

Manufacturing

Service

Tourism

Transport

5,900,000

5,000,000

4,300,000

10,500,000

1,241,000

500,000

British/Italian

Service

Tourism

500,000

90,277,500

British/Italian/Zambian

Service

2,100,000

British/Kenyan

Manufacturing

3,000,000

British/Kenyan/Zambian

Real Estate

20,000,000

British/Namibian

Real Estate

570,000

British/South African/Botswana

Manufacturing

921,000

British/South African/Zambian

Manufacturing

3,000,000

British/Swedish

ICT

Mining

500,000

6,000,000

British/Zambian

Agriculture

4,920,000

BVI/Israeli

Real Estate

25,250,000

Canadian

Tourism

Transport

750,000

500,000

Canadian/Mauritian/Senegalese

Agriculture

1,000,000

Canadian/Zambian

Manufacturing

Service

554,690,000

1,000,000

Chinese

Construction

Manufacturing

Mining

Service

Tourism

Transport

20,410,000

628,400,000

477,780,000

4,800,000

500,000

500,000

Cypriot

Manufacturing

1,470,000

Danish

Tourism

2,500,000

Djibouti/Kenyan

Construction

700,000

Dutch

Manufacturing

742,500

Dutch/Zambian

Tourism

2,950,000

Egyptian

ICT

1,350,000

Eritrean

Tourism

1,500,000

Eritrean/Italian/Zambian

Tourism

2,100,000

Eritrean/Zambian

Manufacturing

Mining

7,000,000

20,000,000

Ethiopian

Transport

600,000

Ethiopian/Somalian

Manufacturing

500,000

Greek/Thai

Construction

Manufacturing

1,100,000

2,100,000

Greek/Zambian

Mining

5,000,000

Indian

Agriculture

Construction

Energy

Health

ICT

Manufacturing

Mining

Service

Tourism

Transport

15,520,000

2,200,000

550,000,000

10,918,000

700,000

159,670,000

101,000,000

5,830,000

3,250,000

1,500,000

Indian/Zambian

Tourism

880,000

Irish/Zambian

Tourism

1,950,000

Italian

Manufacturing

11,000,000

Italian/Zambian

Manufacturing

Transport

40,000,000

500,000

Japanese

Manufacturing

15,844,000

Jersey

Construction

32,500,000

Kenyan/Zambian

Real Estate

57,200,000

Lebanese

ICT

Manufacturing

1,900,000

3,700,000

Lebanese/Sierra Leon/Zambian

Construction

1,200,000

Lebanese/Zambian

Manufacturing

6,400,000

Libyan/Zambian

ICT

147,000,000

Mauritian/Zambian

ICT

1,000,000

New Zealand/Zambian

Real Estate

1,500,000

Nigerian/Zambian

Energy

15,200,000

Norwegian

Mining

1,200,000

Omani

Mining

30,000,000

Palestinian

Manufacturing

1,100,000

Peruvian/Zambian

Construction

1,950,000

Russian

Agriculture

3,200,000

Russian/Zambian

Manufacturing

20,000,000

Singaporean

Mining

17,000,000

Slovenia

Service

956,000

South African

Agriculture

Construction

Health

Manufacturing

Service

Tourism

13,050,000

12,000,000

572,000

6,560,000

3,247,000

1,000,000

South Africa/British/Zambian

Tourism

923,000

South African/Trinidad

Tourism

1,432,000

South African/Zambian

ICT

Tourism

8,779,000

2,500,000

South African/Zimbabwean

Construction

Manufacturing

1,000,000

1,000,000

South Korean

Tourism

1,000,000

Sri Lankan

Real Estate

2,060,000

Swiss

Service

1,977,000

Swiss/Zambian

Education

600,000

Tanzanian

Service

10,000,000

Botswana

Tourism

10,000,000

Ugandan

ICT

500,000

Ugandan/Zambian

Real Estate

16,000,000

Zambian

Education

Manufacturing

Real Estate

Service

Tourism

214,000,000

294,657,350

126,864,000

1,000,000

1,000,000

Zambian/Dutch

Tourism

1,058,000

Zambian/South Africa

Construction

Service

866,630

1,000,000

Zambian/Zimbabwean

Manufacturing

Service

500,000

10,000,000

Zimbabwean

Agriculture

564,000

TOTAL

4,333,612,830

Source: Zambia Development Agency

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Investment by U.S. Companies in Zambia

Value in USD

Cargill Cotton Ginners Ltd

USD 18 million

National Milling Corporation

(Seaboard Corporation)

USD 20 million.

Pioneer DuPont Zambia

(Pioneer Hi-Bred International Inc)

USD 4 million

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Actual Investment by other Nationals in Zambia

Value in USD

Albidon Zambia

(Chinese)

USD 37 m

Pick N Pay

(Woodlands, Lusaka)

(South African)

USD 25 m

Zambia-China Economic and Trade Cooperation Zone (Chambishi MFEZ)

(Chinese)

USD 780 million

Lafarge Cement

(French)

USD 737.5 billion

Maamba Collieries

(Singaporean)

USD 600

Protea Hotel Arcades Limited

(Zambian)

USD 1.8 million

Estimated current FDI stock as a percentage of GDP, according to ZDA: 10%

Estimated FDI inflows as percentage of GDP, according to ZDA: 57%

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