HomeReportsBureau of Economic and Business Affairs2019 Investment Climate Statements...Zambia

# 					2019 Investment Climate Statements: Zambia			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

The Republic of Zambia is a landlocked country in Southern Africa that shares its borders with eight countries: Angola, Democratic Republic of the Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana, and Namibia.  The country has a population of 17.2 million and GDP per capita of USD 1,513, according to the World Bank.

The economy grew by 4 percent in 2018, meeting IMF projections, and inflation remained broadly stable and within the Bank of Zambia’s target range of 6-8 percent.  Though the agriculture sector performed poorly in 2018 due to erratic rainfall, other sectors such as mining, energy (electricity generation), manufacturing, and financial services performed above expectations.  The mining sector grew 6 percent, with copper production increasing above 850,000 metric tons (MT) in 2018 from 797,000 MT in 2017; electricity generation increased by 11.7 percent; manufacturing and financial sector growth was at 5 percent and 4 percent, respectively.  Overall, GDP growth was better than expected, as many financial analysts did not expect the economy to achieve the 4 percent growth rate projected by the IMF in 2017, and the World Bank had revised its projections down to 3.6 percent.

Zambia’s large debt load remains a concern.  Zambia’s external debt rose to USD 10.05 billion in 2018, up from USD 8.74 billion in 2017.  The fiscal deficit ended 2018 at 7.6 percent of GDP, well above the 2018 target of 6.1 percent.  This was mainly due to the increase in interest payments on Eurobond debt and service payments on foreign financed projects.  Domestic arrears rose to K15.1 billion from K12.7 billion (approximately USD 1.3 billion and USD 1.2 billion, with respective exchange rates for 2018 and 2017).  The kwacha also depreciated against the dollar by 22.4 percent in 2018, increasing the cost of external debt service. Investor appetite for domestic bonds continued to shrink, and short- and long-term domestic borrowing costs rose.  Government austerity and fiscal consolidation remain key to ensuring that the macroeconomic fundamentals do not deteriorate further. Foreign exchange reserves stood at USD 1.59 billion at the end of 2018, representing 1.9 months of import cover.  Reserves are projected to fall further in 2019, making Zambia vulnerable to outside shocks to its economy. In addition to debt sustainability concerns, erratic rainfall in the 2018/2019 growing season, with severe drought in certain areas, poses threats to agricultural output and electricity generation; eighty-five percent of the latter relies on hydroelectric dams.  These challenges will constrain businesses looking to partner with the government on new projects.

Budget execution by the Government of the Republic of Zambia (GRZ) has historically been poor, with documented evidence of significant extra-budgetary spending.  The IMF has delayed a much-anticipated USD 1.3 billion loan deal due to large-scale borrowing by, and lack of clarity on fiscal policies from, the government; the government requested the IMF recall the Resident Representative in August 2018, and as of early 2019 there did not appear to be substantive discussions on a new IMF program taking place.

Foreign direct investment (FDI) into Zambia to support structural transformation that can lead to domestic production of export-quality products remains low.  FDI in the manufacturing sector eroded from 9.4 percent of total FDI in 2007 to 3.3 percent in 2017. Zambia recorded USD 310 million of FDI inflow by mid-year 2018, down from USD 329 million over the same time period for 2017.  Large mining investments from Canada, Australia, UK, China, and the United States, in addition to large infrastructure and other projects performed almost entirely by Chinese companies, continue to dominate FDI flows.

The legal environment is generally conducive to U.S. investors, although there is a relatively small commercial presence of U.S. companies in Zambia.  Agriculture and mining continue to be the headlining sectors of Zambia’s economy. While U.S. companies continue to incrementally grow their presence in the agricultural sector, new, large-scale agricultural investments remain elusive.  Despite these challenges, interest from U.S. firms in new projects remains high, and could translate into growth in economic sectors beyond mining, such as tourism, power generation, and agriculture, particularly if the government continues with its plan to reduce or eliminate market-distorting subsidies.

In spite of broad economic reforms in the early 2000s, Zambia today confronts the challenge of diversifying its economy and accelerating private-led growth to address the poverty of its people.  Cumbersome administrative procedures, unpredictability of legal and regulatory changes, lack of transparency in government contracting, the high cost of doing business due to poor infrastructure, the high cost of finance, inadequate human resources, and the lack of reliable electricity and internet service remain concerns.

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Toward Foreign Direct Investment**

In general, Zambian law does not restrict foreign investors in any sector of the economy, although there are a few regulations and practices limiting foreign control laid out below.  The country has affirmed its commitment to fostering private sector development and attracting FDI. FDI, which is monitored by the government, continues to play an increasing role in Zambia’s economy, contributing to increased capital inflows and overall investment.  FDI is facilitated through the Zambia Development Agency (ZDA), which is responsible for fostering economic growth and development in Zambia through promoting trade and investment and an efficient, effective, and coordinated private sector-led economic development strategy.

Zambia has undertaken institutional reforms aimed at improving its attractiveness to investors; these reforms include the Private Sector Development Reform Program (PSDRP), which addresses issues related to cost of doing business through legislation and institutional reforms, and the Millennium Challenge Account (MCA), which addresses some issues relating to transparency and good governance.  However, frequent government policy changes create uncertainty for foreign investors. Recent examples include: a planned, rapid transition from a value-added tax regime to a sales tax currently projected to take effect on July 1, 2019; taxes and royalty increases in the mining sector that took effect on January 1, 2019 and mark the 10th significant change to mining taxes and regulations in 16 years; and constant and unpredictable limits on various crop exports.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

The ZDA does not discriminate against foreign investors, and all sectors are open to both local and foreign investors.  Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activities, and no business ventures are reserved solely for the government.  Although private entities may freely establish and dispose of interests in business enterprises, investment board approval is required to transfer an investment license for a given enterprise to a new owner.

Currently, all land in Zambia is considered state land and ownership is vested in the president; there is no private land in the country.  Land titles held by foreigners are for 99-year state leases; ownership is not conferred. According to the government, the current land administration system leaves little room for the empowerment of citizens, especially the poor and vulnerable rural communities.  The government began reviewing the current land policy in earnest in March 2017. The resulting draft land policy would assert more central government control over traditional lands and seeks to reduce the lease tenure on foreign-owned properties from 99 years to renewable terms of 25 years.  Both traditional chiefs and foreign investors have objected to terms in the draft bill, which has not been presented to Parliament and is currently with the Ministry of Lands for further stakeholder consultation.

Foreign investors in the telecom sector are required to disclose certain proprietary information to the ZDA as part of the regulatory approval process.  Further information regarding information and communication regulation can be found at the website of the Zambia Information and Communication Technology Authority at  http://www.zicta.zm  .

The ZDA board screens all investment proposals and usually makes its decision within 30 days. The reviews appear routine and non-discriminatory and applicants have the right to appeal the investment board decisions.  An investment application is screened to determine: the extent to which the proposed investment will help create employment; the development of human resources; the degree to which the project is export-oriented; the likely impact on the environment; the possible technology transfer; and any other considerations the Board considers appropriate.

The following are the requirements for registering a foreign company in Zambia:

-  At least one and not more than nine local directors must be appointed as directors of a majority foreign-owned company.  At least one local director of the company must be resident in Zambia, and if the company has more than two local directors, more than half of them shall be residents of Zambia.
-  There must be at least one documentary agent (a firm, corporate body registered in Zambia or an individual who is a resident in Zambia).
-  A certified copy of the Certificate of Incorporation from the country of origin must be attached to Form 46.
-  The charter, statutes, regulations, memorandum and articles, or other instrument relating to a foreign company must be submitted.
-  The Registration Fee of K4,166 (~ USD 348.00) must be paid.
-  The issuance and sealing of the Certificate of Registration marks the end of the process for registration.

This information can also be found at the web address of the Patents and Companies Registration Agency (PACRA), http://www.pacra.org.zm  .

**Other Investment Policy Reviews**

The Organization for Economic Co-operation and Development (OECD) conducted its first review in sub-Saharan Africa on the basis of the OECD Policy Framework for Investment in Zambia in 2012.  The OECD review made the following recommendations regarding Zambia’s investment environment: 1) develop a harmonized national investment policy; 2) take better advantage of the investment promotion and facilitation options available; 3) undertake a cost-benefit analysis with regard to fiscal incentives; 4) improve the consultative mechanisms for policy development; 5) strengthen the framework for Public-Private Partnerships (PPPs); 6) strengthen the oversight and enforcement mechanisms of the regulatory framework; and 7) develop mechanisms to channel industry demands for human resource development.

Following the review, the government began an ongoing process to consider new investment reforms, including development of a harmonized investment policy and a review of its tax incentive system and framework for PPPs.  In 2016, the government, under the leadership of the Ministry of Commerce, Trade, and Industry, adopted an industrial policy to support and accelerate industrialization in Zambia. The policy addressed issues of productive capacity for enterprises to promote the production and consumption of local content.  Zambia has also committed to develop a Green Growth Strategy that makes sustainable and equitable use of Zambia’s natural resources within ecological limits.

Report found here: http://www.oecd.org/daf/inv/investment-policy/zambia-investmentpolicyreview-oecd.htm  

The GRZ conducted a trade policy review through the World Trade Organization (WTO) in June 2016.  The report found that Zambia recorded relatively strong economic growth at an average rate of 6.6 percent per year up to 2015.  The improvement was attributed to growing demand for copper (the main export product) and its spillover effects on some other sectors such as transport, communications, and wholesale and retail trade.  Buoyant construction activity and higher agricultural production also helped.

The trade policy review report of 2016 reached the following conclusions: the government will continue to implement programs and initiatives directed at attaining inclusive growth and job creation and pay particular attention to macroeconomic stability, diversification of the economy, support to small and medium enterprises (SMEs), engagement with cooperating partners, and promotion of investment.  Zambia is committed to continue to use bilateral, regional, and multilateral frameworks to support the growth and development of the economy.

Report found here: https://www.wto.org/english/tratop_e/tpr_e/tp440_e.htm  

**Business Facilitation**

The Zambian government, often with support from cooperating partners, has undertaken economic reforms to improve its business facilitation process and attract foreign investors, including steps to support transparent policymaking and to encourage competition.  The impact of these progressive policies, however, has been undermined by persistent fiscal deficits and widespread corruption. Business surveys generally indicate that corruption in Zambia is a major obstacle for conducting business in the country. Given these reasons, companies prefer using a specialized public procurement due diligence tool in order to help mitigate the costs and risks of corruption involving public procurement processes in Zambia.

The Zambian Business Regulatory Review Agency (BRRA) has responsibility for Regulatory Services Centers (RSCs) that serve as a one-stop shop for investors.  RSCs provide for an efficient regulatory clearance system by streamlining business registration processes; providing single licensing system; reducing the procedures and time it takes to complete the registration process; and increasing accessibility of business registration institutions by placing them under one roof.

With an RSC, an investor need contact only one entity to obtain all the necessary paperwork in one streamlined and coordinated process.  This means investors, both local and foreign, are provided with centralized organizations that tend to their needs comprehensively, without having to move from one stakeholder agency to another.  The government established RSCs in Lusaka, Livingstone, Kitwe, and Chipata, and has plans to establish additional RSCs so that there is at least one in each of the country’s 10 provinces. Information about the RSCs can be found at the following links:

- http://www.brra.org.zm/index.php/656-2/  
- http://www.brra.org.zm/index.php/single-licensing-system-2/  

The Companies Act No. 10 of 2017 was operationalized through a statutory instrument (June 2018) and implementing regulations (February 2019) aimed at fostering accountability and transparency in the management of companies.  Companies are now required to maintain a register of beneficial owners, and persons holding shares on behalf of other persons or entities must now disclose those beneficial owners.

In order to facilitate improved access to credit, the Patents and Company Registration Office (PACRA) established the collateral registry system, a central database that records all registrations of charges or collaterals created by borrowers to secure credits provided by lenders.  This service allows lenders to search for collateral offered by loan applicants to see if that collateral already has an existing claim registered against it.  Creditors can also register security interests against the proposed collateral to protect their priority status in accordance with the Movable Property (Security Interest) Act No. 3 of 2016.  Generally, the first registered security interest in the collateral has first priority over any subsequent registrations.

Parliament passed the Border Management and Trade Facilitation Act in December 2018.  The Act, among other things, calls for coordinated border management and control to facilitate the efficient movement and clearance of goods; puts into effect provisions for one-stop border posts; and simplifies clearance of goods with neighboring countries.  While one-stop border posts have existed for several years and agencies are co-located at some border crossings, agencies still had conflicting regulations and processes. The new law seeks to harmonize outstanding issues.

**Outward Investment**

Through the ZDA, the government continues to undertake a number of activities to promote investment through provision of fiscal and non-fiscal incentives, establishment of Multi-Facility Economic Zones (MFEZs), the development of SMEs, as well as the promotion of skills development, productive investment, and increased trade.  However, there is no incentive for outward investment nor is there any known government restriction on domestic investors from investing abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

Zambia has signed Bilateral Investment Treaties (BITs) with thirteen countries (six in force and seven not yet in force).  Six countries have BITs in force with Zambia: France, Germany, Italy, Mauritius, the Netherlands, and Switzerland. Zambia has signed bilateral reciprocal promotional and protection of investment protocols with most of the member states of both the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC).

On October 2, 2000, Zambia became a beneficiary of the African Growth and Opportunity Act (AGOA) market access treaty with the United States and was again found eligible for continuous benefits under AGOA in March 2019.  In November 2001, COMESA, of which Zambia is a member, signed a Trade and Investment Framework Agreement with the United States. Zambia initiated market access through the Eastern and Southern Africa (ESA) interim Economic Partnership Agreement (IEPA) with the European Union on September 30, 2008.  In completing these negotiations, the provisions of the trade in goods chapter and related annexes of the ESA IEPA now apply to Zambia. Zambia has signed protective agreements with Chinese, Nigerian, Libyan, and Indian investors.

							3. Legal Regime					

**Transparency of the Regulatory System**

The GRZ has made strides, in principle, toward introducing transparent policies to foster competition, although complaints arise from time to time.  The unpredictability and intermittence of import and export bans on commodities, especially on maize (corn) and other grains, is a deterrent to private sector participation in commodity markets.  There are no informal regulatory processes managed by non-governmental organizations (NGOs) or private sector associations that discriminate against foreign investors. The government continues to use the Regulatory Impact Assessment (RIA) as part of its policy and legislative making process.  The introduction of the RIA in 2015 was a welcome move with the expectation of improving the decision making process, creating a platform for public-private dialogue and healthy debate on economic development laws and policies, and ultimately improving the quality of regulation. Under the Business Regulatory Act No. 3 of 2014, the law requires that regulators consider alternatives to proposed regulations; the RIA informs those discussions.

Proposed laws and other statutory instruments are, however, often insufficiently vetted with interest groups, or are not released in draft form for public comment.  Proposed bills are published on the National Assembly of Zambia website (http://www.parliament.gov.zm/  ) for public viewing.  Hard copies of the documents are delivered by courier to the stakeholders’ premises/mailboxes.

Opportunities for comment on proposed laws and regulations sometimes exist through trade associations, such as the Zambia Chamber of Commerce and Industry, Zambia Association of Manufacturers, Zambia Chamber of Mines, and American Chamber of Commerce in Zambia.  Stakeholder consultation in developing legislation and regulation has, however, generally been poor under the current administration. The government established the BRRA in 2014 with the mandate to administer the Business Regulatory Act. The Act requires public entities to submit for Cabinet approval a policy or proposed law that regulates business activity, after the policy or proposed law has BRRA approval.  A public entity that intends to introduce any policy or law for regulating business activities should give notice, in writing, to the BRRA at least two months prior to submitting it to Cabinet; hold public consultations for at least 30 days with relevant stakeholders, and perform a Regulatory Impact Assessment (RIA). The BRRA works in close collaboration with the Ministry of Justice, which does not approve any proposed law to regulate business activity without the approval of BRRA.  While this framework is solid on paper, the BRRA and the consultative process is still relatively new and unknown even by other government officials.

Although the underpinnings of an efficient system to handle court disputes exist, Zambian courts are relatively inexperienced in the area of commercial litigation.  This, coupled with the large number of pending commercial cases, affects the promptness and transparency of the regulatory system. Some measures to promote resolution of disputes by mediation have been implemented in an attempt to clear the case backlog.  For example, the courts support Alternative Dispute Resolution (ADR) and there has been an increase in the use of arbitration, mediation, and tribunals by litigants in Zambia. Arbitration is common in commercial matters and the proceedings are governed by the Arbitration Act No. 19 of 2000.  The Act incorporates the United Nations Commission on International Trade Law (UNCITRAL) model and the New York Convention on the recognition and enforcement of foreign arbitral awards. Zambian courts have no jurisdiction if parties have agreed to an arbitration clause in their contract. The establishment of the fee-based judicial commercial division in 2014 to adjudicate high-value claims has helped accelerate resolution of such cases.

In 2015, the government introduced the Output Based Budget (OBB) as a tangible outcome of implementing the planning and budgeting policy that requires a more results-oriented budget in line with national development priorities.  The OBB also provides more relevant information for assessing government’s estimates of revenue, expenditure, and performance. In 2017, the government announced the long-pending migration to the modern Treasury Single Account (TSA) system by all ministries and spending agencies; the system however has not yet achieved full utilization by all budget entities.  The TSA is a unified structure of bank accounts that gives a consolidated position of the government’s cash resources. It aims to improve the government’s ability to efficiently and effectively manage public financial resources by refining current payments processes and eliminating redundant procedures between itself and its clients.

While there are clear public procurement guidelines, concerns persist regarding transparency and a level playing field for U.S. firms.  To enhance the transparency, integrity, and efficiency of Zambia’s procurement system the GRZ launched the electronic government procurement (e-GP) in July 2016.  The e-GP is being piloted by a few ministries, but not available countrywide. In 2018, Cabinet approved legislation to repeal the Public Procurement Act in order to introduce price benchmarking and expert estimates in tendering for capital projects and other high value goods and services; Parliament had not passed the measure as of the end of 1st quarter 2019.

**International Regulatory Considerations**

Zambia is signatory to a range of international treaties that govern international investment and has signed several BITs, but still lacks harmonized legislation for investment built on a national investment policy.  While the government has made gains in improving the business and operating environment for companies, especially for foreign investors, weaknesses in the regulatory framework remain apparent. On October 2, 2000, Zambia became a beneficiary of the African Growth and Opportunity Act (AGOA) market access treaty with the United States and was again found eligible for continuous benefits under AGOA in March 2019.

Zambia is engaged in regional and international integration programs aimed at expanding its trading links and volume to spur further diversification.  Zambia is a member of a number of regional and international groupings aimed at expanding markets for domestically produced goods and services. These include membership in both COMESA and SADC Free Trade Areas (FTAs).  Zambia is also an active participant in the establishment of the Tripartite Free Trade Area between COMESA, SADC, and the East African Community (EAC). In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA); it still awaits ratification by Zambia’s Parliament.  The trade agreement among 49 African Union member states creates a continent-wide single market, followed by the free movement of people and a single-currency union; much work remains to develop implementation protocols and mechanisms across Africa.

At the multilateral level, Zambia has been a WTO member since January 1, 1995.  Zambia’s investment incentives program is transparent and has been included in the WTO’s trade policy reviews.  The incentive packages are also subject to reviews by the Board of the ZDA and to periodic reviews by the Parliamentary Accounts Committee.  Zambia is a signatory to the WTO Trade Facilitation Agreement (TFA) but still faces major challenges in expediting the movement, release, and clearance of goods, including goods in transit, which is a major requisite of the TFA.  Zambia has benefited from duty-free and quota-free market access to the EU through its Everything but Arms FTA, and to the United States from the Generalized System of Preferences (GSP) and AGOA agreements.

Membership in all the aforementioned organizations has led to improved market access under preferential trade terms for Zambia’s private sector, which can invest in and take advantage of larger foreign markets.  The major challenge has been the low productive capacity of the country’s private sector and the difficulty it has in meeting the competitive demands and standards of regional and international markets so as to take advantage of increased market access.

**Legal System and Judicial Independence**

Zambia has a dual legal system that consists of statutory and customary law administered through a single formal court system.  Statutory law is derived from the English legal system with some English Acts of Parliament still deemed to be in full force and effect within Zambia.  Traditional and customary laws, which remain in a state of flux, are generally not written or codified, although some of them have been unified under Acts of Parliament.  No clear definition of customary law has been developed by the courts, and there has not been systematic development of this subject.

Zambia has a written commercial law.  The Commercial Court, a division of the High Court, deals with disputes arising out of commercial transactions.  All commercial matters are registered in the commercial registry and judges of the Commercial Court are experienced in commercial law.  Appeals from the Commercial Court, based on the amended January 2016 constitution, now fall under the recently established Court of Appeals, comprised of eight judges.  Constitutional appeals default to the Constitutional Court, another new judicial body formed following 2016 constitutional reforms. The Foreign Judgments (Reciprocal Enforcement) Act, Chapter 76, makes provision for the enforcement in Zambia of judgments given in foreign countries that accord reciprocal treatment.  The registration of a foreign judgment is not automatic. Although Zambia is a state party to international human rights and regional instruments, it has a dualist system of jurisprudence that considers international treaty law as a separate system of law from domestic law. Domestication of international instruments by Acts of Parliament is necessary for these to be applicable in the country.  Systematic efforts to domesticate international instruments are quite slow, but progressing.

The courts in Zambia are generally independent, but contractual and property rights enforcement is weak and final court decisions can take a prohibitively long time.  At times, politicians have exerted pressure on the judiciary in politically controversial cases. Regulations or enforcement actions are appealable and adjudication depends on the matter at hand and the principal law or act governing the regulations.  Some actions can be handled through commercial arbitration, tribunals, or ADR. Also, courts have powers to determine whether a matter can be handled under any of these mechanisms.

**Laws and Regulations on Foreign Direct Investment**

The major laws affecting foreign investment in Zambia include:

- The Zambia Development Agency Act of 2006, which offers a wide range of incentives in the form of allowances, exemptions, and concessions to companies.
- The Companies Act of 1994, which governs the registration of companies in Zambia.
- The Zambia Revenue Authority’s Customs and Excise Act, Income Tax Act of 1966, and the Value Added Tax of 1995 provide for general incentives to investors in various sectors.
- The Employment Act, Chapter 268, Zambia’s basic employment law that provides for required minimum employment contractual terms.
- The Immigration and Deportation Act, Chapter123, regulates the entry into and residency in Zambia of visitors, expatriates, and immigrants.

**Competition and Anti-Trust Laws**

Market competition operates under a relatively weak regulatory framework, although there is freedom of pricing, currency convertibility, freedom of trade, and free use of profits.  A fairly strong institutional framework is provided for strategic sectors, such as mining and mining supply industries, and large-scale commercial farming. The Competition and Consumer Protection Commission (CCPC) is a statutory body established with a unique dual mandate to protect the competition process in the economy and to protect consumers.  The mandate of the Commission cuts across all economic sectors. The CCPC regulates the economy to avoid restrictive business practices, abuse of dominant position of market power, anti-competitive mergers and acquisitions, and cartels that erode consumer welfare. The Commission is also mandated to enhance consumer welfare. In general terms, therefore, the principal aim of the Commission is to safeguard competition and ensure consumer protection, but it has been described as ineffectual and lacks legislative influence.

In 2016, the CCPC published a series of guidelines and policies that included adopting a formal Leniency Policy, a policy that encourages persons to report to the CCPC information that may help to uncover prohibited agreements.  In certain circumstances, the person receives immunity from prosecution, imposition of fines, or the guarantee of a reduction in fines. The policy also calculates administrative penalties. In addition, the CCPC in 2016 published the draft Settlement Guidelines, which provide a formal framework for parties seeking to engage the CCPC for purposes of reaching a settlement.

The Competition and Fair Trading Act, Chapter 417, prevents firms from distorting the competitive process through conduct or agreements designed to exclude actual or potential competitors, and applies to all entities, regardless of whether private, public, or foreign.  Although the Commission largely opens investigations when a complaint is filed, it can also open investigations on its own initiative. Zambian competition law can also be enforced by civil lawsuits in court brought by private parties and criminal prosecution by the Commission is possible in cartel cases without the involvement of the Director of Public Prosecution under the Competition and Consumer Protection Act (CCPA) No. 24 of 2010.  However, the general perception is the Commission may sometimes be restricted in applying the competition law against government agencies and State Owned Enterprises (SOEs), especially those protected by other laws. There were 29 civil competition cases in 2017.

**Expropriation and Compensation**

Zambia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank and other international agreements.  This guarantees foreign investment protection in cases of war, strife, disasters, and other disturbances, or in cases of expropriation.  Zambia has signed bilateral reciprocal promotional and protection of investment protocols with a number of countries. Furthermore, the ZDA also offers further security for investments in the country through the signing of the Investment Promotion and Protection Agreements (IPPAs).

Investments may only be legally expropriated by an act of Parliament relating to the specific property expropriated.  Although the ZDA Act states that compensation must be at a fair market value, the method for determining fair market value is ill-defined.  Compensation is convertible at the current exchange rate. The ZDA Act also protects investors from being adversely affected by any subsequent changes to the Investment Act of 1993 for seven years from their initial investment.

Leasehold land, which is granted under 99-year leases, may revert to the government if it is determined to be undeveloped after a certain amount of time, generally five years.  Land title is sometimes questioned in court, and land is re-titled to other owners. In 2012, the GRZ took several actions similar to expropriation, reversing the privatization of one SOE and terminating two government concessions.  In two of three instances, full compensation for GRZ actions has yet to be finalized, though GRZ figures for 2012 foreign direct investment reflect a significant offset for the return of foreign acquisition capital.

In January 2012, the GRZ reversed the June 2010 sale of the SOE Zambia Telecommunications Company (Zamtel) to Libya’s LAP GreenN, which had acquired a 75 percent shareholding in Zamtel for USD 257 million.  The GRZ unilaterally reversed the sale and re-appropriated the telecom company, citing corruption and flaws in the privatization process. LAP GreenN, through the Libyan Investment Authority, challenged the Zambian government’s decision in court and asked for USD 480 million in compensation.  In October 2017, the London High Court ordered the Zambian government to compensate LAP GreenN USD 380 million for re-nationalizing Zamtel. The Zambian government insists it will compensate LAP GreenN for its investment in Zamtel, but will not transfer ownership of the company back to the operator.

In November 2012, the GRZ also terminated its concession agreement with the privately owned Zambia Border Crossing Company to manage the Kasumbalesa border post with the Democratic Republic of the Congo, along with five other border concessions at Jimbe (with Angola), Nakonde (with Tanzania), Chanida (with Mozambique), Kipushi (with Congo DR), and Mwami (with Malawi).  The GRZ cited smuggling, loss of revenue, and threats to national security in terminating the concession, which had been awarded as a PPP on a design, build, and operate basis.

There is no pattern of discrimination against U.S. persons by way of an illegal expropriation by the government or authority in the country.  There are no high-risk sectors prone to expropriation actions.

**Dispute Settlement**

*ICSID Convention and New York Convention*

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

Zambia is a member state of the International Center for the Settlement of Investment Disputes (ICSID) Convention and a signatory to the United Nations Commission of International Trade Law (UNCITRAL Model Law).  In 2002, Zambia ratified the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

*Investor-State Dispute Settlement*

Over the past 10 years, previous disputes involved delayed payments from SOEs to U.S. companies for goods and services and the delayed deregistration of a U.S.-owned aircraft that was leased to a Zambian airline company that went bankrupt.  Currently, a U.S. company is in dispute over the refusal of payment by its local joint venture partner that resulted from goods delivered to the government of Zambia. The case, however, has not officially reached the courts of Zambia.

Relatively few investment disputes involving U.S. companies have occurred since Zambia’s economy was liberalized following the introduction of multi-party democracy in 1991.  The Zambian Investment Code stipulates that claimants must first file internal dispute claims with the Zambian High Court. Failing that, the parties may go to international arbitration, which the state recognizes as binding.  However, U.S. companies can encounter difficulties in receiving payments from the government for work performed or products and services rendered. This can be due to inefficient government bureaucracy or, more often, to a lack of funds available to the government to meet its obligations.

In practice, there are also few recorded cases where Zambia has used sovereignty provisions to countermand its international obligations related to investment and settlement of disputes arising out of asset expropriation.  Recently, in November 2016, under the provisions of section 84B of the Banking and Financial Services Act (BSFA), Chapter 387, the Bank of Zambia took possession of Intermarket Banking Corporation Zambia Limited (IBC), stating the bank had become insolvent.  In October 2017, the Minister of Finance announced that the government had successfully restructured the IBC and that its capital requirement had been met. The bank was re-opened under the name Zambia Industrial Commercial Bank Limited and took over the assets and deposits of Intermarket Banking Corporation Zambia Limited.

*International Commercial Arbitration and Foreign Courts*

The Zambian Arbitration Act Number 19 of 2000 incorporates the UNCITRAL and the New York Convention on the recognition and enforcement of foreign arbitral awards.  The Act applies to both domestic and international arbitration and is based on the UNCITRAL model law. Arbitration agreements must be in writing and parties may appoint an arbitrator of any nationality, gender, or professional qualifications.  Foreign lawyers cannot be used to represent parties in domestic or international arbitrations taking place in Zambia. There are no facilities that provide online arbitration, although the Zambia Institute of Arbitrators promotes and facilitates arbitration and other forms of ADR.  The New York Convention on the recognition and enforcement of foreign arbitral awards has been domesticated into Zambian legislation by virtue of Section 31 of the Arbitration Act. Arbitration awards are enforced in the High Court of Zambia, and judgments enforcing or denying enforcement of an award can be appealed to the Supreme Court.

Foreign arbitral awards are recognized and enforced in Zambia under the Arbitration Act, Section 27, which provides for the recognition and enforcement of foreign arbitral awards.  It takes about 18 weeks to enforce a foreign award. The United States has a BIT with Zambia through AGOA and through COMESA, of which Zambia is a member. There have been no claims under these agreements.  Proceedings against the state are subject to the State Proceedings Act, Chapter 71, and Volume 6, which grants the state immunity against execution.

**Bankruptcy Regulations**

The Bankruptcy Act, Chapter 82 provides for the administration of bankruptcy of the estates of debtors and makes provision for punishment of offenses committed by debtors.  It also provides for reciprocity in bankruptcy proceedings between Zambia and other countries and for matters incidental to and consequential upon the foregoing. This applies to individuals, local, and foreign investors.  Bankruptcy judgments are made in local currency, but can be paid out in any internationally convertible currency. Under the Bankruptcy Act, a person can be charged as a criminal. A person guilty of an offense declared to be a felony or misdemeanor under the Bankruptcy Act in respect of which no special penalty is imposed by this Act shall be liable on conviction to imprisonment for a term not exceeding two years.

Zambia has made strides in improving its credit information system.  Since 2008, the credit bureau, TransUnion, requires banks and some non-banks to provide loans requirement information and consult it when making loans.  The credit bureau eventually captures data from other institutions such as utilities. The bureau’s coverage is still less than 10 percent of the population; the quality of information is suspect; and there is lack of clarity on data sources and the inclusion of positive information.

							4. Industrial Policies					

**Investment Incentives**

The ZDA Act provides for a number of incentives available to both local and foreign investors.

Under the Income Tax Act, Chapter 323 or the Customs and Excise Act, Chapter 322, investors who invest not less than USD 500,000 in an MFEZ, an industrial park, a priority sector, or invest in a Rural Enterprise under the ZDA Act, are entitled to the following fiscal incentives:

- A corporate tax rate of 0 percent for 5 years from commencement of operations.
- Taxation on only 50 percent of profits in year 6 through year 8 from commencement of operations and only 75 percent for years 9 and 10.
- 5-year exemption on dividend taxes following the first year of declaration.
- 5-year customs duties exemption on imported machinery and equipment.
- Improvement allowance of 100 percent of capital expenditure on improvements or upgrading of infrastructure.

In addition to fiscal incentives, the above category of investors, along with those who invest an amount not less than USD 250,000 in any sector or product not provided for as a priority sector or product under the Act, are entitled to investment guarantees and protection against state nationalization along with free facilitation for application of immigration permits, secondary licenses, land acquisition, and utilities.  For major investments, the Minister of Finance may specify additional incentives for investment in an identified sector or product of not less than USD 10 million or equivalent in convertible currency in new assets that qualify for those incentives.

During the presentation of the 2018 national budget, the Minister of Finance proposed discontinuing the five-year income tax holidays provided under the ZDA Act.  Instead, the Minister proposed accelerated depreciation for capital expenditure in an effort to safeguard government revenues eroded through tax holidays. The proposal was criticized by foreign investors, and has led to some investors putting the brakes on additional investment in the country.  The proposal to discontinue the five-year income tax holiday is not yet enacted.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

An investor may apply to be appointed and licensed by the Commissioner General to establish and operate a bonded factory under Section 65 of the Customs and Excise Act.  In early 2007, the GRZ announced the creation of MFEZs in which investors enjoy waivers on customs duty on imported equipment, excise duty, and value added tax, among other concessions.  It is currently unclear if the government will maintain these incentives (see Investment Incentives section).

There are three MFEZs currently operating: the Chambishi MFEZ in Copperbelt Province and the Lusaka East MFEZ located near Lusaka’s international airport, both of which are heavily (if not exclusively) dominated by Chinese-owned enterprises; and the Lusaka South MFEZ, which has a mix of multi-national firms.  Foreign-owned firms enjoy the same investment opportunities as domestic firms in MFEZs. The ZDA Act is the primary legislation for investment in Zambia. An investor, foreign or local, is free to identify and suggest any other location in the country deemed economical for MFEZ development, although the government has prioritized designated areas in Lusaka, Ndola, Mpulungu, Chembe, Nakonde, Kasumbalesa, and Mwinilunga.  Investors are encouraged to provide local employment and skills transfer to local entrepreneurs and communities. Investors are also encouraged to utilize local raw materials and intermediate goods and engage in technology transfer to qualify to operate in an MFEZ.

Zambia is active in several key regional organizations that promote regional trade and regulatory harmonization.  COMESA launched its FTA in October 2000 and established a customs union in June 2009. The top five intra-COMESA exports from Zambia include tobacco, raw sugarcane, wire, refined copper, and cement.  The SADC Protocol on Trade came into force in 2008. The Trade Protocol promotes regional integration through trade development and develops natural and human resources for the mutual benefit of their people.  Trade among SADC member states is conducted on reciprocal preferential terms. Rules of Origin define the conditions for products to qualify for preferential trade in the SADC region. Products have to be “wholly produced” or “sufficiently processed” in the SADC region to be considered compliant with the SADC Rules of Origin.  The SADC Rules of Origin are product-specific and not generic, like the Rules of Origin for COMESA.

COMESA, the EAC, and SADC member states agreed in October 2008 to negotiate a Tripartite Free Trade Area (TFTA) covering half of Africa.  The Tripartite Free Trade Area (TFTA) was launched in June 2015 in Egypt; to date, Zambia is one of the 22 out of the 27 member states which have signed the agreement.  The Agreement will enter into force once it has been ratified by 14 Member States. Only Egypt and Uganda have ratified the Agreement thus far. In February 2019, Zambia signed the African Continental Free Trade Agreement (AfCFTA); it must still be ratified by Parliament.  The trade agreement between 49 African Union member states plans to create a single market, followed by the free movement of people and a single-currency union; much work remains to develop implementation protocols and mechanisms continent-wide. The TFTA and AfCFTA declaration have yet to enter into effect.

Zambia performs better than the average sub-Saharan African and lower middle income countries in the areas of information availability, involvement of the trade community, appeal procedures, and automation, according to OECD trade facilitation indicators.   Zambia’s performance for internal border agency co-operation and governance and impartiality is below average for sub-Saharan African and lower middle income countries.

**Performance and Data Localization Requirements**

Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.  Foreign contractors bidding on infrastructure projects are required by law to give 20 percent of works to Zambian small contractors. Outside of infrastructure projects, no requirements currently exist for data localization, local content, equity, financing, employment, or technology transfers.  However, in January 2018 the government issued a Statutory Instrument (SI) instructing all industries to transport 30 percent of their cargo by rail. The government does not impose offset requirements or impose conditions on permission to invest in a specific geographic area or local content, but investors are encouraged to employ local nationals.  There is no legal definition of local content, and the most comprehensive local content legislation is contained in the Mines and Minerals Development Act of 2008. The Citizens Economic Empowerment Act of 2006 and Statutory Instrument of 2008 also contain local content provisions.

The GRZ favors the use of local workers for unskilled labor as well as for skilled middle or senior management workers.  Under the ZDA Act, any foreign investor who invests a minimum of USD 250,000 or its equivalent and employs a minimum of 200 employees at certain technical or managerial levels is entitled to a self-employment permit or resident permit.  The ZDA assists the qualifying investor to obtain work permits for up to five expatriate employees. In practice, however, some foreign companies, especially smaller-scale investors, have had difficulty securing these permits. Any entry permit holder can apply for a dependent’s pass for each of his dependents.  The government is considering limiting foreigners to obtain work permits only for rare skills not found in Zambia. While not yet implemented, the GRZ has at times denied work permits or work permit renewals. The ZDA is also in the process of developing standards regarding investment performance benchmarks that it seeks to establish within an MFEZ to assist the government in monitoring company performance against the commitments made when investment incentives are granted.

The GRZ encourages investors where possible to use domestic content in goods or technology if available.  In 2017 the government started the formulation of a local content strategy to promote inclusive and sustainable growth through increased use of locally available goods and services in development sectors.  According to the Ministry of Commerce, Trade, and Industry, once the strategy is developed, a law will be passed to compel businesses to use a certain percentage of local inputs and products in the production and provision of goods and services.  In a speech to Parliament in March 2018, the president criticized a perceived influx of foreign workers into Zambia’s mining industry; the government has announced it will conduct a month-long review of foreign labor quotas in the sector. The move follows sustained opposition to working practices by domestic unions and civil society organizations.

While this was not the first time that scrutiny of foreign labor has surfaced as a strategic issue for the government, the latest review is a reminder of the burgeoning pressures that continue to underpin sector management and policymaking.  To date, the current administration has adopted a relatively pragmatic approach to managing the mining sector’s fiscal and regulatory framework, acknowledging the challenging commercial conditions for some mining companies, and the need for stability in the operating environment.

Currently, there is no requirement for foreign information technology providers to turn over source code or provide access to surveillance.  The telecommunications sector is governed by the Information and Communications Technology Act No. 15 of 2009 (ICT Act) and falls under the Ministry of Communications and Transport.

The government strives to be consistent with Trade Related Investment Measures (TRIMs) requirements and generally abides by the WTO’s TRIMS obligation.  Although performance requirements are not imposed, authorities expect commitments made in applications for investment licenses to be fulfilled.

							5. Protection of Property Rights					

**Real Property**

Property rights and the regulation of property are well defined in principle, but face problems in implementation.  Contractual and property rights are weak. Courts are often inexperienced in commercial litigation and are frequently slow in reaching their decisions.  The ZDA Act ensures investors’ property rights are respected. Secured interests in property, both movable and real, are recognized and enforced. Property can be owned individually, jointly in undivided shares, or by an entity such as a company, close corporation or trust, or similar entity registered outside Zambia.  The ZDA Act provides for legal protection and facilitates acquisition and disposition of all property rights such as land, buildings, and mortgages. The Lands and Deeds Registry Act of Zambia states that a mortgage is only to operate as security and not a transfer or lease of the estate or interest mortgaged. There are two types of mortgages in Zambia, a legal and an equitable mortgage.  A legal mortgage is created in respect to a legal estate by deed. An equitable mortgage does not convey legal title to the mortgage, and no power of sale vests in the mortgagee.

The president holds all land on behalf of the people of Zambia, which he may give to any Zambian, but the process is set in law.  The Lands Act, Chapter 184, places a number of restrictions on the president’s allocation of land to foreigners. The ZDA Act makes provision for ownership of land by investors.  The ZDA, in consultation with the Ministry of Lands, assists an investor in identifying suitable land for investment, as well as assisting the investor to apply through the Ministry of Lands.  While land is technically owned by the president, it is worth noting that traditional chiefs have jurisdiction over traditional, or customary, land, which makes up roughly 70 percent of Zambia.

The Commissioner of Lands verifies that properties can be transferred after checking if ground rent has been paid and conducting due diligence on the purchaser.  As all land in Zambia belongs to the state, Zambians, Zambian companies, established residents, or investors can only lease it under lease terms established by law.  Land held under customary tenure has no title, but where a sketch plan of the area exists, the chief can give written consent to an investor and a 14-year lease can be obtained for traditional land.  In March 2017, the president expressed concern that land was being given to foreigners at an alarming rate by traditional chiefs and called for an inquiry into this by the Ministry of Lands, which had the lead in forming a new land policy.  The current draft of the new land policy would assert more central government control over traditional lands and seeks to reduce the lease tenure on foreign-owned land from 99 years to renewable periods of 25 years. Both traditional chiefs and foreign investors have objected to terms in the draft bill, which has not been presented to Parliament and is currently with the Ministry of Lands for further stakeholder consultation.

Despite Zambia’s abundant land for agriculture and other purposes, the process of land acquisition and registration is a major obstacle for investors.  About 70 percent of available land is under traditional ownership. Its acquisition involves negotiations with traditional leaders who have to balance the demands of their subjects with the pressure to convert land for commercial purposes.  Most available land has not been surveyed or mapped and where this has been done, records are often outdated or difficult to retrieve from the Ministry of Lands.

The Ministry of Lands is centralized in Lusaka and faces problems of poor record keeping and slow processing of title deeds.  To address these challenges the government, with the support of donor partners, has been working to reform land policy, including modernization of the Lands Department at Ministry of Lands, establishment of Land Banks, establishment of a Land Development Fund, demarcation of MFEZs and industrial parks, and development of farming blocks.

Many of Zambia’s urban poor living on statutory land are not aware of the ways in which they can secure their rights to land.  Some civic leaders, cadres (political party supporters), and traditional leaders allocate and sell land without following the required procedures.  As such, many of the poor living in urban areas find refuge in unplanned settlements, which in some cases are not approved in accordance with Zambian law.  This has led to the continued proliferation of informal and unplanned settlements, illegal land allocations, land grabbing, and misplacement of resources, all of which slow development.

People living on both customary land and in unplanned settlements therefore do so with a sense of insecurity of land tenure due to the absence of documentation to support land ownership coupled with a poor land administration system.  Civil and traditional leaders have demonstrated little transparency and accountability in land governance. Most often, community members have little knowledge about either their land rights or how they can protect themselves.

**Intellectual Property Rights**

Intellectual property laws in Zambia cover such areas as domain names, traditional knowledge, transfer of technology, patents and copyrights, etc.  Zambia is also party to several international intellectual property agreements. The legal framework for trademark protection in Zambia is adequate, however, enforcement of intellectual property rights (IPR) is weak and courts have little experience with commercial litigation.  Copyright protection is limited and does not cover computer applications. Of the many pirated and counterfeit goods in Zambia, the main ones are: DVDs, CDs, audio-visual software, infant milk, pharmaceuticals, body lotions, motor vehicle spare parts (such as tires and brake pads), beverages, cigarettes, toothpaste, electrical appliances, fertilizer, pesticides, and corn seed.  Small-scale trademark infringement occurs in connection with some packaged goods utilizing copied or deceptive packaging. In 2016, the government enacted the Industrial Designs Act and the Protection of Traditional Knowledge, Genetic Resources, and Expressions of Folklore Act. The Industrial Designs Act encourages the creation of designs and development of creative industries through enhanced protection and utilization of designs, and it provides for the registration and protection of designs and the rights of proprietors of registered designs.  The Protection of Traditional Knowledge, Genetic Resources, and Expressions of Folklore Act provides a transparent legal framework for the protection of, access to, and use of, traditional knowledge, genetic resources, and expressions of folklore and guarantees equitable sharing of benefits and effective participation of holders.

The Zambia Police Service Intellectual Property Unit (IPU) carries out raids in shops and markets to confiscate counterfeit and pirated materials.  The IPU tracks and reports on seizures of counterfeit goods but no consolidated record is available. There are fines for revealing proprietary business information, but they are not large enough to adequately penalize possible disclosures.  Zambia’s patent laws conform to the requirements of the Paris Convention for the Protection of Industrial Property, to which Zambia is a signatory. It takes a minimum of four months to patent an item or process. Duplicative patent searches are not performed, but patent awards may be appealed on grounds of infringement.

Zambia is a signatory to a number of international agreements on patents and intellectual property, including the World Intellectual Property Organization (WIPO) Paris Convention and Bern Convention, as well as the Universal Copyright Convention of UNESCO. Zambia is also a member of the African Regional Industrial Property Organization (ARIPO).  The country is a signatory to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which is an international legal agreement between all the member nations of the World Trade Organization.

The Ministry of Commerce, Trade, and Industry and the Patents and Companies Registration Agency (PACRA) are the leading institutions responsible for the implementation of IPR laws in Zambia.  The industrial property registration system at PACRA underwent an upgrade that linked its electronic documentation management system to WIPO’s WIPOScan, which provides for digitization of IPR records.  Though major strides have been made in Zambia in the fight against piracy and counterfeiting, more still needs to be done.

Zambia is not included in USTR’s Special 301 Report nor its Notorious Markets List.  For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market.  Banking supervision and regulation by the Bank of Zambia (BoZ) has improved slightly over the past few years. Improvements include revoking licenses of some insolvent banks, denying bailouts, limiting deposit protection, strengthening loan recovery efforts, and upgrading the training of and incentives for bank supervisors.  High domestic lending rates and the limited accessibility of domestic financing constrain business. High returns on government securities encourage commercial banks to invest heavily in government debt to the exclusion of financing productive private sector investments.

The Lusaka Stock Exchange (LuSE), established in 1993, is structured to meet international recommendations for clearing and settlement system design and operations.  There are no restrictions on foreign participation in the LuSE, and foreigners may invest in stocks on the same terms as Zambians. The LuSE has offered trading in equity securities since its inception and, in March 1998, the LuSE became the official market for selling Zambian government bonds.  Investors intending to trade a listed security or government bond are now mandated to trade via the LuSE. The market is regulated by the Securities Act of 1993 and enforced by the Securities and Exchange Commission (SEC) of Zambia. Secondary trading of financial instruments in the market is very low or non-existent in some areas.  As of the beginning of 2018, there are 22 companies listed on the LuSE with a portfolio worth about K63 billion (USD 6.6 billion).

Existing policies facilitate the free flow of financial resources into the product and factor markets.  The government and the BoZ respect IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions.  Credit is allocated on market terms and foreign investors can get credit on the local market, although local credit is relatively expensive and most investors therefore prefer to obtain credit outside the country.

**Money and Banking System**

The financial sector is comprised of three sub-sectors according to financial sector supervisory authorities.  The banking and financial institutions sub-sector is supervised by the BoZ, the securities sub-sector by the SEC, and the pensions and insurance sub-sector by the Pensions and Insurance Authority.  Zambia’s banking sector is considered relatively well-developed in the African context, but the sector remains highly concentrated. There are currently 19 banks in Zambia with the largest four banks holding nearly two-thirds of total banking assets.  The dominance of the four largest banks in deposits and total assets has been diluted by increased market capture of smaller banks and new industry entrants, an indication of growing competitive intensity in this segment of the banking market. Government policies generally facilitate the free flow of financial resources to support the entry of resources in the product and factor market.  There continued to be a steady increase in electronic banking and related services over the last few years. As stated above, banking supervision and regulation by the BoZ has improved slightly over the past few years. The Banking and Financial Services Act, Chapter 387, and the Bank of Zambia Act, Chapter 360, govern the banking industry.

The BoZ’s current policy rate, as of February 2019, is 9.75 percent.  The commercial lending rate ranged between 23 and 26 percent as of 2018, among the highest in the region.  The persistence of high interest rates led the government to urge commercial banks to reduce their lending rates in order to stimulate private sector growth and the economy as a whole.  One factor inhibiting more affordable lending is a culture of tolerating loan default, which many borrowers view as a minor transgression. Non-performing loans (NPLs) in the sector are growing with some estimates as high as 15 percent.  The government itself is a contributor as it is in arrears of about USD 1.3 billion to many contractors who reportedly hold a high percentage of the NPLs.

Lender data reporting remains erratic and credit rating information is not widely available.  In addition, high returns on government securities encourage commercial banks to invest heavily in government debt, to the exclusion of financing productive private sector investments.  Banking officials acknowledge that they need to upgrade the risk assessment and credit management skills within their institutions in order to better serve borrowers. At the same time, they argue that widespread financial illiteracy limits borrowers’ ability to access credit.  Banks provide credit denominated in foreign currency only for investments aimed at producing goods for export. Banks provide services on a fee-based model and banking charges are generally high. Home mortgages are available from several leading Zambian banks, although interest rates are still very high.

To operate a bank in Zambia, the bank must be licensed by the Registrar of Banks, Financial Institutions, and Financial Businesses (“the Registrar”) whose office is based at the BoZ.  The decision to license banks lies with the Registrar. Foreign banks or branches are allowed to operate in country as long as they fulfill BoZ requirements and meet the minimum capital requirement of USD 100 million for foreign banks and USD 20 million for local banks.  According to the BoZ, many banks in the country have correspondent banking relationships; it is difficult to assess how many there are or whether any bank has lost any correspondent banking relationships in the past three years. It is also difficult to analyze if any of those correspondent relationships are currently in jeopardy as the daily management of those relationships are carried out by the individual banks and not by the BoZ.

The Non-Bank Financial Institutions (NBFIs) are licensed and regulated in accordance with the provisions of the Banking and Financial Services Act of 1994 (BFSA) and related Regulations and Prudential Guidelines.  As key players in the financial sector, NBFIs are subject to regulatory requirements governing their prudential position, consumer protection, and market conduct in order to safeguard the overall soundness and stability of the financial system.  The NBFIs comprise 8 leasing and finance companies, 3 building societies, 1 credit reference bureau, 1 savings and credit institution, 1 development finance institution, 80 bureau de change, 1 credit reference bureau, and 34 micro-finance institutions.

Private firms are open to foreign investment through mergers and acquisitions.  The CCPC reviews and handles big mergers and acquisitions. The High Court of Zambia may reverse decisions made by the Commission.  Under the CCPA, foreign companies without a presence in Zambia and taking over local firms do not, however, have to notify their transactions to the Commission, as it has not established disclosure requirements for foreign companies acquiring existing businesses in Zambia.  In the past decade, some mergers and acquisitions include Bharti Airtel’s purchase of Zain/Celtel Zambia, the acquisition of a huge U.S. multinational energy corporation’s assets in Zambia by Engen Petroleum, a large U.S. retailer takeover of Game Stores through the acquisition of Massmart Holdings Limited of South Africa, Barrick Gold Corp takeover of Equinox Lumwana Copper Mines, the purchase of BP shares in Southern Africa, including BP Zambia, by Puma Energy, the Jinchuan Group Limited takeover of Metorex Chibuluma Copper Mine, Atlas Mara’s acquisition of Finance Bank Zambia and subsequent combination with BANC ABC, and private equity house EMR Capital’s purchase of eighty percent of indirect interest in Lubambe Mine, held equally by African Rainbow Minerals (ARM) and Vale International.

**Foreign Exchange and Remittances**

*Foreign Exchange Policies*

There are currently no restrictions or limitations placed on foreign investors converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, and lease payments) into freely usable currency and at a legal market-clearing rate.  Investors are free to repatriate capital investments, as well as dividends, management fees, interest, profit, technical fees, and royalties. Foreign nationals can also transfer and/or remit wages earned in Zambia. Funds associated with investments can be freely converted into internationally convertible currencies.  The BoZ pursues a flexible exchange rate policy, which generally allows the currency to freely float, though it has intervened heavily to support the local currency, the kwacha, in 2014 to 2016. Transfers of currency are protected by IMF Article VII.

In March 2014, the government announced the revocation of SI Number 33 (mandating use of the kwacha for domestic transactions) and SI Number 55 (monitoring foreign exchange transactions).  The government experienced challenges implementing these statutory instruments and – along with problems of fiscal management and weakening global copper prices – the SIs were perceived as undermining confidence in Zambia’s economy and currency, leading to sharp depreciation of the kwacha.  The decision to revoke the SIs was widely praised in the business community. The kwacha, however, has remained weak in historical terms against the dollar and in early April 2019 was trading between 12-12.5 kwacha per dollar.

Over-the-counter cash conversion of the kwacha into foreign currency is restricted to a USD 5,000 maximum per transaction for account holders and USD 1,000 for non-account holders.  No exchange controls exist in Zambia for anyone doing business as either a resident or non-resident. There are no restrictions on non-cash transactions. The exchange rate of the Zambian national currency is mostly determined by market forces; because the volume and value of exports from Zambia are overwhelmingly related to the extractive industries sector, mining companies’ financial transactions play a major role in exchange rate determination.

**Remittance Policies**

There are no recent changes or plans to change investment remittance policies that tighten or relax access to foreign exchange for investment remittances.  There are no restrictions on converting or transferring funds associated with an investment (including remittances of investment capital, earnings, loan repayments, or lease payments) into freely usable currency at the legal market clearing rate.  Foreign investors can remit through a legal parallel market, including one utilizing convertible, negotiable instruments such as dollar-denominated government bonds issued in lieu of immediate payment in dollars. There are no limitations on the inflow or outflow of funds for remittances of profits or revenue and there is no evidence to show that Zambia manipulates the currency.  Zambia is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which conducted an assessment of the implementation of anti-money laundering and counter-terrorist financing (AML/CTF) measures in Zambia in November 2007. ESAAMLG coordinates with other international organizations concerned with combating money laundering, studying emerging regional typologies, developing institutional and human resource capacities to deal with these issues, and coordinating technical assistance where necessary.  Zambia has demonstrated commitment to establish an AML/CTF framework. The enactment of the Prohibition and Prevention of Money Laundering Act and the Anti-Terrorism Act, establishment of the Anti-Money Laundering Investigations Unit and the Financial Intelligence Center as the sole designated national agencies mandated to handle AML/CTF and other serious offences, and September 2018 accession to the Egmont Group reflect this commitment.

**Sovereign Wealth Funds**

The GRZ had planned to launch a Sovereign Wealth Fund (SWF) following the 2015 reincorporation of the Industrial Development Corporation (IDC) as the parastatal holding company, but has yet to establish the fund.

							7. State-Owned Enterprises					

There are currently 34 state-owned enterprises (SOEs) operating in different sectors in Zambia including agriculture, education, energy, financial services, infrastructure, manufacturing, medical, mining, real estate, technology, media and communication, tourism, and transportation and logistics.  Most SOEs are wholly owned or majority owned by the government under the IDC established in 2015. Zambia has two categories of SOEs: those incorporated under the Companies Act and those established by particular statutes, referred to as statutory corporations. There is a published list of SOEs in the Auditor General’s annual reports; SOE expenditure on research and development is not detailed.  There is no exhaustive list or online location of SOEs’ data for assets, net income, or number of employees. Consequently, inaccurate information is scattered throughout different government agencies/ministries. The majority of SOEs have serious operational and management challenges.

In principle, SOEs do not enjoy preferential treatment by virtue of government ownership, however, they may obtain protection when they are not able to compete or face adverse market conditions.  The Zambia Information Communications Authority Act has a provision restricting the private sector from undertaking postal services that would directly compete with the Zambia Postal Services Corporation.  Zambia is not party to the Government Procurement Agreement (GPA) within the framework of the WTO, however private enterprises are allowed to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, and other business operations such as licenses and supplies.

SOEs in Zambia are governed by Boards of Directors appointed by government in consultation with and including members from the private sector.  The chief executive of the SOE reports to the board chairperson. In the event that the SOE declares dividends, these are paid to the Ministry of Finance.  The board chair is informally obliged to consult with government officials before making decisions. The line minister appoints members of the Board of Directors from public services, private sector, and civil society.  The independence of the board, however, is limited as most boards are comprised of a majority of government officials and board members that are appointed by the line minister from the private sector or civil society can be removed.

SOEs can and do purchase goods or services from the private sector including foreign firms.  SOEs are not bound by the GPA and can procure their own goods, works, and services. SOEs are subject to the same tax policies as their private sector competitors.  SOEs are not afforded material advantages such as preferential access to land and raw materials. SOEs are audited by the Auditor General’s Office, using international reporting standards.  Audits are carried out annually, but delays in finalizing and publishing results are common. Controlling officers appear before a Parliamentary Committee for Public Accounts to answer audit queries.  Audited reports are submitted to the president for tabling with the National Assembly, in accordance with Article 121 of the Constitution and the Public Audit Act, Chapter 378.

In 2015, the government transferred most SOEs from the Ministry of Finance to the revived Industrial Development Corporation (IDC).  The move, according to the government, was to allow line ministries to focus on policy making thereby giving the IDC direct mandate and authorization to oversee SOE performance and accountability on behalf of the government.  In 2016, the government stated its intent to review state owned enterprises in order to improve their performance and contribution to the treasury and directed the IDC to conduct a situational analysis of all the SOEs under its portfolio with a view to recapitalize successful businesses while hiving off ones that are no longer viable; these reviews are ongoing.  The IDC’s oversight responsibilities include all aspects of governance, commercial, financing, operational, and all matters incidental to the interests of the state as shareholder. Zambia strives to adhere to OECD Guidelines on Corporate Governance to ensure a level playing field between SOEs and private sector enterprises.

**Privatization Program**

There were no sectors or companies targeted for privatization in 2018.  The privatization of parastatals began in 1991, with the last one occurring in 2007.  The divestiture of state enterprises mostly rests with the IDC, as the mandated SOE holding company.  The Privatization Act includes the provision for the privatization and commercialization of SOEs; most of the privatization bidding process is advertised via printed media and the IDC‘s website (www.idc.co.zm  ).  There is no known policy that forbids foreign investors from participating in the country’s privatization programs.

In January 2012, the GRZ reversed the June 2010 sale of the SOE Zambia Telecommunications Company (Zamtel) to Libya’s LAP GreenN, which acquired a 75 percent shareholding in Zamtel for USD 257 million.  The GRZ unilaterally reversed the sale and re-appropriated the telecom company, citing corruption and flaws in the privatization process. LAP GreenN, through the Libyan Investment Authority, challenged the Zambian government’s decision in court and asked for USD 480 million in compensation.  In October 2017, the London High Court ordered the Zambia government to compensate LAP GreenN USD 380 million for re-nationalizing Zamtel. The Zambian government insists it will compensate LAP GreenN for its investment in Zamtel, but will not transfer ownership of the company back to the operator.

							8. Responsible Business Conduct					

Zambia’s economy has shown relatively strong performance since the 1990s.  The government in theory limits its direct involvement in business to strategic investments deemed critical for the delivery of public goods and services, and seeks to maintain high standards of consumer protection.

While Zambia is a high-performer among low-income countries in terms of Responsible Business Conduct (RBC), it lacks clearly formulated or well-implemented RBC policies.  Zambia ranked 118 among 138 countries for the second year in a row in the 2017-2018 Global Competitiveness Report. Note: The 2018-2019 report is not yet published.

The government has sought to improve implementation of legislative and regulatory reforms that impact RBC.  As an example, most investment ventures are required to create and submit environmental impact assessments as a prerequisite to the approval process.  The government requires many investment sectors, such as insurance, banking, and financial services, to submit annual audited financial statements as a licensing condition.  In the case of financial services, quarterly publication of financial statements is compulsory and rigidly enforced by the BoZ.

Zambia has ratified a number of international human rights conventions, such as the Convention against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment; the Convention on the Rights of the Child; and the Convention on the Rights of Persons with Disabilities.  At the national level, the lead authority for upholding human rights norms is the Human Rights Commission (HRC), while the Industrial and Labor Relations Act addresses labor issues. The Act provides the legal framework for trade unions, employers’ organizations and their federations, the Tripartite Consultative Labor Council, and the Industrial Relations Court.  The Employment Act, Chapter 268, is the basic employment law, while the Minimum Wages and Conditions of Employment Act makes provisions for the regulation of minimum wage levels and minimum conditions of employment. Currently, the average minimum wage per month for employees, starting with general or domestic workers, stands at K993 kwacha (~USD 83), to include food and transportation.

The Zambian government seeks to maintain high standards of consumer protection by, for example, following the United Nations Guidelines for Consumer Protection.  The Competition and Fair Trading Act of 1994 and superseding Competition and Consumer Protection Act of 2010 seek to encourage competition in the economy, protect consumer welfare, strengthen the efficiency of production and distribution of goods and services, secure the best possible conditions for the freedom of trade, expand the base of entrepreneurship, and regulate monopolies and concentrations of economic power.  The 2010 Act includes specific consumer protection provisions. The Board of Commissioners is composed of representatives from different ministries and professional associations. Statutory agencies are encouraged by the government to regularly engage in stakeholder consultations whenever new laws and regulations are being considered; this does not always occur in practice, or may occur in ways that are not universally transparent.

Generally, all regulatory agencies that issue operating licenses have statutory reporting requirements that businesses operating under their laws and regulations must meet.  For example, the Banking and Financial Services Act has stringent reporting provisions that require all commercial banks to submit weekly returns indicating their liquidity position.  Late submission of the weekly returns or failure to meet the minimum core liquidity and statutory reserves incur punitive penalty interest, and may lead to the placement of non-compliant commercial banks under direct supervision of BoZ, closure of the undertaking, or the prosecution of directors.

All companies listed under the Lusaka Stock Exchange (LuSE) are obliged to publish interim and annual financial statements within three months after the close of the financial year.  Listed companies are also required to disclose in the national print media any information that can affect the value of the price of their securities. According to the Companies Act, Chapter 388, company directors need to generate annual account reports after the end of each financial year.  The annual account, the auditor’s report or reports on the accounts, and the directors’ report should be sent to each person entitled to receive notice of the annual general meeting and to each registered debenture holder of the company. A foreign company is required to submit annual accounts and an auditor’s report to the Registrar.

The government fully supports measures that encourage responsible business conduct and has recognized the importance of adopting international practices.  The main challenges include domesticating international practices and strengthening regulatory capacities. In many cases, the business sector is encouraged by the government to adopt practices that promote responsible business conduct on a “voluntary basis.”  For example, the Institute of Directors Zambia (IODZ) actively advocated the introduction of “Board Charters” that set out good corporate standards (such as ethical conduct) with which business enterprises will be associated and will implement. The Citizens Economic Empowerment Commission (CEEC) is also promoting the adoption of “Sector Codes” by the business sectors that commit themselves to supporting citizens’ economic empowerment.

In addition, a number of public institutions have established Integrity Committees that address the strengthening of internal policies and procedures for combating corruption.  The private sector is also encouraged to either establish similar Integrity Committees or to strengthen their corporate governance standards to effectively address corruption. Most local manufacturers of consumer products have submitted to voluntary product testing and certification by the Zambia Bureau of Standards (ZABS); ZABS certification is then embossed on the product labels as a “mark of quality” indicating the product’s suitability for consumption.  Legislative measures have also been agreed with food processors and drug manufacturers that indicate product manufacturing and expiry dates.

Most mining companies have acceded to the Extractive Industries Transparency Initiative (EITI) adapted in February 2009 for Zambian conditions, and allow independent audits of their operations and financial reporting.  EITI audit results are available to the general public. Zambia has been an EITI compliant country since September 2012. The government receives revenue in the form of taxes from all extractive industries, including mining.  The mining sector accounts for about 10 percent of GDP and around 70 percent of export revenue. All exploration and mining activities are governed by the Mines and Minerals Act of 2008 and other mining related regulations that include:  the Mineral Royalty Tax (Repeal) Act, the Petroleum Exploration and Production Act, the Explosives Act, and the Environmental Protection and Pollution Control Act. The GRZ, through the Ministry of Mines and Minerals, conducts open bidding and grants mining licenses to qualified bidders.  The Zambian Revenue Authority collects all payments from mining companies and remits them to the Ministry of Finance. The Zambian Revenue Authority regularly publishes production volumes for copper, cobalt, and gold, and the names of companies operating in the country.

							9. Corruption					

Zambia’s anti-corruption activities are governed by the Anti-Corruption Act of 2010 and the National Anti-Corruption Policy of 2009, which stipulate penalties for different offenses.  While legislation and stated policies on anti-corruption are adequate, implementation sometimes falls short. The Public Interest Disclosure (Protection of Whistleblowers) Act of 2010 provides for the disclosure of conduct adverse to the public interest in the public and private sectors; however, like with other laws and policies, enforcement is weak. Zambia lacks adequate laws on asset disclosure, evidence, and freedom of information.  In March 2019, Cabinet approved the Access to Information Bill (ATI); the draft bill had not been made public or presented to Parliament as of March 2019. The bill aims to ensure the government is proactive and organized in disseminating information to the public. Versions of the ATI Bill have been pending since 2002.

Zambia had made some progress in the fight against corruption in the last decade, as reflected by improvements recorded in several governance indicators.  However, recent years have seen the persistent perception that corruption has increased and it remains a primary impediment to governance and development programs.  In the 2018 Corruption Perception Index (CPI) report, Zambia ranked 105 out of 180 countries, which is a drop from 96 in the 2017 report. The legal and institutional frameworks against corruption have been strengthened, and efforts have been made to reduce red tape and streamline bureaucratic procedures, as well as to investigate and prosecute corruption cases, including those involving high-ranking officials.  Most of these cases, however, remain on the shelves waiting to be tried while officials remain free, sometimes still occupying the positions through which the alleged corruption took place. In March 2018, Parliament passed the Public Finance Management Bill that will allow the government to prosecute public officials for misappropriating funds, something previous legislation lacked. The government has not yet established implementing regulations.  In spite of progress made, corruption remains a serious issue in Zambia, affecting the lives of ordinary citizens and their access to public services. Corruption in the police service emerges as an area of particular concern (with frequency of bribery well above that found in any other sector), followed by corruption in the education and health services. The government has cited corruption in public procurements and contracting procedures as major areas of concern.

The Anti-Corruption Commission (ACC) is the agency mandated to spearhead the fight against corruption in Zambia.  The Anti-Money Laundering Unit of the Drug Enforcement Commission (DEC) also assists with investigation of allegations of misconduct.  An independent Financial Intelligence Center (FIC) was established in 2010, but does not have the authority to prosecute financial crimes.  In November 2012, the FIC Board of Directors was appointed and sworn in with a challenge to implement its mandate. Zambia’s anti-corruption agencies generally do not discriminate between local and foreign investors.  Transparency International has an active Zambian chapter.

The government encourages private companies to establish internal codes of conduct that prohibit bribery of public officials.  Most large private companies have internal controls, ethics, and compliance programs to detect and prevent bribery. The Integrity Committees (ICs) Initiative is one of the strategies of the National Anti-Corruption Policy (NACP), which is aimed at institutionalizing the prevention of corruption.  The NACP received Cabinet’s approval in March 2009 and the Anti-Corruption Commission spearheads its implementation. The NACP targets eight institutions, including the Zambia Revenue Authority, Immigration Department, and Ministry of Lands. The government has taken measures to enhance protection of whistleblowers and witnesses with the enactment of the Public Disclosure Act as well as to strengthen protection of citizens against false reports, in line with Article 32 of the UN Convention.

U.S. firms and the Zambian government have identified corruption as an obstacle to foreign direct investment.  Corruption is most pervasive in government procurement and dispute settlement. Giving or accepting a bribe by a private, public, or foreign official is a criminal act, and a person convicted of doing so is liable to a fine or a prison term not exceeding five years.  A bribe by a local company or individual to a foreign official is a criminal act and punishable under the laws of Zambia. A local company cannot deduct a bribe to a foreign official from taxes. Many businesses have complained that bribery and kickbacks, however, remain rampant and difficult to police, as some companies have notedgovernment officials’ complicity in and/or benefitting from corrupt deals.

Zambia signed and ratified the United Nations Convention against Corruption in December 2007.  Other regional anti-corruption initiatives are the SADC Protocol against Corruption, ratified July 8, 2003, and the AU Convention on Preventing and Combating Corruption, ratified March 30, 2007.  Zambia is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, but is a party to the Anticorruption Convention. Currently, there are no local industries or non-profit groups that offer services for vetting potential local investment partners.  Normally, the U.S. Embassy provides limited vetting of potential local investment partners for U.S. businesses, when contracted as a commercial service.

**Resources to Report Corruption**

Contact at government agency or agencies are responsible for combating corruption:

Mr. Kapetwa PhiriDirector General, Anti-Corruption CommissionKulima House, Cha Cha Cha Road, P.O. Box 50486, Lusaka+260 211 237914Email: kphiri@acc.gov.zm

Contact at “watchdog” organization:

Mr. Wesley ChibambaExecutive Director, Transparency International Zambia3880 Kwacha Road, Olympia Park, P.O. Box 37475, Lusaka+260 211 290080Email: tizambia@zamtel.zm and wchibanda@tizambia.org.zm

							10. Political and Security Environment					

Zambia does not have a history of large-scale political violence.  It has a laudable record of democratic elections, which has resulted in two peaceful transitions of power from one party to another since independence in 1964.  More recently, political tensions have been on the rise. Before and during the 2016 elections, there were numerous clashes of supporters of different political parties, resulting sometimes in injuries and arrests.  The leading opposition party contested the election results, leading to a heightened state of political tension that continues to flare up whenever by-elections are held. The U.S. government acknowledged the 2016 election results as representative of Zambians’ choice on election day.  In July of 2017, the Zambian parliament approved a 90-day state of emergency decreed by President Edgar Lungu following a series of incidents of arson at local markets, but arrests were never made and critics saw the move as an effort by Lungu to tighten his grip on power by restricting public gatherings.  Media freedoms have been curtailed in Zambia, with government institutions taking numerous actions to silence private media critical of the ruling party. Similarly, the government often harasses those who raise voices critical of government actions.

							11. Labor Policies and Practices					

Although an abundance of unskilled labor exists in Zambia, investors complain that the supply of skilled and semi-skilled labor is inadequate.  Labor-management relations vary by sector. Zambia’s population is estimated to be over 17.2 million, the majority being of employable age. Labor demand, however, does not match supply and Zambia has high rates of unemployment, youth unemployment, and underemployment while living costs have risen steadily.  The government adheres closely to International Labor Organization (ILO) conventions and has ratified all eight ILO core conventions. The government has continuously sought to revise labor laws and improve compliance, but there are still gaps in law and practice. Strikes are not uncommon in the public sector and often are related to the government’s failure to pay salaries or allowances on time, but lawful strikes are very difficult to hold due to several restrictions and conditions.

Labor laws provide for extremely generous severance pay, leave, and other benefits to workers, which can impede investment.  Such rules do not apply to personnel hired on a short-term basis. As such, the vast majority of Zambian employees are hired on an informal or short-term basis. In September 2018, the Minimum Wage and Conditions of Employment Act 276 of the laws of Zambia were revised following issuance of Statutory Instrument (SI) number 69 of 2018 covering domestic workers. This revision doubled the minimum wage of certain classes of low-wage workers.  

The Employment Act, Chapter 268 covers employment and labor related issues.  While the law recognizes the right of workers to form and join independent unions, conduct legal strikes, and bargain collectively, there are statutory restrictions limiting these rights.  Police officers, military personnel, and certain other categories of workers are excluded from exercising these rights. No trade union can be registered if it claims to represent a class of employees already represented by an existing trade union.  At least 25 members are required and registration may take up to six months. The government has discretionary power to exclude certain categories of workers, including prison staff, judges, registrars of the court, magistrates, and local court justices from labor law provisions.  The law also gives the labor commissioner the power to suspend and appoint an interim executive board of a trade union, as well as to dissolve the board and call for a new election.

The government generally protects unions’ right to conduct their activities without interference.  All categories of workers except police and military are free to form or join unions. Workers’ organizations are independent of government and political parties.  Trade unions are independent of government, but the Ministry of Labor and Social Security is ultimately responsible for employment exchange services and enforcing labor legislation.  An employer is allowed to terminate a contract of service on grounds of redundancy, however, the Employment Act requires the employer fulfill certain conditions before terminating a contract of service on such grounds.  One of these conditions is notifying the employee’s trade union. The Act makes a clear distinction between layoffs and severance. In the event an employee is summarily dismissed, he/she shall be paid upon dismissal the wages and allowances due up to the date of such dismissal.  The government formally permits employment of expatriate labor only in sectors where there is scarcity of local personnel, but investors promoting large scale investments can negotiate the number of work permits that they can obtain from the Department of Immigration to employ expatriates.

The law does not limit the scope of collective bargaining, but it allows, in certain cases, either party to refer a labor dispute to court or arbitration.  The law also allows for a maximum period of one year from the day on which the complaint is filed within which a court must consider the complaint and issue its ruling.  The law provides for the right to strike if recourse to all legal options is first exhausted. The law prohibits workers engaged in a broadly defined range of essential services from striking.  Under Zambian law, essential services are defined as any activity relating to the generation, supply, or distribution of electricity; the supply and distribution of water and sewage removal; fire departments; and the mining sector.  Employees in the Zambian Defense Forces, judiciary, police, prison, and the Zambia Security Intelligence Service (ZSIS) personnel are also considered essential. The government has power to add other services to the list of essential services, in consultation with the tripartite consultative labor council.

The process of exhausting the legal alternatives to a strike is lengthy.  The law also limits the maximum duration of a strike to 14 days, after which, if the dispute remains unsolved, it is referred to the court.  A strike can be discontinued if the court finds it not to be “in the public interest.” Workers who engage in illegal strikes may be dismissed by employers.  The Industrial and Labor Relations Act, Chapter 269, Part IX covers the settling of labor disputes. Aggrieved parties may report the matter to a labor officer, who would take steps deemed fit to effect a settlement between the parties and would encourage the use of collective bargaining facilities where applicable.  In the event of a collective dispute between an employer and a trade union regarding the terms and conditions of employment, claims and demands must be put in writing and both parties must have held at least one meeting with a view to reaching a settlement. Such disputes are referred to a conciliator or board of conciliators to be appointed by both parties to the dispute.  If the conciliator fails to resolve the problem, the conciliator will inform the Labor Commissioner. The Commissioner will then request the Minister of Labor to appoint a conciliator who will again call the parties to consider the dispute. If all efforts to resolve the matter fail, it is then taken to the Industrial Relations Court for arbitration.

The practice of collective bargaining is very much used by trade unions.  In December 2018, workers of the Zambia postal service (ZAMPOST) went on strike for alleged salary delays for five months.  Workers returned to work after a consensus was reached between the postal union and management. In March 2019, unionized teaching and non-teaching staff employed at the University of Zambia went on strike to protest delayed salaries and chronic government underfunding.  In 2017, hundreds of Konkola Copper Mines (KCM) employees in Chililabombwe protested to demand salary increases, which they alleged had been static for four years. The government urged the aggrieved miners to allow dialogue between their employer and their respective labor unions to resolve the matter instead of going on strike.  Meetings among KCM, the Mine workers Union of Zambia (MUZ), National Union of Mine and Allied Workers (NUMAW) and the United Mine Workers Union of Zambia (UMUZ) resolved the matter but did not disclose settlement details. In March 2018, workers of the Tanzania-Zambia Railway Authority (TAZARA) in Zambia, who had not received their salaries for the previous three months, threatened to go on strike, but called off the strike after government intervention.

Other internationally recognized fundamental labor rights, including the elimination of forced labor, child labor employment, discrimination, minimum wage, occupational safety and health, and weekly work hours are all recognized under domestic law, but enforcement is often weak.  In 2016, Zambia made a moderate advancement in efforts to eliminate the worst forms of child labor. The government hired additional labor inspectors and approved a new development assistance framework that aims to prevent the worst forms of child labor. The government also supported the development of programming to empower adolescent girls and reduce child labor in rural areas.  However, children in Zambia continue to engage in the worst forms of child labor, including in the production of tobacco, and in commercial sexual exploitation, sometimes as a result of human trafficking. Gaps remain in the legal framework related to children; for example, the Education Act does not include the specific age to which education is compulsory, which may leave children under the legal working age vulnerable to the worst forms of child labor.  In addition, law enforcement agencies lack the necessary human and financial resources to adequately enforce laws against child labor. There is no documented number of children in Zambia who are engaged in child labor, but studies point to a yearly increase in the number of these children, who work primarily in the agriculture and mining sectors. Cotton, tobacco, cattle, gems, and stones are included on the U.S. Government’s List of Goods Produced by Child Labor or Forced Labor in Zambia.

The Department of Labor and the Department of Occupational Safety and Health of the Ministry of Labor and Social Security monitor labor abuses, as well as health and safety standards in low-wage assembly operations such as construction.  Two main social partners, the Zambian Congress of Trade Unions (ZCTU) and the Zambian Federation of Employers (ZFE), assist with Ministry of Labor enforcement. The worker and employer organizations are consulted at tripartite gatherings on any proposed policy document or legislation, and they participate in labor inspections.  The Ministry of Labor produces annual inspection reports, which are made available to social partners. In December 2015, Parliament passed and the president signed a suite of amendments to the Employment Act that prohibit casual labor and increase protections for unskilled workers. Zambia has benefited from duty-free and quota-free market access from the GSP in the U.S. market under AGOA.

							12. OPIC and Other Investment Insurance Programs					

The Overseas Private Investment Corporation (OPIC) is active in Zambia: several projects are already underway and more opportunities exist in strategic sectors.  OPIC and Zambia signed an agreement in June 1999 that provides for OPIC support through the African Trade Insurance Agency. This institution, open to all African states that are members of the AU, provides exporters with insurance against receivables on export trade deals and political risk insurance for trade transactions.  Zambia is also a signatory to MIGA, which guarantees foreign investment protection in cases of war, strife, disasters, other disturbances, or expropriation

Host country currency exchange restrictions can affect the commercial viability of a project, making it difficult to convert and transfer profits.  OPIC inconvertibility coverage can insure conversion and transfer of earnings, returns of capital, principal, and interest payments, technical assistance fees, and similar remittances pursuant to the bilateral agreement providing for the OPIC program while giving priority for U.S. government expenses.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*