Doing Business
in Zambia
A unique flavour
March 2013
Table of contents
1. Forward
1
2. Introduction
3
3. High-level overview of Zambia
5
Introduction5
Political and judicial environment
7
Economic environment
8
- Overview
8
- Mining
13
- Agriculture
16
- Energy
20
- Financial services
24
- Tourism
30
- Transport
32
- Telecommunications
34
Stock exchange
37
4. General business regulations
Company registration
ZDA Investment license
Exchange Controls
Employment permit
Temporary employment permit
Sector specific permits
Minimum wages and conditions
of employment
Social security
Mergers and acquisitions
Accounting and auditing
2
39
39
42
42
43
43
44
46
46
47
48
5. Taxation
50
Introduction50
Tax administration
50
PAYE51
Company Tax
52
WHT55
Capital Gains Tax
55
VAT56
Customs & Exercise
57
PTT58
Investment incentives
59
Company vs. Branch
62
6. About Deloitte The global firm
Deloitte in Zambia
63
63
64
7. Key Deloitte contacts
65
8.Glossary of terms
66
Doing Business in Zambia – A unique flavour
3
1. Forward
I am delighted to present the first edition
of Doing Business in Zambia, which I trust
will be handy for businesses and individuals
seeking an understanding of the Zambian
business environment.
Zambian’s economic performance over
the past decade has been impressive, driven
by:
•• Improved macro-economic management.
This has resulted in general economic
stability in contrast to pre 2000 years of
significant foreign exchange rate volatility,
high inflation, rapid currency depreciation
and high interest rates.
•• Low debt levels. In 2005, Zambia qualified
for significant debt relief under the World
Bank’s Highly Indebted Poor Countries
(“HIPC”) debt relief initiative. This has
provided the country a major impetus
for sustained economic growth. GDP
now stands at approximately US$20
billion, nearly double what it was in
the mid-2000’s.
•• A resurgence of the mining industry,
propelled by increased global demand for
metals, particularly in China. The outlook
for mining looks bright, with sector
growth expected to accelerate over
the next three to four years. Based on
current pipeline of major investments,
Zambia’s copper output may almost
double by 2016.
1
Chisanga Chungu
Managing Partner
[email protected]
Zambia has undergone
an unprecedented period
of robust economic growth
over the past several years,
a trend which appears set to
continue
Looking to the future, I see Zambia’s
economic outlook as promising. According
to the Economist Intelligence Unit (“EIU”),
Zambia’s economic growth trajectory
is expected to continue at a robust
annual rate of about 7% over the period
2013 to 2016. The one significant
bottleneck to Zambia’s future economic
growth is the relatively underdeveloped
infrastructure particularly in the power
and transport sectors. Recognising this
challenge, the Zambian Government
has embarked on a significant 5 year
investment program, which should assist
un-lock Zambia’s economic growth
potential:
•• Road infrastructure is projected to
improve significantly as a five-year
US$5.6 billion project to upgrade
approximately 8,000km of road
network (20% of the country’s road
network) is implemented, under
the Link Zambia 8,000 Programme.
As I present our first edition of this
booklet, I thank all the Deloitte professionals who have worked tirelessly and
taken time to share their insights.
•• Based on current planned projects,
Zambia’s power generation capacity
could increase to approximately 4,700
MW over the next 5 years, from
the current c.1,800MW.
Doing Business in Zambia – A unique flavour
2
2. Introduction
Purpose of booklet
The primary purpose of this booklet is to
provide potential investors, businesses and
interested individuals with information
fundamental to doing business in Zambia.
The information we present in this booklet
is intended to be a guide and accordingly,
is not exhaustive.
Deloitte section of this booklet.
Finally, this booklet is necessarily based
on conditions existing at the date of
publication and will continuously evolve as
changes occur in the Zambian economic
and regulatory environment.
Readers are strongly advised to seek
professional advice prior to relying on
any information contained herein. To
contact Deloitte in Zambia please refer to
the Contacts section of this booklet. For
information on how Deloitte can assist
you in Zambia including details of our core
service offerings, please refer to the About
This booklet is aimed at
providing information relevant
to Doing Business in Zambia to
potential investors, businesses
and other interested individuals
3
Located in Southern Africa, Zambia is a landlocked country covering
a landmass of approximately 750,000 sq. km, with a population of
some 13.6 million people
Zambia - Key statistics
Population (millions): 13.6 million
Land mass: 752,614 sq. km
Number of neighboring countries: 8
No. of ethnic groups: 72
Year attained independence: 1964
Business language: English
Primary exports: Copper & Cobalt
Capital City: Lusaka
Currency: Kwacha
Time zone: GMT + 2
Zambia is a landlocked country in
the Southern Africa sub-region. It is
bordered by Tanzania in the North East,
Malawi in the East, Mozambique in
the South-East, Zimbabwe in the South,
Botswana and Namibia in the South-West,
Angola in the West and the Democratic
Republic of Congo in the North.
It is estimated that approximately 40%
of the water resources in Central and
Southern Africa are found in Zambia,
which gives the country immense
irrigation and hydro-power potential.
Zambia’s climate is characterised by three
distinct seasons: cool and dry from May
to August, hot and dry from September
to November and hot and wet from
December to April. Average monthly
temperatures remain above 20°C for most
of the year.
Doing Business in Zambia – A unique flavour
4
3. High-level overview
of Zambia
Zambia’s population is estimated at 13.6 million and comprises
approximately 72 Bantu-speaking ethnic groups
Introduction
Zambia was a former colony of Great
Britain and attained political independence
on 24 October 1964. Zambia’s population
is estimated at 13.6 million, with
approximately 46% of the population
representing an active and productive
workforce, aged between 15 and 64
years.
The population comprises approximately
72 Bantu-speaking ethnic groups. Almost
90% of Zambians belong to one of nine
main ethno-linguistic groups namely;
Nyanja-Chewa, Bemba, Tonga, Tumbuka,
Lunda, Luvale, Kaonda, Nkoya and Lozi.
English remains the official business
language for the country.
Zambia’s key export products are copper
and cobalt. However the country also
has a number of non traditional exports
including, sugar and sugar confectionaries,
dairy products, bird’s eggs and natural
honey.
Zambia has significant world class tourism
attractions including the Victoria Falls to
the South and 19 national game parks
strewn around the country.
5
Zambia
The Zambian Government is undertaking economic
diversification to exploit other components of the country’s
rich minerals resource base
Zambia’s economy has experienced
strong growth in recent years, with real
GDP growth of more than 6% per year
for the past five years. Privatization of
government-owned copper mines in
the late 1990s relieved the Government
from sustaining mammoth losses
generated by the industry and greatly
increased copper mining output and
profitability to spur economic growth.
In 2005, Zambia qualified for debt relief
under the Highly Indebted Poor Country
Initiative, consisting of approximately US$6
billion in debt relief. Nevertheless, poverty
remains a significant problem in Zambia
with approximately 60% of the population
below the poverty line, despite a stronger
economy. However, the medium-term
economic outlook appears favourable,
with inflation projected to remain in
single digits. The current inflation rate is
estimated at 6%.
The Zambian economy has historically
been based on the copper mining industry.
However, the Zambian Government is
undertaking economic diversification
to reduce the economy’s reliance on
the copper mining industry and exploit
other components of Zambia’s rich
resource base by promoting agriculture,
tourism, gemstone mining, and
hydro-power. In 2012, the Government
raised USD750 million via a Eurobond
issue to cover a funding gap for
infrastructure projects. The infrastructure
investment is expected to boost growth
by up to two (2%) percentage points per
annum.
The Zambian Government recently took
advantage of the current low level of
inflation and relatively stable economy to
rebase the Zambian currency by dividing
every denomination by 1,000, effective
1 January 2013.
Doing Business in Zambia – A unique flavour
6
Zambia operates a multi-party democratic system, with
Presidential and Parliamentary elections held every five years
The Political and Judicial Environment
Political Overview
System of Government
Republic, Universal Suffrage
No. of parliamentary seats
158, with 8 members appointed by the President
Date of last Presidential election
September 2011
Year of next election
2016
Name of current ruling party
Patriotic Front
Duration of Presidential term
5 years
Current Head of State
Mr. Michael Chilufya Sata
Main opposition parties
Movement for Multi Party Democracy
United Party for National Development
System of governance and arms of
Government
•• Zambia is a multi-party democratic
country, with three separate arms of
Government namely, the Executive,
Legislature and the Judiciary.
•• The Executive is headed by the President,
who has the prerogative to appoint
a Vice President.
•• Both the President, who must belong to
a registered political party, and members
of Parliament are elected via national
elections.
•• The President is elected by popular vote
for a five-year term. Presidents are eligible
for a maximum of 2 five year terms.
7
•• Cabinet Ministers are appointed by
the President from the pool of both
elected and nominated members of
Parliament.
•• Parliament is headed by a Speaker and
comprises 150 elected and up to 8
members nominated by the President.
•• The Zambian legal system is based on
English common law and customary law
principles.
•• The Supreme Court is the highest court
of appeal and is headed by the Chief
Justice. The justices are appointed by
the President.
Zambia’s GDP now stands at US$20 billion, nearly double what
it was in the mid 2000s
The Economic Environment - Overview
Recent trends in economic
performance
•• Since 2004, Zambia has undergone
improved macro-economic stability in
contrast to previous years of significant
foreign exchange rate volatility, high
inflation, rapid currency depreciation,
and high interest rates.
•• In 2005, Zambia qualified for
significant debt relief under the World
Bank’s Highly Indebted Poor Countries
debt relief initiative. The Highly
Indebted Poor Countries relief has
provided
withtöbb
a major impetus
6-10
11-20Zambia
20-nál
for sustained economic growth. GDP
now stands at US$20 billion, nearly
double what it was in the mid 2000s.
Historical GDP/inflation movement (%)
20
18
16
14
12
10
8
6
4
2
0
2004 2005 2006
Inflation
2007
2008 2009
2010
2011
2012
Real GDP Grow
Source: Bank of Zambia
9,0
8,5
Recent historical economic trends
8,0
7,5
Indicator
2008
2009
2010
2011
2012
Nominal GDP (US$ m)
14 705
6,5
13 398
16 855
19 742
20 939
1 540
1 643
1 737
13,0
13,3
13,6
7,0
6,0
GDP per capita
(US$ at PPP)
1 408
1 479
Population (m)
12,2
4,5
12,5
5,5
5,0
4,0
Forex rate (ZMK: US$)
4 832
4 641
2013f4 796
External debt stock
(US$ m)
2 975
3 039
3 689
2014f 5 117 2015f
4 619
5 0892016f
5 442
Source: EIU, Deloitte analysis
800 000
Doing Business in Zambia – A unique flavour
8
9 000
8 000
Despite unfavourable global economic conditions, the Zambian
economy has remained resilient, with annual GDP growth of 7%
for 2012
•• Despite the recent adverse global
economic conditions, Zambia has
continued to experience strong output
performance. In 2011, GDP grew by
6.8%. GDP growth has continued to
remain resilient with a growth of 7%
forecast for 2012.
•• Inflation has declined significantly from
c.18% in the mid-2000’s to c.6% in
2012.
•• Further, Zambia’s exchange rate has
remained relatively stable over recent
years, with the currency depreciating
by less than c.7% between 2008 and
2012.
•• This low level of inflation and
relatively stable exchange rate
provided the country’s Central Bank,
BOZ, an opportune time to rebase
the Zambian currency by dividing every
denomination by 1,000, effective 1
January 2013.
•• In September 2012, Zambia had
a successful maiden entry into
the international bond market through
the US$750 million bond issuance with
a coupon of 5.375%, one of the lowest
prices ever for an inaugural issue by
a Sub-Sahara African country. The bond
issue was 15 times over subscribed.
•• In order not to undermine long-term
debt sustainability, the Government
proposes to apply the bond proceeds
primarily on energy and transport
infrastructure as summarised in
the table opposite.
Application of proceeds from the US$750m issue
Project
Energy (generation and transmission)
255.0
Transport (road and rail)
430.0
Human capital and access to finance
Fees and transaction costs
Discount premium
Total
Source: 2013 Zambia Budget speech
9
US$ million
49.0
1.4
14.6
750.0
Zambia’s economic outlook appears bright, on the back of increasing
investments in various core sectors of the economy
Economic forecasts
Indicator
2012
2013f
2014f
2015f
2016f
Nominal GDP (US$ m)
20,939
21,528
23,713
30.1
31.9
GDP per capita
(US$ at PPP)
1 ,737
1 ,859
2,014
2,087
2,164
Population (m)
13.6
13.9
14.2
15.2
15.7
Forex rate (ZMK: US$)
5 ,089
5 ,712
5,787
5,756
6,135
External debt stock
(US$ m)
5 ,442
5 ,995
6,601
n/a
n/a
n/a: data not available Source: EIU, Deloitte analysis
Economic outlook
•• According to the EIU, Zambia’s economic
growth trajectory is expected to continue
at a robust annual rate c.7% over
the period 2013 to 2016. The growth
will be led by increasing investments
in mining, agriculture, power and
construction:
- Growth in mining is expected to
accelerate in 2014-15 as investments
at the Kansanshi, Lumwana and
Konkola mines, as well as First
Quantum’s new Trident mine,
approach completion.
- Agricultural production, especially of
the country’s staple food, maize, looks
set to be strong in 2012-13 supported
by Government’s continued efforts to
assist the sector yield results.
- Based on current planned projects,
Zambia’s power generation capacity
may increase to c. 4,700 MW over
the next 5 years, from the current
c.1,800MW.
- Road infrastructure is projected to
improve significantly as a five-year
US$5.6 billion project to upgrade
approximately 8,000km of road
network (20% of the country’s road
network) is implemented, under
the Link Zambia 8,000 Programme.
- Construction growth will be driven
mainly by planned investments in
mining, power and the road network.
Doing Business in Zambia – A unique flavour
10
20
18
16
14
12
10
8
6
4
2
0
Inflation is projected to average c.6.4% between 2013 and 2016,
down from 8.3% in 2011
2004 2005 2006 2007 2008 2009 2010 2011
6-10
11-20
2012
20-nál több
•• The Kwacha’s value is expected to be
supported by robust growth in copper
production levels over the period
to 2016, significant Foreign Direct
Investment (“FDI”) and public borrowing
(e.g. the successful bond issue of
US$750 million in September 2012).
Forecast GDP / Inflation movement (%)
9,0
8,5
8,0
7,5
7,0
6,5
•• Inflation which averaged 8.3% in 2011,
is forecast to decline further, averaging
c.6.4% over the period 2013 to 2016
6,0
5,5
5,0
4,5
4,0
2013f
2014f
2015f
Inflation
2016f
Real GDP Grow
Source: EIU, Deloitte analysis
800 000
9 000
700 000
8 000
7 000
6 000
500 000
5 000
400 000
4 000
300 000
3 000
200 000
2 000
100 000
-
US$ / MT
MT
600 000
1 000
2008
2009
2010
2011
2012e
-
11
7 000
60
The Zambian Government aims to create some one million jobs over
the five-year period to 2017, underpinned by the National Strategy
for Industrialisation and Job Creation
•• As part of the newly formulated
National Strategy for Industrialisation
and Job Creation, the Government has
identified four priority areas of focus
for growth and job creation; namely,
Agriculture, Tourism, Infrastructure and
Manufacturing. Under this initiative,
the Government aims to create
approximately one million new jobs over
the next five years.
Jobs to be created over five-year period to 2017
Sector
No. of new
jobs over 5
year period
Agriculture
255.0
Tourism
300,000
Infrastructure (energy & transport)
110,000
Manufacturing
Tourism
90,000
300,000
Total
1,050,000
Source: 2013 Zambia Budget speech
Doing Business in Zambia – A unique flavour
12
6-10
11-20
11-20
20-nál több
2004 2005 2006
2007
2008 2009
2007
2008 2009
2010
2010
2011
2012
2011
2012
20-nál több
9,0
8,5
9,0
8,0
8,5
7,5
8,0
7,0
7,5
6,5
7,0
6,0
The mining sector is the cornerstone
of Zambia’s economy,
6,5
5,5
6,0
with copper and cobalt being the main
metals mined
5,0
5,5
4,5
5,0
4,0
2013f
4,5
The Economic Environment - Mining
2014f
2015f
2016f
4,0
2013f
2014f
2015f
2016f
Overview
700 000
800 000
8 000
9 000
7 000
8 000
6 000
7 000
5 000
6 000
4 000
5 000
3 000
4 000
2 000
3 000
1 000
2 000
1 000
500 000
600 000
400 000
500 000
300 000
400 000
200 000
300 000
100 000
200 000
-
2008
2009
Copper exports (MT)
2008
2009
2010
2010
2011
2012e
Average copper price (US$/MT)
2011
2012e
Historical cobalt exports and prices
7 000
60
6 000
7 000
5 000
6 000
4 000
5 000
3 000
4 000
2 000
3 000
1 000
2 000
1 000
50
60
40
50
-
30
40
20
30
10
20
2008
2008
2009
2009
Cobalt exports (MT)
2010
2010
2011
2011
2012e
10
-
Average cobalt price (US$/lb)
Source: 2008 to 2012 Budget speeches, BOZ, CSO reports,
Deloitte analysis
13
2012e
US$ / lb
US$ / lb
100 000
US$ / MT
US$ / MT
9 000
600 000
700 000
•• The outlook for mining looks bright,
with sector growth expected to
accelerate over the next three to four
years. Based on current pipeline of
major investments, Zambia’s copper
output could almost double by 2016.
•• On the pricing side, although copper
prices weakened somewhat in
2012, most forecasts indicate that
copper prices will remain robust over
the medium term, driven by demand
in China.
800 000
MT
•• Zambia is one of the world’s largest
producers of copper and cobalt. It also
has considerable reserves of selenium
and silver, in addition to minor
quantities of gold.
Historical copper exports and prices
MT
•• Zambia has a vast endowment of
metals, gemstones, industrial minerals
and potential energy resources
including coal, hydrocarbons, and
more recently, uranium.
MT
5
6-10
MT
-5
2004 2005 2006
2
0
With a number of significant projects currently underway,
the outlook for Zambia’s mining industry appears bright
Zambia: Key copper mining companies
Entity
Ownership
Konkola Copper Mines Plc
Kansanshi Mining Plc
Mine name /
location
Annual 2011
production
(MT ‘000)
Vedanta Resources Plc (51%)
Konkola
166
Zambia Copper Investments (28.4%)
Nchanga
ZCCM Investment Holdings Plc
(“ZCCM-IH”) (20.6%)
Napundwe
First Quantum Minerals Ltd (80%)
Kansanshi
ZCCM-IH (20%)
Mopani Copper Mines Plc
230
Sentinel
Glencore International Plc (73.1%)
Nkana, Mufulira
250
First Quantum Minerals Ltd (16.9%)
ZCCM-IH (10%)
Lumwana Mining
Corporation
Barrick Gold Corporation (100%)
Solwezi
146
NFC Africa Mining Plc
China Non Ferrous Metals Mining
Group Limited (85%)
Chambeshi
90
ZCCM-IH (15%)
Source: Respective company websites, Deloitte research
Doing Business in Zambia – A unique flavour
14
Based on current pipeline of major investment, Zambia’s copper
output may almost double by 2016
Key players in Zambia’s mining sector
Future outlook
•• Historically, the copper mines in Zambia
were owned by the state-controlled
Zambia Consolidated Copper Mines
Limited (“ZCCM”).
•• There are a number of significant
projects currently underway, which are
expected to transform the copper mining
landscape in Zambia:
•• By the early 2000’s, the Government had
privatised the state-owned copper mines
in an attempt to return the industry
to profitability and to boost economic
growth.
- Konkola Copper Mines, owned by
London listed Vendeta, is investing
US$180million at Nchanga, which is
expected to breath an additional 25
years of life in the mine.
•• Zambia’s mining sector is currently
dominated by entities owned by multinationals, as depicted in the table opposite.
- Canadian-owned First Quantum’s
Sentinel project is expected to initially
produce 150,000 MT of copper
per annum, subsequently rising to
300,000 MT of copper per annum.
The capital cost is expected to be in
the region of US $1 billion.
- Swiss-owned Mopani (Glencore) is
projecting an additional 150,000
tonnes per annum and has finalised
a feasibility study on a new project to
invest an additional US$1.5 billion in
Zambia.
•• The above projects, coupled with other
on-going investments in the sector,
could nearly double Zambia’s copper
output to c.1.6 million tonnes by 2016.
15
7,000
6,000
5,000
4,000
3,000
2,000
1,000
Zambia’s agricultural sector, which- is 2003
dominated
by maize, accounts
2004 2005 2006 2007
2008 2009 2010
for a fifth of national GDP
2011
The Economic Environment - Agriculture
Introduction
Zambia: GDP contribution by sector
•• Zambia’s agricultural sector accounts for
21% of GDP, with the balance coming
from industry (35%) and services (44%).
21%
•• It is estimated that the agricultural sector
employs about 70% of the population.
•• The sector has immense potential
to drive economic growth, given
the country’s vast expanses of arable
2010 2011 land
2012 and free flowing easily accessible
water supplies:
- Zambia has approximately 752,000
sq.km of landmass of which 58% is
arable. Yet only 15% of its of arable
land is currently used for farming.
- Small scale farmers supply about
70% of national crop output, despite
limited access to finance.
44%
Agriculture
35%
Industry
Services
Source: EIU
Zambia’s top five crops by production (MT ‘000)
Crop
2009 /
2010
2010 /
2011
%
change
Key crops produced
3 000
Maize
2 795
3 020
8%
•• Zambia’s primary agricultural output
crop is maize, the country’s staple. This
is partly driven by:
Wheat
2 500
172
237
38%
253
147
-42%
Groundnuts
165
139
-16%
Soya beans
112
116
4%
2016f -
Generous guaranteed minimum
prices; and
- Provision of subsidised inputs to small
and medium scale producers.
•• Agricultural experts state that crop yield
9rates
000 are currently low compared to
global
standards.
8 000
3 500
Sweet
2 000
potatoes
1 500
1 000
Source: Ministry of Agriculture & Livestock statistics
Note:
500 In addition to the above, sugar is another key agricultural
output for Zambia. Production is dominated by Zambia Sugar Plc,
which accounts for over 90% of the country’s output. c.55% of
sugar production is exported, 10%, to the EU. Annual sugar output is
Maize tonnes.
Wheat
Sweet
estimated at 450,000
potatoes
7 000
Doing Business in Zambia – A unique flavour
6 000
2009 / 2010
MT
5 000
16
2010 / 2011
Groundn
4,000
30%
3,000
20%
2,000
10%
1,000
-
2003
2004
2005
2006
2007
2008
2009
2010
2011
0%
A number of initiatives are being implemented to
improve yields
21%
•• Government has embarked on a number
of initiatives to improve yields, including:
44%
- Investment in training of small scale
famers;
5%
- Investment in research and
development; and
5%
- Promotion of local production of key
35%
inputs such as fertilisers and seeds.
Zambia’s top five crops by production (MT)
3 500
3 000
2 500
2 000
1 500
1 000
500
Maize
Wheat
Sweet
potatoes
2009 / 2010
20
17
18
Groundnuts
Soya beans
2010 / 2011
18
18
16
15
16
14
12
14
13
Zambia’s agricultural sector has a number of players including
the Ministry of Agriculture and the Food Reserve Agency
Key players in Zambia’s agricultural
sector
•• Key players include:
The Ministry of Agriculture &
Livestock: Sets policies and provides
farmer input support.
- Food Reserve Agency: Responsible
for crop marketing and food
storage.
- Commercial farmers: There are
various commercial farms in
the country including:
Zambia’s top 5 crops yield rates (MT per Ha)
Crop
2009 /
2010
2010 /
2011
% change
Maize
2.25
2.23
-1%
Wheat
6.33
6.31
0%
Sweet potatoes
3.57
3.23
-10%
Groundnuts
0.61
0.62
2%
Soya beans
1.80
1.90
6%
Source: Ministry of Agriculture & Livestock statistics
- Mpongwe Farms, a division of
Zambeef which produces over
50,000 tonnes of crop (wheat,
maize, soya) ; and
- Zambia Sugar Plc, the country’s
largest sugar producer with
a milling capacity of 450,000
tons per annum.
- Small-scale farmers i.e. those with
less than two hectares of land:
The are fragmented and currently
account for c.70% of national
crop output.
- Various associations: These aim
to protect the interest of their
members and include the Zambia
National Famer Union and Zambia
Coffee Growers Association.
Doing Business in Zambia – A unique flavour
18
The Zambian Government recognises the agricultural sector’s
significant potential and has implemented targeted incentives to
support growth
Government incentives
•• The Government is keen to support
growth in the agricultural sector given
its immense potential to alleviate
poverty. 52% of the approximately
one million jobs that the Government
targets to create over the next five
years, are in the agricultural sector.
•• Promoting agriculture is one of
the Governments key strategies to
diversify the economy from over
reliance on mining. Agriculture related
incentives include:
- Agricultural activities currently enjoy
concessionary corporation tax rates
of 10% compared to the standard
rates of 30% – 35%;
- Dividends from agricultural activities
are exempt from WHT for the first 5
years; and
- Designated farm blocks have been
set up that can be accessed by both
local and international investors.
These are pre surveyed blocks for
agro purposes where Government
is providing/installing basic
infrastructure such as roads, schools,
health facilities, dams, and electricity.
•• A number of crops have been
prioritized for investment including
coffee, cotton, tobacco, sugarcane,
pineapples, floricultural and
horticultural crops.
19
Zambia’s agricultural regions
Province
Annual rainfall
Suitable crop /
activity
Southern and
parts of Eastern
and Western
Less
than 800 mm
Maize, cotton,
sesame, millet,
sorghum,
groundnuts,
beef, dairy
Lusaka, Central,
Southern and
Eastern
800 mm
to 1,000 mm
Maize, cotton,
soya beans,
wheat, beef,
dairy, vegetables,
tobacco
Western
800 mm
to 1,000 mm
Maize, rice,
cashew nuts,
cassava, millet,
vegetables,
timber, beef,
dairy, poultry, fish
Northern, Luapula,
Copperbelt,
North-Western
1,000 mm
to 1,500 mm
Maize,
pineapples,
millet, rice,
sorghum,
coffee, beans,
sugarcane,
cassava,
groundnuts and
fish farming
Source: Ministry of Agriculture & Livestock website
Zambia’s power output is dominated by hydro primarily generated
by the state owned ZESCO
The Economic Environment - Energy
Power generation capacity
Power station
Current
capacity
(MW)
Projected
capacity
by 2018
(MW)
Estimated
completion
date
Type
Kafue Gorge
990
990
Existing
Hydro
Kariba North Bank
720
720
Existing
Hydro
Victoria Falls
108
108
Existing
Hydro
LHPC
55
300
2018
Hydro
CEC
80
880
2018
Gas/Hydro
Other ZESCO small
hydros
24
68
2018
Hydro
Kafue Gorge Lower
_
750
2017
Hydro
Kariba North Bank
Extension
_
360
2013
Hydro
Itezhi-Tezhi
_
120
2015
Hydro
Ndola Energy
Company
_
100
2013
HFO
300
2015
Coal
Maamba
Total
1,869
4,696
Source: ZESCO, Maamba, CEC websites & other Deloitte research sources
Doing Business in Zambia – A unique flavour
20
Based on current planned projects, Zambia’s power generation
capacity is to increase by two and a half times over the next five
years, from the current c.1,800MW
Overview
Projected power capacity
•• Zambia has abundant hydroelectric
resources and has historically met
most of its electricity needs from its
own hydroelectric stations, which are
operated by the state-owned ZESCO
Liimited (“ZESCO”).
•• Zambia’s current installed hydro-power
capacity is less than 2000MW,
while resource potential stands at
an estimated 6000MW.
•• Hydro power accounts for 99% of
electricity production with the major
sources being Kafue Gorge, Kariba
North Bank and Victoria Falls power
stations.
•• Zambia’s mining sector is the single
largest power consumer of power
taking up over 50% of Zambia’s total
power output.
•• Zambia was a large regional electricity
exporter, but in November 2005
ZESCO was forced to suspend exports,
as generation capacity fell owing to
the start of rehabilitation work on
the country’s ageing main hydroelectric power stations.
•• The fall in generation was so steep
that electricity had to be imported
from South Africa and the DRC.
Matters were worsened in 2007 when
South Africa suspended its own power
exports as the region fell victim to
widespread power shortages.
21
•• Based on projects currently in
the pipeline, Zambia’s power
generation capacity could increase to
c. 4,700 MW over the next five years.
This excludes the Batoka Gorge project
in respect of which the Zambezi River
Authority (“ZRA”) has recently invited
Expressions of Interest to perform
a feasibility study and environmental
and social impact assessments.
Should Batoka go ahead, it will be
a 1,600-MW hydroelectric project
and is expected to take seven to
eight years from date of construction.
Output will be shared equally between
Zambia and Zimbabwe.
•• ZESCO has recently announced that it
intends to raise up to ZMK10 trillion
(US$2 billion) through a mixture of
different type financing instruments
to support various hydro power
generation projects in the country.
The electricity supply industry primarily comprises the vertically
integrated state utility, ZESCO, and an energy service company CEC
that purchases power from ZESCO and supplies it to the mines
Key players in Zambia’s electricity
sector
•• The key players in Zambia’s electricity
industry include:
- ZESCO: A vertically integrated
generation, transmission, distribution state utility which currently
accounts for 99% of the country’s
electricity generation capacity.
The company produces the bulk of
its power from three main hydro
power plants, namely Kariba North
bank, Kafue Gorge and Victoria Falls
power stations. In addition, ZESCO
generates limited amounts of power
from mini hydro power stations
including Chishimba, Lusiwasi and
Shiwang’andu.
- CEC: A LuSE listed company that
was created following the privatisation of ZCCM power division in
1997. Currently, CEC’s principal
assets comprises transmission
and distribution assets in
the Copper belt region of Zambia.
It is estimated that the company
purchases 55% of the power
generated by ZESCO, which it
supplies to the mines. As part
of its growth strategy, CEC has
recently announced that it would
be partnering with a Nigerian
investment bank to develop
the Kabompo gorge hydro-power
project in northwestern Zambia
(34MW) and five Luapula river
hydro power projects with
an estimated combined capacity of
800MW.
- LHPC: A privately owned
independent power producer
created following the privatisation
of ZCCM. The Company has
an installed capacity of 55MW
and currently sells all its power to
ZESCO under a power purchase
agreement. LHPC’s vision is to grow
generation capacity to more than
300MW by 2018.
- ERB: The regulating body of
Zambia’s energy sector, including
power.
Doing Business in Zambia – A unique flavour
22
Zambia’s other key energy sources comprise
petroleum and coal
Other key energy sources
•• Apart from electricity, Zambia’s other
key energy sources comprise:
•• Petroleum: Zambia imports all of
its petroleum needs primarily via
a 1,700km pipeline which runs
from Dar es Salaam to Ndola, in
the country’s Copperbelt Province.
The country has one petroleum
refinery plant with a design capacity of
800,000 tonnes per annum
•• Coal: proven coal deposits are
estimated at over 30 million tonnes.
Maamba Collieries Limited is
the largest coal mining company
in Zambia and it is in the process
of investing in a coal based
300MW power generation plant at
an estimated capital outlay of approximately US$750 Million.
23
There have been a number of new entrants into Zambia’s
banking sector over the past few years, following improvements
in the financial services regulatory framework macro-economic
management
The Economic Environment - Financial Services
Overview
•• Pre-2006, the banking system was
small and under-developed. However,
over the past few years a number of
new banks have entered the market
including:
- Access Bank of Nigeria;
- Ecobank from West Africa
- First National Bank of South Africa
- United Bank of Africa of Nigeria;
and
•• Currently, there are 33 micro-financial
institutions in Zambia excluding
leasing, building societies and bureau
de change, which all fall under
the non-bank financial institutions
category. Non-bank financial
institutions refers to institutions or
persons authorised by law or the Bank
of Zambia to engage in banking
business not involving the receipt of
money on current account subject to
withdrawal by cheque.
- Rabo Bank of Netherlands who have
acquired 49% of Zambia National
Commercial Bank.
•• Improvements in the financial services
regulatory framework coupled
with improved macro-economic
stability have had a positive impact
on Zambia’s financial system over
the recent past.
•• Among the group of seven foreign
banks, three large banks (Barclays,
Standard Chartered and Stanbic Bank),
play a dominant role in Zambia’s
financial system.
Doing Business in Zambia – A unique flavour
24
Barclays, Finance Bank and ZANACO, have the widest branch
network in Zambia
Branch network for commercial banks
Registered Bank
Number
of branches
AB Bank
1
Access Bank Zambia
5
African Banking Corporation
6
Bank of China
2
Barclays Bank Zambia
55
Cavmont Capital
16
Citibank Zambia
2
Ecobank Zambia
5
Finance Bank Zambia
51
First National Bank Zambia
9
First Alliance Bank
5
Indo-Zambia Bank
18
International Commercial Bank
2
Intermarket Banking Corporation
7
Investrust Bank
19
Stanbic Bank Zambia
19
Standard Chartered Bank
20
United Bank for Africa Zambia
Zambia National Commercial Bank
Source: Bank of Zambia
25
4
59
2 000
2 500
1 500
2 000
1 000
1 500
500
1 000
-500
Maize
Wheat
Sweet
potatoes
-
Groundnuts
Soya beans
The total Maize
number of banks
has increased
fromGroundnuts
10 in 1990 Soya beans
Wheat
Sweet
potatoes
to 18 in 2012
2009 / 2010
2010 / 2011
Number of Banks: 1990 - 2012 2009 / 2010
20
18
2010 / 2011
18
18
16
15
10
20
18
16
14
18
15
14
14
10
18
13
16
12
14
12
16
13
10
10
5
0
5
1990
1992
0 Bank of Zambia
Source:
1990
1992
1994
1996
1994
1998
1996
2000
1998
2000
2002
2004
2002
2004
2010
2010
2012
2012
Loans
and advances historical development
14,000
12,000
14,000
1
10,000
12,000
8,000
10,000
6,000
8,000
4,000
6,000
2,000
4,000
‐ 2,000
‐
2008
2009
2010
2012
ZMK 'b
2008
2009
2010
2012
ZMK 'b
Source: Bank of Zambia 2011 annual report
Doing Business in Zambia – A unique flavour
26
140
1.2%
120
1.0%
100
0.8%
80
0.6%
60
0.4%
40
The responsibility
to regulate Zambia’s0.2%
financial system lies with
20
the BOZ,- as provided under the Bank of
Zambia Act, of 1996
0.0%
2003 2004 2005 2006 2007 2008 2009 2010 2011
Regulation
New capital adequacy framework
•• Zambia’s financial system is regulated
by the BOZ, whose stated mission is
“ to achieve and maintain price and
financial systems stability for balanced
macroeconomic development”.
•• The BOZ issued a new capital
adequacy framework in January 2012.
Prior to January 2012, the minimum
capital requirement for commercial
banks operating in Zambia was
ZMK12 billion (US$2.4 million).
The new capitalisation requirement are
linked to the shareholding structure
as follows:
•• The BOZ draws its
8%authority from
the Bank of Zambia Act, of 1996.
21%
10%
•• As the country’s Central Bank,
the BOZ’s primary functions include:
- Licensing, supervision and regulation
of the activities of banks and
financial institutions;
- For foreign-owned banks
the minimum requirement is now
ZMK520 billion (US$104 million); and
- Issuance of notes and coins and
regulation of all currency related
matters;
- For local banks , a lower threshold
of ZMK104 billion (US$20 million)
- Supporting the efficient operation of
the exchange system; and
•• A foreign owned bank refers to a bank
with more than 49% of its equity by
foreign entities.
61%
- Acting as adviser to the Government
on matters relating to economic
and monetary management.
2011 Loans and advances by sector
20%
29%
Personal Loans
Agriculture
5%
Manufacturing
Wholesale & Retail Trade
5%
Transport, Storage & Comms
10%
18%
12%
Source: BOZ 2011 annual report
27
Financial Services
9.00
Others
8.50
8.00
7.50
7.00
6.50
6.00
Effective 1 January 2013, Zambia rebased its currency, an initiative
expected to bring several benefits to individuals, organisations and
the country as a whole
Currency rebasing
•• On 23 January 2012, GRZ gave
approval to BOZ’s recommendation to
rebase the Zambian Kwacha, effective
1 January 2013.
•• The rebasing involved dividing
Zambia’s currency, the Kwacha, by
one thousand (1,000). To illustrate,
ZMK50,000 became ZMW50
following the rebasing exercise.
•• The key drivers for implementing
the rebasement are as follows:
- To facilitate easier business
transactions: Use of smaller units
simplifies accounting and reduces
the risk of errors arising from data
input and time spent reviewing such
financial data.
- To increase confidence levels in
the Zambian currency: People tend
to have less confidence in currencies
with numerous zeros.
- To reduce the costs associated with
adapting standard accounting
packages: Most accounting
packages are developed in countries
where currencies have significantly
fewer zero’s compared to Zambia.
Accordingly, Zambian entities
purchasing these accounting
packages, are required to customize
them by increasing the field size to
accommodate multiple zeros, at a cost.
- To encourage an efficient payment
system: The adoption of a rebased
currency will enable easier use of
vending machines, car park meters
and other related technologies.
In addition it will avoid the need
to carry large sums of money for
transactions.
- To facilitate the introduction of
coins: The rebasing of the currency
will enable the BOZ to re-introduce
the use of coins, which are significantly more durable compared to
notes.
•• The currency rebasing transition
period will run from 1 January to
30 June 2013. During this period
both the new and old currencies
will circulate simultaneously. Further,
both currencies will be used for
the purchase of goods and services.
•• During the period 1 January 2013
to 30 June 2013, an interim symbol
(“KR”) will be used to denote prices
in the new currency while the current
symbol (K) will denote prices in
the old currency. Post-30 June 2013,
the interim symbol (KR) will cease to
be used.
•• The simultaneous circulation of
currencies will cease on 1 July 2013
and effective this date the old currency
will no longer be accepted for
the purchase of goods and services.
Doing Business in Zambia – A unique flavour
28
29%
5%
5%
5%
5%
10%
18%
10%
18%
12%
Zambia’s insurance industry comprises several private players in
12%
addition to the state-owned ZISC
The insurance industry
•• The Pensions and Insurance Authority
(“PIA”) is the regulatory and
supervisory authority for the pensions
and insurance industry in Zambia.
The PIA was created by the Pension
Scheme Regulation Act no. 28 of 1996
and the Insurance Act No. 27 of 1997.
•• The PIA’s stated mission is “to
regulate the conduct of the pensions
and insurance industry through
prudential supervision in order to
protect the interest of pension scheme
members and insurance policyholders
Soya beans
and to foster the industry’s growth,
development
and stability.”
Soya
beans
ts
•• Zambia’s insurance industry is relatively
small and comprises the state owned
Zambia State Insurance Corporation
(“ZISC”) and several private sector
players including Madison, African Life
and PICZ.18
16
9%
22%
4%
4%
22%
9%
ZISC
Madison
25%
36%
25%
36%
16
PICZ
NICO
Goldman
ZIGI
Life insurance top players by gross premiums
1%
9%
9%
1%
16%
18
13
General insurance top players by gross premiums
4%
4%
29%
29%
16%
13
ZISC
Madison
PICZ
Aflife
ZIGI
2004
2004
2010
2010
46%
2012
Source: BOZ 2011 annual report
46%
2012
29
1 000 000
52%
52%
There is significant growth potential in Zambia’s tourism industry.
The Zambian Government aims to create some 300,000 jobs in
tourism over the five-year period to 2017
The Economic Environment - Tourism
•• Tourism is becoming an increasingly
important foreign exchange earner,
although it currently contributes only
around 5% of Zambia’s GDP.
•• Growth in the sector is seen by
the Government as having great
potential for diversifying the Zambian
economy.
•• The principal challenges that have
limited Zambia’s tourism potential
have included the relatively underdeveloped infrastructure, as well as,
inadequate supply of competitive
accommodation.
•• The Government is attempting to
remedy this and the prospects are
improving. As part of the recently
announced 2013 Budget,
the Government has unveiled plans
to create 300,000 jobs in tourism
over the next five years. In addition,
Zambia’s tourism sector has benefited
from the political challenges in
neighbouring Zimbabwe.
•• Most tourists are keen to see
the Victoria Falls, which is located
on the border between Zambia and
Zimbabwe. New hotels in Zambia are
cashing in on the influx, and this is
raising revenue collection and creating
new jobs.
•• In addition to the Victoria Falls,
Zambia is home to 19 national game
parks and 34 game management
areas covering 22.4m hectares.
•• Tourism will receive a boost in
2013 from the UN World Tourism
Organisation Conference, with
visitor numbers expected to increase
significantly.
Doing Business in Zambia – A unique flavour
30
6.50
6.00
5.50
4%
4%
5.00
2007
22%
9%
Zambia is aiming to grow the number of tourist arrivals to 4 million
by 2015, which compares with just under 1 million in 2011
25%
36%
Zambia tourism sector snap shot
Key highlights
Travel and Tourism as a % of GDP 1%
5.5%
9%
Government 2013 tourism expenditure allocation
ZMK21.1 billion
29%
Revenue from international tourists (2010)
US$125 million
16%
Targeted revenue from international tourists (2015)
33%
US$550 million
Visitor arrivals (2011)
910,000
52%
Visitor arrivals (2015)
4000,000
Targeted new jobs in tourism over next four years to 2017
300,000
Targeted Travel and Tourism as a % of GDP (2015)
8.0%
15%
46%
Zambia’s visitor arrivals
1 000 000
800 000
600 000
400 000
200 000
0
2004
2005
2006
2007
2008
2009
Sources: EIU, “Zambia Country Report” (2008); World Travel and Tourism Council,
“Travel & Tourism Economic Impact (2009), Tourism ministry website
31
2010
2011
Zambia’s transport sector is expected to receive a major boost over
the next five years driven by major planned investment in road and
rail infrastructure
The Economic Environment - Transport
Overview
•• Zambia is a landlocked country
with several natural lakes and rivers.
Imports, exports and local commerce
are significantly dependent on
road and air transport to facilitate
trade. Zambia’s lakes, rivers and
canals present significant potential
for development of transport
infrastructure that can enhance and
facilitate trade with neighbouring
countries.
•• In 2012, the GRZ issued a US$750
million bond from the international
capital market. 57% of the proceeds
of the bond has been allocated to
investment in the transport sector.
Furthermore, customs duties have
been eliminated for importation of
locomotives, carriages, rail traffic
control equipment, canoes, cruise
and ferry boats, dredgers, pontoons,
motor cycles and new motor vehicles
for certain tourism enterprises.
•• Approximately 14% of the 2013
national expenditure budget
is earmarked for investment in
the transport sector, amounting to
ZMW 3.4 million.
•• A five-year plan to enhance
the existing road network by 8,000
kilometers is in the offing. The GRZ
announcement to increase investment
in rail will decongest existing roads
and reduce road maintenance costs.
•• As shown below, diesel and petrol
prices have fluctuated significantly
in recent years, accentuated by
uncertainty in global commodity
markets.
Doing Business in Zambia – A unique flavour
32
%
Zambia’s transport sector comprises several players including
RDA and RSTA
Key players
Average retail pump price pr litre (ZMW)
•• The key players in Zambia’s transport
industry include:
9.00
- Road Development Agency
(“RDA”): Responsible for the care,
maintenance and construction of
public roads in Zambia.
- National Council for Construction
(“NCC”): Administration and
registration of road contractors.
- Ministry of Communications and
Transport: Formulation and administration of transport sector policies.
- Road Traffic and Safety Agency
(“RTSA”): Implementation of
policy on road transport, traffic
management and road safety.
8.50
8.00
7.50
7.00
Unleaded petrol
6.50
6.00
Diesel
5.50
5.00
2007
2008
5%
29%
33%
52%
2010
Source: Energy Regulation Board website
- Zambia Railways and Tanzania
Zambia Railway (“TAZARA”): Railway
operators.
33
2009
2011
2012
7.00
6.50
6.00
5.50
4%
4%
5.00
2007
22%
%
2008
2009
Zambia’s ICT sector is regulated by ZICTA
25%
%
The Economic Environment - Telecomms
Regulation
•• The Zambia Information and
Communications Technology Authority
(“ZICTA”) is an ICT Regulatory
body responsible for regulating
1%
9% the Information and Communications
Technologies (“ICT”) Sector in Zambia.
Market share of mobile market based on subscription
29%
•• ZICTA’s stated visions is:
“To be
the catalyst of a better Zambia
transformed through the use of ICTs in
all sectors of the economy”.
•• ZICTA derives its mandate from
the three Acts, the Postal Services
Act No. 22 of 2009, Electronic
Communications and Transactions
Act No. 21 and the Information and
Communications Technologies (ICT)
Act
46%No. 15 of 2009 to regulate ICTs,
postal and courier services in Zambia.
2005
2006
2007
2008
33%
52%
MTN
ZAMTEL
15%
Airtel
Sources: ZICTA website 3 February 2013
2009
2010
2011
Doing Business in Zambia – A unique flavour
34
2010
Increasing competition in the Zambian telecommunications sectors
has led to lower price tariffs, and increased investments
Mobile phone sector
•• The mobile phone sector has
boomed in recent years, with
competition between the three
providers, the state-owned ZAMTEL
and the privately owned MTN and
Airtel Zambia resulting in major
improvements in coverage and quality
together with significantly lower
prices.
•• The country’s telecommunications
market is dominated by mobile
network operator Bharti Airtel which
has a market share around 52%, with
MTN and ZAMTEL in second and third
place respectively.
•• All operators have intensified efforts
to cover rural areas, and nearly all
ten provinces can now be reached
by mobile phones on one of
the networks.
•• The Government of Zambia has recently
confirmed it intends to license a fourth
mobile network operator in the near
future and aims for the new player to be
in place before the end of 2013.
Mobile voice market: subscription & penetration levels
70%
9,000
8,000
Subcribers (‘000)
7,000
Penetration levels
60%
50%
6,000
5,000
40%
4,000
30%
3,000
20%
2,000
10%
1,000
-
2003
2004
2005
2006
Sources: ZICTA website 3 February 2013
35
2007
2008
2009
2010
2011
0%
011
0.8%
80
0.6%
60
0.4%
40
0.2%
20
-
2003 2004 2005 2006 2007 2008 2009 2010 2011
Zambia’s fixed line sector is controlled by state owned ZAMTEL
70%
60%
50%
40%
Fixed telephony
Market share of internet subscription
8%
•• The fixed line telephone sector
is a monopoly controlled by
the state-owned ZAMTEL.
21%
10%
•• As depicted opposite, the number
of fixed lines in the country is low,
30%
with the number of lines at less than
100,000.
20%
10%
0%
•• Penetration levels are less than 1%.
Internet sector
Africonnect
•• Zambia has recently gained access to
international submarine fiber optic
cables for the first time, which has
already led to some significant retail
price reduction for broadband services.
ZAMTEL
•• Third generation (3G) mobile
broadband services were launched in
early 2011 and national fiber networks
are being rolled out by a number of
different companies. Several ISPs have
rolled out W/MAX wireless broadband
networks.
•• These developments are set to
increase broadband penetration
significantly in the coming years.
ZAMNET
Other
61%
Mobile voice market: subscription & penetration levels
140
1.2%
120
1.0%
100
0.8%
80
20%
29%
60
0.4%
40
0.2%
5%
20
5%
0.6%
2003 2004 2005 2006 2007 2008 2009 2010 2011
0.0%
Sources: ZICTA website 3 February 2013
10%
18%
%
%
12%
Doing Business in Zambia – A unique flavour
36
0.0%
The Lusaka Stock Exchange was opened in 1994 and currently
has 21 listed companies
The Stock Exchange
•• The Lusaka Stock Exchange (“LuSE”)
was established in 1994 as a modern
stock exchange based on the most
current international standards and
practices. These include:
- Use of a central share depository
system.
- Trade-for-trade netting clearing and
settlement process.
- Rolling settlement three days after
the trade (T+3).
•• The primary objectives of LuSE include:
- To enable local businesses raise
longer term capital.
- Citizenship empowerment through
shares ownership.
- To attract foreign direct investment
(FDI).
- To enable companies achieve
wider share ownership and good
corporate governance.
37
•• There are currently 21 listed
companies on LuSE. Ten of these were
triggered by Zambia’s privatisation
process in the 1990’s / early 2000’s.
•• Notably Shoprite, which should benefit
from rising consumer demand in
the country, represents over half of
LuSE market capitalisation making it
by far the largest company on this
basis, driven by the dual listing of its
holding company on the LuSE and
the Johannesburg Stock Exchange.
•• Overall supervision of the Zambian
capital market including licensing
and registration falls under the ambit
of the Securities and Exchange
Commission (“SEC”), which was
established in 1993.
The total market capitalization of LuSE is aproximately
US$9.5 billion
Lusaka Stock Exchange (LuSE) – Key stats
Crop
Date opened
21 February 1994
Main stock index
LuSE All Share Index
Total number of listed entities
21
Total market capitalisation
ZMK49,364 billion (US$9.5billion)
Most liquid sectors
Banking
Top 5 listed companies by
market capitalisation
Shoprite Holdings Limited (US$5,900 million)
Celtel Zambia Plc (US$722 million)
Lafarge Cement Zambia Plc (US$316 million)
Zambia Breweries Plc (US$285 million)
ZCCM IH Plc (US$220million)
Source: LuSE website monthly flash reports
Doing Business in Zambia – A unique flavour
38
4. General business regulations
Company registration is governed by the Companies Act, 1994
Company registration
Private Limited Companies
•• The registration of companies is
governed by the Companies Act,
1994 and is done at the Patents
and Companies Registration Office
(“PACRA”). Registering a company
typically takes between three to five
working days.
•• The following are the types of Private
Limited Companies that can be
incorporated:
•• The process starts with completing
a Name Clearance Form requesting
for a particular proposed name to be
cleared.
•• There is no law that requires foreign
companies to partner with locals, as is
the case in other jurisdictions.
•• There are broadly two types of
companies that can be incorporated in
Zambia, namely:
- Private Limited Companies; and
- Public Limited Companies (“PLCs”).
39
1. Company Limited by Shares: This
is a company incorporated for
purposes of carrying on business
driven by a profit. Currently,
the minimum required authorised
capital for a private company
other than banks, insurance and
other financial institution, is ZMK5
million. A Private Limited Company
may not have more than fifty (50)
shareholders. It nevertheless may
have the capacity to enter into any
type of legal activities as long as its
articles do not restrict it. This type
of company is however prohibited
from making any invitation to
the public to purchase its shares
or debentures. In the event that
it winds up and its assets are
insufficient to cover its liabilities,
the liability of its shareholders is
limited to the amount left unpaid
on their shares.
These are three types of Private Limited Companies that can be
incorporated; namely: Company Limited by Shares, Company
Limited by Guarantee and an Unlimited Company
2. Company Limited by Guarantee:
A Company Limited by Guarantee
does not have share capital and is
not permitted to carry on business
for the purpose of making a profit
for its members or for anyone
concerned in its promotion
or management. This type of
company is normally formed in
order to help the community
benefit from a certain project.
Typically, these are organisations
such as churches, foundations
and trusts. At the time of
formation, each member must
sign a declaration of guarantee,
specifying the amount that
the member undertakes to
contribute if the company is
wound up. And in case it winds
up, and the assets are insufficient
to cover its liabilities, the liability
of its members is limited to
the amount so guaranteed.
3. Unlimited Company: An Unlimited
Company is one that has share
capital but whose members
have unlimited liability for
the company’s debts and other
liabilities. In other words, whatever
is incurred by the company, is also
deemed to have been incurred
by the members. An Unlimited
Company may not have more than
fifty (50) shareholders.
Doing Business in Zambia – A unique flavour
40
Registration of a company involves the submission of an application
for incorporation, together with a number of supporting documents
Public Limited Company
•• A Public Limited Company is required
to have an authorised minimum share
capital capital of ZMK50 million. It
has the capacity of entering into any
business activity unless restricted by its
articles of association. Its name always
ends with the words “Public Limited
Company” frequently abbreviated
to “PLC”. The articles of association
are required to specifically state that
the company is a” Public Limited
Company”.
•• A PLC can invite the public to buy its
shares and accordingly it can list its
shares on the Stock Exchange. If it
winds up and its assets are not sufficient
to cover its liabilities, the liability of
the shareholders is limited to the amount
left unpaid on their shares.
Company registration documentation
requirements
•• To register a company, the following
documents are required to be submitted
together with the application for
incorporation:
- Proposed Articles of Association of
the company – These are regulations
that govern the relationship between
the company and its members;
41
- A signed consent from each person
named in the application as a director
or secretary of the company;
- A declaration of guarantee by each
subscriber if the Company is to be
limited by guarantee; and
- A statutory declaration that
the requirements of the Companies
Act have been complied with.
Eligibility to incorporate a company
in Zambia
•• Any two (2) or more persons associated
for any legal purpose may form
an incorporated company by subscribing
their names to an application for
incorporation and lodging it with
the Registrar.
•• The following are not eligible to
subscribe to an application for
incorporation:
- Persons under eighteen years of age;
- An undischarged bankrupt person;
and
- Anyone who is of unsound mind and
has been declared so by the court or
a court of competent jurisdiction of
another country.
The ZDA is responsible for fostering economic growth and
development in Zambia through promoting trade and investment
The ZDA & investment
licenses
•• The Zambia Development Agency
(“ZDA”) is responsible for fostering
economic growth and development in
Zambia through promoting trade and
investment and has the challenge to
develop an internationally competitive
Zambian economy through innovations
that promotes high skills, productive
investment and increased trade.
•• To be eligible for an investment license
application, investors must invest not less
than US$500,000 in Zambia. Investment
licenses attract various tax benefits as
discussed in the Taxation section under
“Investment incentives”.
•• Applications for an investment licence
in some sectors of the economy require
proof that application for subsidiary
permits from relevant institutions or
ministries have been lodged.
Exchange Controls
•• Exchange control regulations were
abolished in Zambia, effective 29 January
1994. As a result, no restrictions are
imposed on the import or export of
capital. Repatriation payments can be
made in any currency. Both residents and
non-residents can hold bank accounts in
any currency.
•• All applications for investment licences
must be submitted to the ZDA and must
submit the following documents:
- Copy of Certificate of Incorporation,
issued by the Registrar of Companies;
- Certificate of Share capital;
- Official list of shareholders / directors;
- Proof of finance (certificate of deposit
at bank or latest bank statement); and
- Detailed business plan.
- Proof of having secured a place / land
to operate from (Lease Agreements or
Title Deed or Letter of Offer)
Doing Business in Zambia – A unique flavour
42
Any non- Zambian individual who resides, enters and re-enters Zambia
for purposes of employment must obtain an employment permit
Employment permit
- Certified photocopies of professional
certificates;
Public Limited Company
- Copy of letter of offer of employment/
contract; and
•• An employment permit allows
an individual to reside, enter and
re-enter Zambia while in employment
during the validity of the permit.
•• Employment permits are issued by
the Department of Immigration to
foreigners working in Zambia. Zambian
law requires that applicants secure their
employment permits while outside
the country. However, Government
employees, volunteers, missionaries and
investors may apply for their permits
whilst in the country.
•• Work permits are issued within about
a month, but it may take significantly longer depending on specific
circumstances.
Application steps
•• In order to obtain a Zambian
employment permit, the following
information is required to be submitted
to the Department of Immigration:
- A duly completed employment permit
application form;
- Two recent passport size photographs;
- Police clearance certificate from
applicant’s country of permanent
residence proving that applicant has
no previous criminal record;
43
- Certified photocopies of the passport.
Temporary employment permit
Overview
•• This permit is issued to any business
visitor intending to remain in Zambia
for a period exceeding thirty (30) days.
The period granted shall not exceed six
(6)months in any period of twelve (12)
months.
Application steps
•• Applying for temporary employment
permit involves submission of
the following information:
- A duly completed employment permit
application form;
- Two recent passport size photographs;
- Certified photocopies of current
passport; and
- Covering letter to the Director General
of Immigration from the employer
indicating the nature of work
the applicant intends to undertake in
Zambia.
Operating in certain sectors requires specific permits to be obtained
from relevant regulatory bodies
Sector specific permits
•• Energy sector: The Energy Regulation
Board is the primary regulatory board
in the energy sector and has overall
responsibility for issuing energy licenses.
Energy license applications are required
to be supported by:
- A five - year business plan;
- Latest audited financial statements;
- Details of subsequent significant
capital outflows including major
decommissioning costs; and
- Estimates of net annual cash flows.
•• Financial sector: The Bank of Zambia,
as Zambia’s Central Bank and agency
for executing Government’s monetary
policy, is responsible for issuance of
banking licences. Key information
requirements from applicants of
- Disclosure of any criminal record for all
principal managers and directors;
- Business plan with three-year financial
projections (profit & loss account,
cash flow and balance sheet);
- Curriculum vitae for all principal
managers and shareholders;
- Copy of the company’s Certificate of
Incorporation;
- Copy of the company’s Articles of
Association; and
- Approval by the home country
supervisors (usually another Central
Bank), if the applicants are foreign
registered financial institutions
a banking licence include:
- Minimum capital requirement of
ZMK520 billion (US$104m) for foreign
owned banks or ZMK104 billion
(US$20 million) for a local bank;
- Complete questionnaire for principal
managers and directors;
Doing Business in Zambia – A unique flavour
44
Operating in certain sectors requires specific permits to be obtained
from relevant regulatory bodies
•• Mining sector: The Ministry of Mines
and Mineral Resources is responsible
for the issuance of permits and licences
relating to investment in the mining
sector. The licences and permits issued
include:
- Large-scale mining licence;
- Small-scale mining licence;
- Prospecting permit; and
- Gemstone licence and sales certificate.
•• Applications for the mining sector
permits and licences must be supported
by the following documents, as
appropriate:
- Topographical maps of the area;
- Certificate of incorporation and Articles
of Association;
- Photocopies of passports of directors
and shareholders;
- Bank statements and reference letters
from applicants’ bank;
- Programme of operations and
estimated costs; and
- Statement of mineral deposit in
the mining area.
•• Telecommunications sector:
Telecommunication service licenses
are provided in three distinct
categories, under ZICTA’s mandate:
- Type A: Licenses that require service
providers to install, own and operate
public switched telephone network
(“PSTN”) infrastructure e.g. network
facilities for basic local or national long
distance services.
- Type B: Licenses that do not require
ownership of public networked
telephone facilities in order to provide
services e.g. Internet Service Providers
(“ISPs*).
- Type C: Licenses that require ownership
of infrastructure facilities for cellular
mobile services.
•• The application procedure, involves:
- Submission of a duly completed
application form to ZICTA;
- Evaluation of the application form by
ZICTA;
- If approved, ZICTA subjects
the application to comments from
the public and other interested parties
where necessary;
- For successful applications, a license
is issued following payment of
the appropriate license fee; and
- Unsuccessful applicants may appeal
against the decision of the Authority to
the Minister of Communications and
Transport.
45
Operating in certain sectors requires specific permits to be obtained
from relevant regulatory bodies.
•• Tourism sector: Investment projects
that have to be located in a Game
Management Area will require a permit
issued by the Zambia Wildlife Authority
(“ZAWA”). Applications for the permit
should be supported by the following
documents:
- Project proposal;
- List of Shareholders;
- Information on promoters’ business
experience;
- Recommendation letter from
the District council;
- Letter of Consent from the chief
(Game Management Areas fall
under traditional land which is under
the jurisdiction of the local chief);
- Project proposal; and
- Building drawings.
Minimum wages and
conditions of employment
•• The Minimum Wages and Conditions
of Employment Act Cap 276 enables
the Government to determine minimum
conditions of employment for various
categories of employees including
general workers, drivers and clerks.
Social security
•• Zambia’s public pension scheme
is administered by the National
Pension Scheme Authority (“NAPSA”).
Membership to NAPSA is compulsory
for all regularly employed persons.
The scheme is financed by both
the employer and employee contributions at the rate of 5% each, subject
to a ceiling determined annually.
Doing Business in Zambia – A unique flavour
46
Mergers and acquisitions that meet certain criteria require
pre-approval by the Competition and Consumer Protection
Commission
Mergers and acquisitions
•• Mergers and acquisitions in Zambia are
governed, from an approval perspective,
by the Competition and Consumer
Protection Act, 2010 (the “Act”), which
is administered by the Competition
and Consumer Protection Commission
(the “Commission”).
•• Section 24 of the Act defines a merger
transaction as where an enterprise
directly or indirectly, acquires or
establishes, direct or indirect, control
over the whole or part of the business
of another enterprise, or when two
or more enterprises mutually agree
to adopt arrangements for common
ownership or control over the whole or
part of their respective businesses.
•• Section 24 of the Act further states
that a merger could occur where
an enterprise purchases shares or
leases assets in, or acquires an interest
in, any shares or assets belonging to
another enterprise or where a joint
venture occurs between two or more
independent enterprises.
47
•• Section 26 of the Act states that
parties to a merger transaction that
meets the threshold for authorization of a proposed merger shall
apply to the Competition and
Consumer Protection Commission
(the “Commission”) for authorization of
the proposed merger.
•• The quantum of the Threshold is
stipulated in Part V Section 8 (1) of
Statutory Instrument No. 97 of 2011,
which states: A merger transaction
shall require authorisation by
the Commission where the combined
turnover and assets, whichever is
higher, in Zambia of the merging
parties, is at least fifty million fee units
in their latest financial year, for which
figures are available. Currently one fee
unit is equivalent to ZMK180.
•• Section 28 gives reference to negative
clearance and mandates that parties to
a transaction seeking clarification as to
whether the proposed merger requires
the authorisation of the Commission
under this law may apply to
the Commission for negative clearance.
Zambia’s accounting profession is regulated by the Accountants’ Act
of 2008 through the Zambia Institute of Chartered Accountants
Accounting and auditing
•• The accounting profession in Zambia
is regulated by the Accountants’ Act
of 2008 through the Zambia Institute
of Chartered Accountants (“ZICA” or
the “Institute”).
•• ZICA provides standards for public
practice and accountancy education
in Zambia. All individuals who wish
to practice as public accountants or
auditors are required to apply for
a practicing certificate with ZICA.
•• ZICA is a member of the International
Federation of Accountants (“IFAC”).
IFAC is a global organization committed
to protecting the public interest by
supporting the development of all
sectors of the accountancy profession
around the world.
•• All members of ZICA, including those
holding a certificate of public practice
are mandated to undertake activities
to further Continuing Professional
Development (”CPD”) in order to
remain competent and relevant to
the accounting profession. CPD
is the continuous maintenance,
development and enhancement
of the professional and personal
knowledge and skills which members of
ZICA require throughout their careers in
accounting.
•• The Accountants’ Act of 2008 states
that a practicing certificate will be
awarded once an individual has been
a member of ZICA continuously for
a period not less than 12 months; and
before or after, or partly before or partly
after admission to membership of ZICA,
he/she has completed a period, being
not less than 30 months of approved
accountancy experience under
supervision of an approved principal in
the office of a public accountant.
•• The experience should be:
- Of a wider and deeper nature than that
required for ZICA Membership;
- Gained in four of the following areas:
accounting, auditing, taxation,
incomplete records, computer systems
and operations, and sources of finance;
- Reviewed by an approved principal;
and
- Confirmed by a supervising principal.
Doing Business in Zambia – A unique flavour
48
Zambia’s accounting profession is regulated by the Accountants’ Act
of 2008 through the Zambia Institute of Chartered Accountants
Accounting standards
•• The local accounting framework is
the International Financial Reporting
Standards (“IFRS”). The Companies
Act 1994 (as amended) also provides
for company accounting regulations.
Entities are required to use one of three
tiers for financial reporting purposes as
shown below:
Type of entity
Financial reporting framework
Listed companies, public interest entities
and Government-owned enterprises
Full IFRS
Economically significant companies –
companies that are not public companies
or quoted on the stock exchange with
turnover greater than ZMW 20 million
IFRS for SMEs or Full IFRS at
the Company’s discretion
Micro and small entities – defined as
entities with turnover less than ZMW 20
million.
Zambian Financial Reporting Standard
for micro and small entities
Auditors and audited financial
statements
•• All audits in Zambia are required to
be conducted in terms of International
Standards on Auditing (“ISA”). Only
registered public accountants and
auditors who are chartered accountants
are permitted to carry out statutory
external audits.
49
•• .An external audit is a statutory
requirement for all companies
with limited liability. All companies
must lodge an annual return
with the Registrar of companies
accompanied by an audit report .
•• Companies whose annual financial
statements are audited are required to
submit audited accounts to the ZRA
when filing their income tax returns.
5. Taxation
Zambia operates a source-based system of taxation whereby every
person receiving income from a source within or deemed to be
within Zambia, is liable to income tax in Zambia on that income
Introduction
•• This information is based on existing
tax legislation and the 2013 Budget
Address delivered by the Minister of
Finance, Honourable Alexander Bwalya
Chikwanda, MP, to National Assembly
on 12 October 2012.
Tax administration
•• Zambia operates a source-based system
of taxation. Every person receiving
income from a source within or
deemed to be within Zambia, will be
liable to income tax in Zambia on that
income. The concept of residence is of
secondary importance in that it only
extends the tax net to cover interest
and dividend income received from
a foreign-source by Zambian residents.
•• The tax year for both individuals and
companies currently runs from 1
January to 31 December.
•• Income tax is divided into PAYE, Tax on
Self-employed Individuals and Company
Tax. A 3% income tax on all commercial
imports was introduced from 1 April
2007. The Minister, however, has
the authority to determine when this
tax will not be applicable.
•• The tax system is administered by
the Zambian Revenue Authority (“ZRA”),
an agency established in 1994. Where
disputes arise between taxpayers
and the ZRA under the Income Tax
Act, Value Added Tax (“VAT”) Act
and the Customs and Excise Act,
the aggrieved party has a right of
appeal to the Revenue Appeals Tribunal
(“RAT”), a statutory body that hears and
determines the settlement of tax cases.
A party dissatisfied with the decision of
the RAT can appeal to the High Court
of Zambia.
Doing Business in Zambia – A unique flavour
50
PAYE is collected at source from individuals in gainful employment
Pay As You Earn (PAYE)
Overview
Tax on self-employed Individuals
•• PAYE is collected at source from
individuals in gainful employment.
The employer deducts the tax from
the employee’s salary or wages and
is required to remit it to the ZRA by
the 14th of the month following
the month of deduction.
•• This tax is levied on business profits of
individuals running business ventures
as sole proprietors, or partners in
a partnership, at the graduated PAYE
rates.
•• The Government has again maintained
the graduated four-band system for
taxing income from employment but
the PAYE exempt threshold has been
increased from ZMK24 million per
month to ZMK26.4 million per month.
•• For individuals earning both business
income and emoluments, business
income that has been taxed under
turnover tax is (as from 1 April 2007)
no longer added to emoluments
that are subject to PAYE but remains
under the turnover tax system. The tax
treatment for income that exceeds
the annual threshold is not clear.
Non-residents
•• The rates opposite are also applicable to
non-residents in respect of employment
and business income earned in Zambia.
In addition, certain payments made to
non-residents are subject to WHT.
2013 PAYE regime
PAYE Rates for Individuals: From 1 January 2013
Annual Taxable Income as exceeds
But does not exceed
Rate
ZMK
ZMK
%
0
26 400 000
0 %
26 400 000
36 000 000
25%
36 000 000
70 800 000
30%
70 800 000+
51
35%
Company tax is levied on business profits of incorporated companies
and branches of foreign companies
Company tax
Overview
•• Company tax is levied on business
profits of incorporated companies
and branches of foreign companies.
Taxpayers are required to compute
taxable income on an actual basis by
reference to the charge year.
•• A company that has an accounting
year-end other than 31 December, can
apply to the ZRA to base its tax return
on the accounting year-end. The final
tax returns are due by 30 June following
the end of the respective charge year.
•• New listings on the LuSE attract a 2%
discount on the above income tax rate
applicable and a further 5% discount
where Zambians hold at least 33% of
the shares.
•• Where companies operate in
the priority sectors under the Zambia
Development Agency Act, they are
allowed the following:
- Exemption from income tax for five
years from the first year that taxable
profits are made, 50% in years six to
eight and then 25% in years nine to
ten.
- Dividends will be exempt from tax for
a period of five years from date of
commencement of operations.
- Capital expenditure on
the improvement or upgrading
of infrastructure will qualify for
an improvement allowance of 100% of
such expenditure.
•• Zambian transfer pricing rules require
that transactions between associated
persons be on arm’s length terms.
The tax authorities can replace “actual
conditions” with “arm’s length
conditions” for commercial or financial
transactions between associated
persons.
Doing Business in Zambia – A unique flavour
52
Companies listed on the LuSE attract a 2% reduction on
the relevant sector, company tax rate
2013 Income tax rates for companies
Income Tax Rates : January 2013 to December 2013
Rate of Tax
Basic rate
Companies listed on the LuSE (year of listing)
35%
2% less than the sector rate
Banks
35%
Mobile telecommunications operators - First K250 million profit
35%
- Balance of profit
40%
Charitable organisations - Income from commercial activities
15%
Farmers, exporters of non-traditional products,
producers of chemical fertilisers
10%
Manufacturers and others
35%
Rural enterprises
30%
Businesses with turnover up to K200 million,
excluding consultancy (“Presumptive Tax”)
53
3%
Mining companies are taxed at a reduced rate of 30%, which
compares with 35% from other companies
Mining tax regime
•• The regime for the taxation of mining
companies is as follows:
- A basic rate of 30% (other companies
remain at 35%).
- Variable profit tax of up to 15% on
taxable income that is above 8% of
gross income.
- A mineral royalty rate on base metals at
6% on gross value.
- The Government has proposed to
increase the WHT rate from 15% to
20% on payments of management
or consultancy fees and royalties to
non-resident contractors with effect
from 1 January 2013.
- A reference price is applied for
the purposes of assessing mineral
royalties and any transaction for
the sale of base metals, gemstones
or precious metals between related
or associated parties. The reference
price is to be based on the London
Metal Exchange or other commodity
exchange prices.
- Cash accounting basis for VAT.
- Transfer pricing law will be enhanced
to specifically apply to related party
borrowings by mining companies in
addition to the existing thin capitalisation rules (effective from 1 January
2012).
- WHT on dividends at 0%.
- Capital expenditure deductions:
forming equipment, plant, machinery
and other capital expenditure will be
claimed at the rate of 25% per annum,
from the year that the asset is brought
into use (previously given at 100% of
capital expenditure incurred).
Doing Business in Zambia – A unique flavour
54
Whilst there is no CGT in Zambia, when an asset is sold, the excess
of the proceeds from the asset over the tax written down value is
treated as a balancing charge which is combined with the entity’s
taxable income
WHTs
•• Certain payments to residents and
non-residents, whether individual or
corporate, are subject to WHT.
Capital Gains Tax (CGT)
•• There is no CGT in Zambia. However,
where an asset is sold in respect of
which capital allowances have been or
could have been claimed, the excess
of the proceeds from the asset over
the tax written-down value is treated as
a balancing charge which is combined
with the entity’s taxable income. In
each instance, the balancing charge is
restricted to the allowances previously
claimed.
•• For mining companies, the Government
has proposed to introduce PPT at 10%
on the transfer or sale of a mining right
granted under the Mines and Minerals
Development Act, 1994 (effective 1
January 2013).
55
2013 WHT
WHT rates
Residents
Non-residents
Commission paid
to non-employees
15%
15%
Dividends, royalties,
rental income,
management
and consulting fees
15%
15%
_
15%
15%
15%
_
15%
Entertainers
and sportspersons
Interest
Non-resident contractors
The standard rate for VAT is 16%. VAT registration is voluntary for
businesses with an annual taxable turnover below K800 million
VAT
•• The VAT registration threshold has been
increased from K200 million to K800
million per annum effective 1 January
2013. Therefore, Companies and
individuals dealing in taxable supplies
and with a turnover exceeding ZMK800
million per annum are required to
register for VAT. Registered suppliers
should submit returns to the ZRA for
each calendar month within 21 days of
the end of the month and account for
the excess of output over input VAT.
•• The standard rate for VAT is 16%. VAT
registration is voluntary for businesses
with an annual taxable turnover below
ZMKK800 million.
•• VAT exemptions include infant formula,
health, education, domestic house
rentals, water, transport, financial
and insurance services, conveyancing
services, funeral services, statutory fees
and insurance brokering.
•• Proposed changes to take effect from 1
January 2013 include:
- The VAT registration threshold is
increased from ZMK200 million to
K800 million per annum;
- Goods supplied to, or imported by,
businesses operating in an MFEZ or
industrial park have been standard
rated.
•• VAT registered suppliers with an annual
taxable turnover of ZMK1 billion and
above are required to submit input
tax schedules electronically and in
the approved manner.
•• Supplies of goods and services are
taxable at standard rate, zero-rated or
exempt. Input tax paid on purchases
to produce exempt supplies is not
recoverable.
Doing Business in Zambia – A unique flavour
56
Customs duty is levied on goods imported into Zambia at rates
ranging from 0% to 25%
Customs and Excise
•• The importation of goods into Zambia
is subject to import or customs duty. All
goods are categorised as to whether
they are raw materials, intermediate
or finished goods, and taxed at rates
in the range 0% to 25% on cost,
insurance and freight value (or value for
duty purposes). •• Excise duties are levied on specific
classes of goods manufactured in,
or imported into, the country by
reference to value using pre-determined
rates contained in the Harmonised
Commodity Description and Coding
System plus the customs duty payable
on those goods. From 1 January 2011,
a 10% excise duty on plastic bags was
introduced.
57
•• Proposed changes to take effect from
1 January 2013 include:
- The customs duty rate on flat-rolled
products of iron or non-alloy steel
not clad, plated or coated, used in
the manufacture of roofing sheets has
been increased from 0% to 15 percent;
- Customs duty on flat rolled products of
iron or non-alloy steel, clad, plated or
coated excluding those coated with tin
and lead, has been increased from 0%
to 25%t;
- Customs duty on importation of
multiple or cabled yarn (knitting wools)
of synthetic staple fibers has been
increased from 0% to 15 percent; and
- Duty has been removed on wide range
of medical, mechanical and electrical
tools, plant, machinery and equipment.
Transfer of property attracts PTT at a rate of 5% of the realised value
of the property being transferred
PTT
•• PTT is charged at 5% on the realised
value of the property being transferred.
It is payable by the transferor.
Property includes any land (including
any buildings, structures, or other
improvements thereon) and any share
issued by a company in Zambia that is
not listed on the LuSE.
•• The realised value is the price at which
the shares or land could, at the time
of transfer, reasonably have been
sold on the open market. There is
a discretionary exemption for transfers
of property within the same group of
companies, provided the transferee
is a company resident in Zambia and
the transfer is for the purposes of
effecting internal group reorganisation.
•• Effective 1 January 2013,
the Government has proposed to
introduce Property PPT at 10% on
the transfer or sale of a mining right
granted under the Mines and Minerals
Development Act, 1994.
Doing Business in Zambia – A unique flavour
58
Agricultural activities are taxed at a reduced rate of 15%
Investment Incentives
Agriculture
Manufacturing
•• Income taxed at a reduced rate of
15% (10% from 1 April 2012) (except
for cotton lint - the income tax rate
on profits from export of cotton lint is
35%).
•• Refund of Zambian VAT on export of
Zambian products by non-resident
businesses under the Commercial
Exporters Scheme.
•• Dividends paid out of farming exempt
from tax for the first five years of
the distributing company commencing
farming.
•• VAT deferment on importation of some
agricultural equipment and machinery.
•• No import duty on irrigation equipment
and reduced duty rates on imports of
other farming equipment.
•• Reduced customs duty at 5% on
premixes, being vitamin additives for
animal feed.
•• Company income tax rate applicable
to the manufacture of organic fertiliser
has been reduced from 35 percent to15
percent(effective 1 January 2013).
59
•• Guaranteed input tax claim for two
years prior to commencement of
production.
•• Income from chemical manufacturing
of fertilizers is taxed at a reduced rate
of 15%.
•• Import duty on certain textile machinery
has been reduced to 0% and all woven
fabrics of polyester imported for further
processing, all imported sewing threads
and grey fabric has duty reduced to 0%.
•• Import duty on PVC lining and eyelets
used in the manufacture of shoes has
been reduced to 5%.
•• Import duty on semi-refined wax and
cerechlor used in the manufacturing
of paint, and on tapioca starch with
dextrose powder which is used in
the manufacture of biscuits, has been
reduced 15%.
Tourism attracts various incentives including zero import VAT on all
goods temporarily imported into the country by foreign tourists
Tourism
General incentives
•• Zero-rate of VAT on tour packages
throughout Zambia.
•• Import VAT relief for VAT registered
businesses on imports of eligible capital
goods (i.e. VAT Deferment).
•• Zero-rate of VAT on other tourist
services provided to foreign tourists
other than those included in tour
packages.
•• Refund of VAT for non-resident tourists
and visitors on selected goods.
•• No import VAT on all goods temporarily
imported into the country by foreign
tourists.
•• Inadequate infrastructure, service
delivery and limited marketing activities
addressed by the development of
Kasaba Bay, Livingstone and Mfuwe
tourist areas and future refund of
certain expenses incurred in showing
movies that promote the country.
•• In order to leverage the maximum
benefit from hosting the 2013 United
Nations World Tourism Organisation
Conference, Government proposes to
suspend duty up to 31 December 2013
on the following goods:
•• Zero rate of VAT on export of taxable
products.
•• Guarantee of VAT refund within 30 days
of lodgment of adequately supported
claims within 30 days of submission of
the claim.
•• Relief of VAT on transfer of business as
a going concern.
•• Equal treatment of services for VAT
irrespective of domicile of supplier (i.e.
reverse VAT).
•• Cash accounting for VAT for members
of the Association of Building and Civil
Engineering Contractors.
•• Guaranteed VAT input tax claim for three
months prior to VAT registration for
businesses that have already commenced
trading.
•• Reintroduction of voluntary registration
for compliant businesses whose turnover
is below ZMK800 per annum subject to
conditions stated above.
- New motor vehicles for tourism
enterprise that offer transport services.
•• Registered businesses allowed to re-claim
20% of input VAT paid on petrol.
- New articles and equipment needed to
furnish or refurbish accommodation
and catering facilities for businesses
licensed as tourism enterprises.
•• Exemption of interest component of
finance leases from VAT.
•• Reduction of VAT rate for investors in
manufacturing, agriculture, commercial
banking and insurance operating in
tax-free zones.
Doing Business in Zambia – A unique flavour
60
Qualifying companies operating under the Zambian Development
Agency (ZDA) Act attract various investment incentives
Concessions for companies operating
under the Zambian Development
Agency (ZDA) Act
•• Further concessions for developers and
investors in the MFEZ and industrial parks
(introduced last year) include:
•• Profits made in designated zones are
100% exempt from income tax for five
years from the date when the approved
investment commences operations, 50%
in years six to eight, 25% in years nine to
10 and then 0% thereafter.
- Removal of WHT on management
fees, consultancy fees, and interest
re-payments to foreign contractors.
•• 0% tax on dividends for five years from
the date when the approved investment
commences operations.
•• 0% import duty rate on raw materials,
capital goods and machinery (including
trucks and specialised motor vehicles) for
five years.
•• Deferment of VAT on machinery and
equipment (including trucks and
specialised motor vehicles).
61
- Zero-rating of supplies to developers
of MFEZ and industrial parks.
- Foreign suppliers to MFEZ and
industrial parks exempt from reverse
VAT charge.
- Exemption from customs duty of
equipment and machinery imported
for the development of MFEZ and
industrial parks.
Dividends paid by a Zambian Company are subject to a 15% WHT
which, however, does not apply on repatriation of profits made by
a branch to its Head Office. This makes operating a Branch more
attractive from a tax perspective
Company vs. Branch
•• For most practical tax purposes
a registered branch and a resident
company are treated similarly in that
the same rates of tax apply to effectively
the same quantum of profit.
•• However, there is an important
difference between a company and
a branch which arises on the repatriation
of profits. In the absence of a favourable
double taxation agreement the payment
of dividends by a subsidiary would be
subject to deduction of withholding tax,
currently at a rate of 15%.
•• This would give an effective tax rate of
44.75% (being 35% company income
tax and 15% withholding tax) on any
profits repatriated outside the Republic.
By contrast, a branch can repatriate its
profits with no tax withholding, giving
an effective Zambian tax rate of 35%.
•• Additionally, a company requires
the appointment of at least two
directors, whereas a branch requires only
one. For both a company and a branch,
more than 50% of the directors must be
resident in Zambia.
Doing Business in Zambia – A unique flavour
62
6. About Deloitte
The global firm
Deloitte is a global professional services provider, with a strong
presence in Zambia
Kitwe
Lusaka
EMEA
US$ 10.0 billion
62,700 people
Asia Pacific
US$ 3.6 billion
34,000 people
Americas
US$13.0 billion
72,850 people
Zambia
2 Cities
> 100 people
Over 152 countries
Two main offices in Zambia
Aggregate global revenues of US$ 31.3 billion
Professionals working across
Approximately 195,000 people globally
Audit, Tax, Financial Advisory
Services and Consulting
63
Deloitte in Zambia
Deloitte Zambia offers world class professional services via 4 core
service line...
•• Financial statement audits
•• Business Tax
•• Accounting advisory
•• Indirect Tax
•• Assurance services
•• International Tax
•• Transfer Pricing
Tax
Audit
Clients
Financial
Advisory
Consulting
•• Corporate Finance Advisory
•• Human Capital
•• M&A Transactions Services
•• Strategy & Operations
•• Forensic investigations
•• Technology
•• Restructuring Services
•• Ad hoc consulting
•• Valuation Services
Deloitte Zambia’s depth of capability is impressive, but what differentiates us is a consistent ability
to integrate service capability with deep industry sector insights.
Doing Business in Zambia – A unique flavour
64
7. Contacts
Chisanga Chungu
Humphrey Mulenga
Chief Executive Officer
Financial Advisory Services & Consulting
Office:Lusaka
Email:[email protected]
Tel:
+260 211 228677
Office:Lusaka
Email:[email protected]
Tel:
+260 211 222036
Alice Jere Tembo
Victor Muhundika
Audit
Tax
Office:Lusaka
Email:[email protected]
Tel:
+260 211 228677
Office:Lusaka
Email:[email protected]
Tel:
+260 211 228677
Fellystons Nchimunya
Audit
Office:Kitwe
Email:
[email protected]
Tel:
+260 212 222688
65
8. Glossary of Terms
BOZ
Bank of Zambia
c.
Circa (approximately)
CEC
Copperbelt Energy Corporation PLC
DRC
Democratic Republic of Congo
EBZ
Export Board of Zambia
EIU
Economist Intelligence Unit
ERB
Energy Regulation Board
FDI
Foreign Direct Investment
GDP
Gross Domestic Product
GRZ
Government of the Republic of Zambia
HFO
Heavy Fuel Oil
IFAC
International Federation of Accountants
KCM
Konkola Copper Mines Plc
LHPC
Lunsemfwa Hydro Power Company Limited
Maamba
Maamba Collieries Limited
MP
Member of Parliament
NAPSA
National Pension Scheme Authority
PACRA
Patents and Companies Registration Office
PAYE
Pay As You Earn
PIA
Pensions and Insurance Authority
PICZ
Professional Insurance Corporation Zambia Limited
PPT
Property Transfer Tax
SEDB
Small Enterprises Development Board
TelecommsTelecommunications
UN
United Nations
USD
United States Dollar
VAT
Value Added Tax
WT
Withholding Tax
ZAWA
Zambia Wildlife Authority
ZCCM
Zambia Consolidated Copper Mines Limited
ZCCM-IH
ZCCM Investment Holdings Plc
ZEPZA
Zambia Export Processing Zones Authority
ZESCO
ZESCO Limited
ZIC
Zambia Investment Centre
ZICA
Zambia Institute of Chartered Accountants
ZICTA
Zambia Information and Communications Technology Authority
ZMK
Old Kwacha, pre -1 January 2013
ZMW
The new re-based Kwacha, effective 1 January 2013
ZPA
Zambia Privatisation Agency
ZRA
Zambia Revenue Authority
ZSIC
Zambia State Insurance Corporation Limited
Doing Business in Zambia – A unique flavour
66
Deloitte provides audit, tax, consulting, and financial advisory service to public and private clients
spanning multiple industries. With a globally connected network of member firms in more than
150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients
succeed wherever they operate. Deloitte’s more than approximately 195,000 professionals are
committed to becoming the standard of excellence.
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