Zambia is large and landlocked experiencing rapid economic growth in the centre of Southern Africa. It shares several of its key geographical and economic features with neighbouring Zimbabwe—the Victoria Falls, Lake Kariba (and its hydroelectric capacity), and a stretch of the Zambezi River. It also borders the southern tip of Lake Tanganyika and Tanzania, as well as the Democratic Republic of the Congo, Angola, Botswana, Mozambique, and Malawi. Its population, much of it urban, is estimated at about 16.5 million (2016).

Zambia is considered a stable country in Africa with successful democratic elections held every five years. The next elections will be held in 2021. The current President is Edgar Chagwa Lungu of the Patriotic Front was re-elected in August 2016, in a closely contested presidential race with his main rival, Hakainde Hichilema of the United Party for National Development (UPND).

Zambia has a long history of mining and a large known resource base of copper, emeralds, and other deposits such as: uranium, silver, cobalt, copper, coal, lead, silver, zinc, emeralds and gold.   Zambia is also a chief global producer of semiprecious gemstones.

Apart from its abundant wildlife, rivers, and lakes, Zambia holds 6% of the worlds copper reserves and is the fourth largest copper producing nation in the world. Zambia is internationally recognised as a major producer of emeralds, aquamarines, amethyst and tourmalines and the quality of the gems are highly competitive with world markets.

It also has very good potential for further discoveries. The sector is also a significant source of government revenue and formal employment, both directly and indirectly.

 

Incentives in the Mining Sector

The Zambia Development Agency Act provides for incentives for companies investing in the mining sector in the country. The Act provides for the investment thresholds that investors must meet in order to qualify for fiscal and non-fiscal incentives. Currently the threshold is; investments of US$ 500,000 and above qualify for the incentives.

The general investment incentives applicable to the mining sector are;

1.     Guaranteed input tax claim for five years on pre-production expenditure for exploration companies in the mining sector.

2.     Any mining company holding a large-scale mining license carrying on the mining of base metals is taxed at 30%. Other mining companies are taxed at            35%

3.     Dividend paid by a mining company holding a large-scale mining license and carrying on the mining of base metals is taxed at 0%

4.     Income earned by companies in the first year of listing on the Lusaka stock exchange qualifies for a 2% discount on the applicable company tax rate,             however companies with more than 1/3 of their shareholding in the hands of Zambians qualify for a 7% discount

5.     Duty free importation of most capital equipment for the mining sectors.

6.     100% mining deduction on capital expenditure on buildings, railway lines, equipment, shaft sinking or any similar works.

7.     The debt to equity ratio reduced from 2:1 to 3:1 to encourage further investment in the sector.

 

Mining Licensing System

Three types of licence are available to the large-scale operator:

1.         Prospecting Licence: this confers the right to prospect for any mineral over any size of area for a period of two years renewable.

2.         Retention Licence: the right to retain an area, subject to the Minister’s agreement, over which feasibility studies have been completed but market                  conditions are unfavourable to development of a deposit at that time. Size of the area may be that covered by a Prospecting Licence or smaller area              as redefined by the Licence holder. Duration would be for three years renewable for another single period of three years.

3.         Large Scale Mining Licence: this confers exclusive rights to carry out mining operations and other acts reasonably incidental thereto in the area for             a maximum of 25 years. The area to be held should not exceed the area reasonably required to carry out the proposed mining operations.                                       Applications need to be accompanied by environmental protection plans and by proposals for the employment and training of citizens of Zambia.

Similar rights are available to smaller operators, but on a reduced scale.

1.         Prospecting Permits: relate to areas of 10 km2 and have a duration of 2 years non-renewable.

2.         Small Scale Mining Licences: relate to areas not exceeding 400 hectares and have a duration of 10 years renewable.

3.         Artisans Mining Rights: give the right to local people to mine on an artisanal basis an area not exceeding 5 hectares for a period of 2 years non-                          renewable.

4.         Gemstone Licences:   holders may carry out mining operations  over an  area not  exceeding 400 hectares for a period of not more than 10 years.

Environment Framework

Key steps in establishing a project as laid down by the 1997 regulations are:

1. Preparation of a project brief to the Director of Mines Safety describing the site, proposed activities, and all aspects of potential environmental impact.
2. Director may request more information or can forward the project brief to the Environmental Council of Zambia recommending one of : rejection; acceptance after submission of a full Environmental Impact Statement; the project be accepted and allowed to proceed immediately.
3. Preparation of an Environmental Impact Statement and submission to the Director of Mines Safety.
4. The Director of Mines Safety submits his recommendations to the Environmental Council which makes the final decision.
5. Environmental Impact Statements, if called for, to be updated annually or within fifteen months of the first statement.
6. Environmental audits of projects to be completed annually.
7. If a developer finds the provisions of any regulation unduly onerous, he may apply to the Minister or Director of Mines Safety for an exemption from that regulation. The exemption may be granted under prescribed conditions.
8. Developers of large-scale mining projects to contribute to the Environmental Management Fund for rehabilitation purposes.

Export Procedures

In all cases a Customs and Excise Declaration form has to be completed, usually accompanied by a letter of authorization from the Mines Development Department. Additional procedures must be followed for different commodities:

1.         Gemstones: Valuation Certificate required from Government Recognised Valuer.

2.         Precious metals: provision of a sample for analysis.

3.         Base metals: a one-year letter of authority is issued by the Mines Development Department, rather than for individual shipments.

4.         Rock and soil samples of no commercial value: the samples to be physically checked before export.

 

International investment agreements

Zambia has signed:

·       Bilateral Investment Treaties with the following countries:   United Kingdom, Belgium, Netherlands, Switzerland, Finland, Germany, France,                                 Luxemburg, China, Croatia, Cuba, Italy, Ghana, Ireland and Egypt.

 

·       Double Taxation Agreements with the following countries:

        Canada, Denmark, Finland, France, Germany, India, Italy, Japan, Kenya, Mauritius, the Netherlands, Norway, Romania, South Africa, Sweden,                                  Switzerland, the United, Republic of Tanzania, Uganda, the United Kingdom and Zimbabwe.

 

Repatriation of funds

 

Zambia allows for free movement of capital into and out of the country. The country does not have a foreign exchange control system. However, when converting Kwacha to US dollars ‘across the counter’, a limit of US$1,000 per day is allowable for individuals and US$5,000 for corporates at either a bank or a bureau de change. The ZDA Act gives rights to investors to repatriate profits, royalties, fees, debt service as well as disinvestment proceeds.

 

Trade Opportunities

Zambia is the cross roads centre for two major regional groupings. The Southern Africa Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA).

Other market opportunities through agreements / membership to:

• EU through the EBA initiative
• USA through AGOA Market Initiative
• Canadian Market Access Initiatives
• Chinese Market Access Initiative
• Japanese Market Access Initiative

 

The Investment Promotion arm has the mandate to promote Zambia’s investment opportunities locally and internationally in order to attract foreign and local investors in the different sectors of the economy, which include manufacturing, tourism, energy, agriculture and agro-processing, mining and infrastructure.

The division is also responsible for leading, directing the marketing and promotion of Zambia as the “Best Investment Destination” to maximise investments in line with national economic and social goals.

There are various policies, laws and treaties that protect investors in Zambia. These are domestic, regional, bilateral and international depending on the situation.

 

The Zambia Development Act assures investors that property rights shall be respected. No investment of any description can be expropriated unless Parliament passes an Act relating to the compulsory acquisition of that property. In case of expropriation, full compensation shall be made at market value and shall be convertible at the current exchange rate.

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Available at: https://www.mineralcommodities.com/home/company-profile/
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Zambia Development Agency (ZDA), 2015. Zambia Development Agency (ZDA). [Online]
Available at: http://www.zda.org.zm/
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Zambia Mining, 2019. Exploration Potential. [Online]
Available at: https://zambia-mining.com/exploration.html
[Accessed 15 November 2019].