A COMPARATIVE ANALYSIS OF THE ZAMBIA DEVELOPMENT

AGENCY ACT AND THE REPEALED INVESTMENT ACT OF 1993

BY

' l

MARINA KAMANZI

27003451

2012

University of Zambia
A COMPARATIVE ANALYSIS OF THE ZAMBIA DEVELOPMENT AGENCY ACT

AND THE REPEALED INVESTMENT ACT OF 1993

BY

MARINA KAMANZI

27003451

A dissertation submitted to the University of Zambia Law Faculty in partial fulfillment of the

requirements for the Award of the Bachelor of Laws (LLB) Degree.

© University of Zambia 201

ll
 DECLARATION

I, MARINA KAMANZI (COMPUTER NUMBER: 27003451) hereby declare that the

contents of this directed research are entirely based on my own findings and it has not previously

been submitted for a degree at the University of Zambia or any other University. All other works

referred to in this essay have been duly acknowledged. I bear absolute responsibility for all

errors, defects or any omissions herein.

STUDENTS' N t.... t\.~~!).~ .....~?.!Y.I.Q.f.\3.<.... .

SIGNATURE. ............ '~.0. .....................................
DATE. ....... ~~---~-~ ....'1:-~J.?:-:.: ................................. .

Jll
 THE UNIVERSITY OF ZAMBIA

SCHOOL OF LAW

I recommend that the Directed Research prepared under my supervision by:

MARINA KAMANZI

(Computer No. 27003451)

Entitled:

A Comparative Analysis of the Zambia Development Agency Act and the Repealed

Investment Act of 1993

Be accepted for examination. I have checked it carefully and I am satisfied that it fulfills the

requirements relating to the format as laid down in the regulations governing Directed Research.

9- ~ L -----
11 I~;-·u!l 2___
-------~------~~----- -------------- ----------- l

Mr. G. LYEMPE Date

IV
 DEDICATION

To my parents Esther and Antoine and my husband Jonathan for your sacrifices, belief and all

the support you have given me making it possible for me to pursue my LLB. To my brothers

Thierry and Patrick, thank you for everything.

v
 ACKNOWLEDGEMENTS

The conclusion of this work is the pinnacle of what has been an exigent and somewhat satisfying

expedition, as it were, in the school of law. Thank you to Mr. Greenwell Lyempe my supervisor

for his guidance during the preparation of this paper. He has a liberal yet intelligent and

exceptional way of bringing the best out ofhis students.

Special appreciation and mention goes to my loving family who has been reliable, supportive and

understanding beyond measure. This one is for us. Thank you so much. My husband Jonathan for

helping me to dot the I"s and cross the T"s. gratias vobis ago! I further wish to express my

profound gratitude to my colleagues, Billiard Mwendalubi, Pamela Ngulube, Benedict Mulumba,

and Layeni Phiri. What I have learnt from their friendship through the good and the bad is

invaluable. Friends, together we can move mountains.

I am particularly indebted to Milton Mulenga and Patient Mukuka, my desk mates of two years.

Thank you for the support and friendship. Let"s finish what we started! Special thanks go to

Sibajene Mukunkombwe, Robert Buzz Banda and the entire Zambia Development Agency

research department for all the help you rendered to me and all the information you gave me.

It is humanly impossible to acknowledge by name everyone who has assisted me through my

university education in general and in the preparation of this paper in particular. Therefore, to all

those not mentioned by name, but who supported me in one way or the other, I extend my cordial

grateful ness.

VI
 ABSTRACf

Zambia has many attributes to attract foreign direct investment (FDI). Recent export trends
mainly spearheaded by FDI demonstrating its great potential have contributed modestly to the
much-needed diversification of the economic base and exports. However going by the
assessment of its resource potential, Zambia is under-performing and should do better in
attracting FDI. The foregoing has largely been blamed on the lack of a comprehensive legal
framework. It is against this background that this treatise aims at painstakingly comparatively
analysing the ZDA Act and the Repealed Investment of 1993 so as to establish whether the
criticism levelled against the repealed law have since been addressed in the ZDA Act. In so
doing Chapter one introduces the study and sets out the methodology which was employed.
Much of the work was desktop work reviewing legislations and written literature on the subject
matter with a few field work such as interviews and questioners. Chapter two delves into the
repealed Investment Acts of 1993 in particular considering its brief back ground, the salient
features, and for a deeper insight of the issues being grappled with; the weaknesses of the 1993 Acts
are outlined. The following Chapter focuses on the Zambia Development Agency Act No 11 of
2006 taking into account of what ZDA is and its cardinal salient features. More also the Chapter
considers the efficacy of the various statutory instruments passed pursuant to section 18 of the
ZDA Act. namely; the Roma Industrial Park, the Lusaka South Multi-Facility Economic Zone,
the sub-Sahara gemstone exchange industrial park and lumwana multi-facility economic zone.
Additionally For a deeper insight of the issues being tackled, in the fourth chapter a comparative
analysis of the ZDA Act of 200 6 and the repealed Investment Act of 1993 is undertaken
highlighting the fact the existing investment law in Zambia is not adequate to deal with the
problems faced in promoting both local and foreign direct investment. The last chapter sums up
the findings h ighlighting several recommendations on how to improve our investment legal
framework. These include sensitisation of the public on the functions of the Agency,
decentralisation of the agency to provincial headquarters, the Act must stress more on the quality
and relevance of investment unlike emphasise on the amount of investment, and independences
of the Agency.

Vll
 Table of Statutes

The Pioneer Industries (Relief from income tax) Act no 55 of 1965 ofthe Laws of Zambia

The Industrial Development Act no 18 of 1977 of the Laws of Zambia

The Investment Act of 1989 ofthe Laws of Zambia

The Investment Act of 1991 of the Laws of Zambia

The Investment Act of 1993 Cap 3 85 of the Laws of Zambia

Zambia Development Agency Act no 11 of 2006 of the Laws of Zambia

viii
 Glossary of Acronym

COMESA ........................................... Common Market for Eastern and Southern Africa

EBZ ............................................................................... Export Board of Zambia

FDI .............................................................................. Foreign Direct Investment

ICSID ............................... .International Centre for the Settlement oflnvestment Disputes

JICA. ....................................................... .Japanese International Cooperation Agency

KTPC .................................................................................... Kulim Hi-Tech Park

LWSC ............................................................ Lusaka Water and Sewerage Company

MFEZ ............................................................................. Multi-Facility Economic Zones

MMD ............................................................... Movement for Multi-Party Democracy

SADC ......................................................... Southern Africa Development Community

SEDB .............................................................. Small Enterprises Development Board

UNCTAD ...................................... United Nations Conference on Trade and Development

VAT ......................................................................................... Value Added Tax

WTO .............................................................................. World Trade Organisation

ZAMTEL. ..........................................................Zambia Telecommunication Authority

ZDA ......................................................................... Zambia Development Agency

ZCCZ ..................................................................... Zambia-China Cooperation Zone

ZESCO ........................................................... Zambia Electricity Supply Corporations

ZEPZA .......................................................Zambia Export Processing Zones Authority

ZIC ............................................................................... Zambia Investment Centre

ZPA ........................................................................... Zambia Privatization Agency

IX
 TABLE OF CONTENTS

Title ...................................................................................................................................... .ii

Declaration ................................................................................................................ .iii

Supervisor's Recommendation .......................................................................................... .iv

Dedication ............................................................................................................................ v

Acknowledgements .............................................................................................................. vi

Abstract .......................................................................................................................... vii

Table of Statute .................................................................................................................... ix

Glossary of Acronyms .......................................................................................................... x

Chapter 1

General Introduction

1.0 Introduction ...................................................................................................................... 1

1.1 Statement of Problem ............................................................................... 3

1.2 Objectives of the Study ............................................................................ .4

1.3. Specific Objectives .................................................................................. 4

1.4 Rationale and Justification ........................................................................ .4

1.5 Research Questions ................................................................................. 5

1.6 Methodology .......................................................................................... 6

1.6.1Methodology and Synopsis of Research ...................................................... 6

1.6.2 Document Analysis .............................................................................. 6

X
1.6.3 Analysis of the Responses from Questioners and Interviews ................................ 6

1. 7 conclusion ............................................................................................ 8

Chapter 2

Literature Review

The Investment Act of 1993

2.0 Introduction ......................................................................................... 9

2.1 The Investment Act of 1993 ........................................................................ 9

2.2Background ......................................................................................... 11

2.3 Salient Features of the Act ...................................................................... .11

2.4 Objectives of the Act. ........................................................................... .11

2.5 Definition of an Investor .......................................................................... 11

2.6The Investment Centre and Board .............................................................. .13

2.7Procedure for Investment ........................................................................ 14

2.8General Incentives .................................................................................. .16

2.9. Specific Incentives ................................................................................ 16

2.1 0. Investment Guarantees ........................................................................... 17

2.11. The Laws Establishing the Now Five Obsolete Bodies ..................................... 17

2.11.1 The Zambia Privation Agency Act ............................................................ 17

2.11.2 The Export Processing Zone Act number 7 of2001.. ....................................... 18

XI
2.11.3 Export Development Act No 29 of 1999 .................................................. 18

2.11.4 Small Enterprises Development Act no. 29 of 1996 ...................................... 18

2.12. Overall weakness of the Investment Act of 1993 ......................................... 18

2.12. Conclusion ...................................................................................... 22

Chapter3

The Zambia Development Agency Act No 11 of 2006

3.0. Introduction ....................................................................................... 23

3.1 The Policy Behind the Enactment of Act NO II of 2006 .................................. .23

3.2 Salient Features of the ZDA Act ................................................................ .24

3.3 Economic Objectives ............................................................................ .24

3.4 The Zambia Development Agency (administrative machinery) .............................. .24

3.5 Entry and Post Entry Treatment of Investors ................................................ .26

3.6 Investment Promotions and Guarantees ....................................................... 27

3.7 Incentives .......................................................................................... 27

3.8 Dispute Settlement ............................................................................... 28

3.9 Multi-facility Economic Zone .................................................................. 29

3.10 What is a Multi-Facility Economic Zone ..................................................................... .29

3.11 Purposes ofMFEZ .............................................................................. 30

3.12 Main Conditions ofMFEZ ........................................................................ 30

3.13 Location ofMFEZ ............................................................................... 31

3.14. Qualification Criteria to locate in MFEZ I Industrial Park ............................... 31

3.15 MFEZ Incentives .................................................................................... 32

Xll
3.16 Status ofMFEZ Development in Zambia .................................................... 33

3.17 Chambeshi MFEZ .............................................................................. 34

3.18 Lusaka East MFEZ .............................................................................. 34

3.19 Lusaka South MFEZ ........................................................................... 35

3.20 Lumwana MFEZ .................................................................................36

3.21 Sub Sahara Gemstone Exchange Industrial Park ............................................... 36

3.22 Roma Industrial Park ............................................................................ 37

3.23 Weaknesses of the Act .......................................................................... 37

3.24 Conclusion ....................................................................................... 40

Chapter4

A Comparative Analysis of the ZDA Act No 11 of2006 and the Repealed Investment Act of

1993

4.0 Introduction ....................................................................................... 41

4.1 Objectives .......................................................................................... 41

4.2 Administrative Machinery ..................................................................... .42

4.3 Entry and Post Entry Treatment oflnvestors ............................................... .45

4. 4 Investment Promotions and Guarantees ..................................................... .46

4.5Dispute Settlement ................................................................................ 46

4.6 Multi-facility Economic Zone ................................................................. .47

4.7 Present Investment in Zambia ................................................................. .47

4.8. Conclusion ....................................................................................... 48

xiii
3.16 Status ofMFEZ Development in Zambia .................................................... 33

3.17 Chambeshi MFEZ .............................................................................. 34

3.18 Lusaka East MFEZ .............................................................................. 34

3.19 Lusaka South MFEZ ........................................................................... 35

3.20 Lumwana MFEZ .................................................................................36

3.21 Sub Sahara Gemstone Exchange Industrial Park ............................................... 36

3.22 Roma Industrial Park ............................................................................ 37

3.23 Weaknesses of the Act .......................................................................... 37

3.24 Conclusion ....................................................................................... 40

Chapter4

A Comparative Analysis of the ZDA Act No 11 of2006 and the Repealed Investment Act of

1993

4.0 Introduction ....................................................................................... 41

4.1 Objectives .......................................................................................... 41

4.2 Administrative Machinery ..................................................................... .42

4.3 Entry and Post Entry Treatment oflnvestors ............................................... .45

4. 4 Investment Promotions and Guarantees ..................................................... .46

4.5Dispute Settlement. ............................................................................... 46

4.6 Multi-facility Economic Zone ................................................................. .47

4.7 Present Investment in Zambia ................................................................. .47

4.8. Conclusion ....................................................................................... 48

xiii
 Chapter 5

General Conclusions and Recommendation

5.0 Introduction ........................................................................................ 49

5.1 Findings ............................................................................................ 49

5.2Recommendations ................................................................................. 50

5.3. Conclusion .......................................................................................... 52

5.4 Bibliography ........................................................................................ 53

5 .5Questionnaires ...................................................................................... 55

XIV
 CHAPTER ONE

General Introduction

1.0 Introduction

Zambia has many attributes to attract Foreign Direct Investment (FDI) which has come to serve

as an engine of economic growth for most developing nations. It is a mining economy with

decades of experience in mining-related activities. Recent export trends mainly spearheaded by

FDI also demonstrate the great potential and scope that exist in Zambia for deepening investment

in non-traditional export sectors such as vegetables, flowers, ores, slag and ash, sugar and sugar

confectionary, dairy products, bird's eggs, natural honey, edible products, copper wire and

electricity 1 • The prospects for investment in higher value added activities in mining, services and

agriculture are also immense.

More also with the opening up of the Zambian economy in 1990s, FDI inflows has increased

considerably reaching $364 million in 2004 and $ 1.0414 billion in 20102 • This can largely be

explained by the implementation of an ambitious privatisation programme, investments in copper

and cobalt extraction, Greenfield Investments in the agricultural sector, in particular horticulture

and floriculture production, and tourism 3 .

Another explanation to this is that in 2006 the Zambia Development Agency hereinafter referred

as ZDA was established as a one-stop agency by merging five organisations namely; Zambia

1
Kenneth Kaoma: Contemporary issues in Corporate and Investment Law.( Washington: Penn Press, 2000): 54
2
Richard Chakaba: Is the Zambia Development Agency Act an effective Instrument of development through a one
stop shop facility, 4th year obligatory Essay, (UNZA, 2008): I
3
Chakaba.3

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Privatisation Agency (ZPA), Zambia Investment Centre (ZIC), Export Board of Zambia (EBZ),

Zambia Export Processing Zones Authority (ZEPZA) and Small Enterprises Development Board

(SEDB). ZDA is responsible for fostering economic growth and development in Zambia through

promoting trade and investment and has the challenge to develop an internationally competitive

Zambian economy through innovations that promotes high skills, productive investment, and

increased trade. Further ZDA provides investment facilitation, market development, business

development and support services for micro small and medium enterprises. ZDA has an

outstanding organisation structure with five divisions and these include investment promotion

and privatisation, research planning and policy, micro and small market development, corporate

services, and office ofthe director general 4•

The recent FDI inflows have contributed modestly to the much-needed diversification of the

economic base and exports. However going by the assessment of its resource potential, Zambia

is under-performing and should have done better in attracting FDI. The foregoing has largely

been blamed on the lack of a comprehensive legal framework. The challenge Zambia faces is to

increase and sustain FDI inflows beyond recent levels, and to reap greater benefits from FDI for

diversification, industrialization and development. To overcome this, a comprehensive legal

flame work must be present. It is against this background that this treatise aims at painstakingly

comparatively analysing the ZDA Act and the Repealed Investment of 1993 so as to establish

whether the criticism levelled against the repealed law has since been addressed in the ZDA Act.

4
lnvestment in Zambia http// www.zda.org.zm visited on lih January. 2012.

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1.1. Statement of Problem.

As aforementioned, Foreign Direct Investment provides a major source of capital which brings

with it up to date technology in general and in particular benefits a country's economy as a

whole by creating an environment for the transfer of general knowledge and of specific

technologies in production and distribution, industrial upgrading, employment well as work

experience. Since the opening up of Zambian market for equal share in business, Foreign Direct

Investment and indeed Local Investment have increased in number. Recently, Chinese investors

have been identified to be the leading investors in Zambia. In order to attract foreign investment

not only does a country need to be endowed with abundant natural resources but also it is of the

essence to provide incentives by protecting investors from political risks such as expropriations5

and transfer risks such as currency control and inconvertibility of funds.

Despite Zambia being endowed with abundant natural resources which since 1991 have

attracted an increasing considerable number of Foreign Direct Investors, recent records and

comments by investment experts and indeed United Nations Organisations such as UNCT AD,

expresses the fact that this increase is not as expected given the abundant natural resources

Zambia is endowed with. This has been blamed on the lack of a comprehensive legal framework.

This discourse therefore, aims at comparatively analysing the ZDA Act and the repealed

Investment Act of 1993. Further the research will consider whether the current legal framework

is effectual so as to bring about developments that will help Zambia achieve its Vision 2030.

1.2 Objective of the Study

The general objective of this study is to compare the ZDA Act and the repealed Investment Act

of 1993. The repealed Investment Act was highly criticised of its ineffectiveness, therefore this
5
like the situation obtaining at the moment where the PF lead Government has nationalise ZAMTEL

- 3-
study aims at examining whether such criticism have been addressed in the current Zambia

Development Agency Act.

1.3 Specific Objectives

1. To consider the weaknesses of the Investment Act of 1993.

2. To consider the current investment legal framework, the policy behind the enactment of

the ZDA Act.

3. To consider the functions of the Zambia Development Agency

4. To consider the efficacy of the various Statutory Instruments passed pursuant to section

18 of the ZDA Act namely; the Roma Industrial Park, the Lusaka South Multi-Facility

Economic Zone, the Sub-Sahara Gemstone Exchange Industrial Park and Lumwana

Multi-Facility Economic Zone.

5. To draw a conclusion on the efficacy of the Current Investment Legal Frame Work and

recommendations there to.

1.4 Rationale and Justification

This research is justified on the basis that it is fundamental to comparatively analyse the repealed

law and the current law in any field so as to understand where our legal framework is coming

from and where it is heading to. More also this treatise is justified on the basis that, with the

increased need to promote foreign direct investment and an investor friendly milieu in the

country, it is necessary that the legal frame work prevailing over the issues of investment be

constantly and adequately analysed from time to time. This is imperative because the treatise will

evaluate the efficacy of various statutory instruments passed pursuant to section 18 of the ZDA

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Act namely; the Roma Industrial Park, the Lusaka South Multi-Facility Economic Zone, the Sub-

Sahara Gemstone Exchange Industrial Park and Lumwana Multi-Facility Economic Zone, so as

to see how relevant and applicability the law is in this era.

1.5 Research Question

1. What is the background of the investment legal framework m Zambia smce

independence?

2. What were the cardinal salient features ofthe repealed Investment Act of 1993?

3. What were the major weaknesses ofthe previous Investment Act of 1993?

4. What other laws regulated investment in Zambia?

5. What was the policy behind the enactment of the Zambia Development Agency Act no

11 of2006

6. What is ZDA? What are its functions?

7. What are some of the salient provisions of the ZDA Act with specific reference to both

local and FDI?

8. What are the major weaknesses of the ZDA Act?

9. Is the ZDA Act adequate to take investment in Zambia to higher heights? If not what are

the recommendations the?

1.6 Methodology

This section sets out the research methods and procedures used in this study.

1.6.1Methodology and Synopsis of Research

This research was carried out by way of reviewing relevant pieces of Investment legislation since

independence in 1964. This piece of legislation includes; the Pioneer Industries (Relief from

- 5-
income tax) Act no 55 of 1965, Industrial Development Act no 18 of 1977, Investment Act of

1989, Investment Act of 1991, Investment Act of 1993, and the ZDA Act of2006. Further the

research was mainly done by reviewing published and unpublished works. Additionally

interviews with relevant officials at Zambia Development Agency was carried out and

questioners where sent to nearby multi -facility economic Zones. Other information is from

authors of books, journals and scholarly articles who have thoroughly analysed the issues

pertaining to investment laws in Zambia. Parliamentary Debts on the subject matter were also

referred to, and internet was attended to with a view of disseminating current information. Much

of the work was desktop work with very little field work.

1.6.2 Document Analysis

Documents are usually considered as important source of information since they are most likely

to echo a dependable situation which transpired in the past6 • In this study various documents

where highly relied on as document analysis puts forward suggestions on momentous

presumptions which link vital insights into the public policy process, whose recommendations

lay concrete on the way for future policy Actions. This study centre on comparatively analysing

the repealed Investment Act of 1993 and the current ZDA Act of 2006. To achieve this, much

work was done through a review of scholarly articles on the subject matter and interviews/

meetings with relevant government officials at the Zambia Development Agency.

1.6.3 Analysis of the Responses from Questioners and Interviews

Questioners were sent to managers and senior staff in the Research and MFEZ departments at

Zambia Development Agency and at Lusaka East MFEZ, Lusaka South MFEZ, and Roma

Industrial Park. No much information was obtained from the questioners as most of the officers
6
Catherine Dawson. Practical Research Methods: (New Delhi, UBS Publisher's Distributors 2002), 44-45

-6-
were either out in the field or were too busy with their desk work. As a result, follow up

interviews were done though officials preferred to e mail me documents which would help me in

my research.

It was noted from the interviews and questioners that the current ZDA Act is a land mark Act

first of its kind since independence in 1964. Various salient provisions where set out such as the

Zambia Development Agency provision, dispute settlement section and the wide ranging

incentives. Others include the mandatory investment threshold and restrictive screening

procedure for all the foreign investment and most important of the provision recognizing MFEZ.

Furthermore, with regards to MFEZ, it was noted that MFEZ are a unique feature of the current

Investment Legal Framework unlike the repealed Legal Framework. Furthermore it was noted

that any investor whether foreign or local qualifies to develop multi facility economic zone or

industrial park or operating an existing multi facility economic zone upon demonstrating that the

investment he is undertaking relates to MFEZ priority sector. A number of other observations

were that that the MFEZ have a wide ranging incentives and that the government has made it a

priority to support the creation and management of MFEZ. To add on, since 2006, 6 locations

have been declared for MFEZ/Industrial Park development namely; Chambeshi, Lusaka East

(Lusaka Sub Zone), Roma Industrial Park, Lusaka South, Sub-Sahara Gemstone Exchange

Industrial Park and Lumwana.

One participant noted that the Zambia Development Agency Board is tilted towards government

with a majority of government representative thus defeating the government's proclamation of a

private sector led economic development agenda. He further noted that the Act is not clear on

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how individuals will be appointed to the board and it has become of great concern that the 16

members of the board are than necessary. To add on he pointed out that the threshold to qualify

for access to incentives is 500,000 USA dollars or equivalent in convertible currency technically

excludes kwacha investment because kwacha is not convertible. Furthermore the Agency has

done little to educate the citizens on its functions and incentives. To many Zambians, investment

is a myth and only attributed to foreign nationals.

1. 7 Conclusion

This Chapter looked at the problem statement, general objectives of the study and its

significance. Further this Chapter has also looked at the rationale and justification of this

discourse and research questions have also been outlined. A synopsis of the research

methodology and analysed the responses from questionnaires and interviews was also looked.

The Chapter has also illuminated on the various natural resources Zambia is endowed with and

further has expounded the cardinal role FDI plays in the development progression of each given

country.

The following Chapter will discuss the Investment of 1993 while Chapter 3 will look the Zambia

Development Agency Act no 11 of 2006. Further Chapter 4 will comparatively analyse the two

pieces of legislation setting out whether the current Investment Legal Framework is good enough

to enable Zambia meet its Vision 2030 with the help of Investment.

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 CHAPTER TWO

Literature Review: The Investment Act of 1993

2.0 Introduction

This Chapter thrashes out the brief background of the enactment of the Investment Act of 1993.

Further the Chapter will outline its salient features. Additionally the Chapter will also briefly

consider other laws which established the five now obsolete bodies which also dealt with

investment in Zambia. These bodies include, the Zambia Investment Centre, Zambia Privation

Agency, Export Processing Zones Authority, and Small Enterprises Development Board.

Thereafter the different challenges which this Act faced will be outlined.

2.1 Background

When Zambia gained independence in 1964, it took over a vibrant rich economy in capital with

little or no infrastructure, manufacturing industries and skilled labour. To this effect the UNIP

government lead by President Kenneth Kaunda embarked on developmental programs to

improve the various sectors of the economy. For these developmental programmes to succeed

laws were enacted to give them effect'. The first Act to be enacted in relation to investment was

the Pioneer Industries (Relief from income tax) Act2 which as enacted to afford relief from

income tax for companies that was designed as pioneer industries. This Act was designed to

promote the establishment of new industrial and commercial enterprises in the country. In 1977

1
Kennedy Kaunda," Legality Journal; the Washington Consensus: A Critical Discussion of its Benefits to Zambia in
Attracting Foreign Direct Investment", University of Zambia Law Association; (2005) :13
2
Pioneer Industries (Relief from income tax) Act no 55 of 1965 of the laws of Zambia

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the Pioneer Industries Act was repealed and replaced by the Industrial Development Act3 . This

Act was aimed at providing for the licensing and controlling of manufacturing enterprises and to

provide for matters incidental or connected there to such as technology transfer. Despite having

good objectives, Act no 18 of 1977 failed to attract investment and consequently was repealed by

the Investment Act of 19894 . The striking features of this Act were that it basically revised the

law relating to the granting of incentives and provided for the establishment of the Investment

Council and the Investment Coordinating Committee. In Section 4 of the Act, the Investment

Council was tasked with the formulation and approval of national policies that were designed to

develop and foster investment in Zambia5 .

In 1991 when the Movement of Multi Party Democracy (MMD) assumed power, the Investment

Act of 1989 was repealed and replaced by the Investment Act of 1991. The enactment of this Act

was in response to the promises the MMD had made to the people of Zambia in its manifesto.

The Investment Act of 1991 reworked the law relating to investment and established the Zambia

Investment Centre designed as a one stop facility for the promotion, coordination, regulation and

monitoring of investments6 . One remarkable feature of this Act is that it provided for tax

holidays and duty free importation of capital equipments and vehicles. In 1993 the 1991

Investment Act was repealed and replaced by the Investment Act of 1993 hereinafter referred to

as the 1993 Ace.

3
Industrial Development Act no 18 of 1977 of the laws of Zambia
4
Investment Act of 1989, Act no 5 of 1989 of the laws of Zambia
5
Rogers Chongwe. Review of Kenneth Kaoma Mwenda, Zambia's Stock Exchange and Privatisation Programme:
Corporate Finance law in Emerging Markets. H-SAfrica. H-Net Review. (July 200) :7
6
Sashi Nchito A Critical Analysis of the Investment Act and the Zambia Investment Centre 4th year Obligatory
Essay, (UNZA, 2001): 20
7
Investment Act no 15 of 1993 of the laws of Zambia

- 10-
2.2 Salient Features of the Act

The Investment Act of 1993 which came into force on gth September 1993 was the principle

Investment legislation in Zambia. This Act had utmost six remarkable feature and these include,

its objectives, definition of an investor, the Investment Centre and Board, procedure for

investment, incentives and investment guarantees. These salient features will be discussed in

details below.

2.3 Objectives of the Act

The objective of the 1993 Act as was set out in the preamble was to revise the law
relating to investment in Zambia so as to provide a comprehensive legal framework for
investment in Zambia. Further the Act was to continue the Zambia Investment Center
constituted under the repealed 1991 Act as a one-stop facility to easy the burdens of
investors. This act was to be applicable to both local and foreign investors8 .

2.4. Definition of an Investor

The word investor was defined in section two of the 1993 Act to mean any person, natural or

juridical, whether a Zambian citizen or not, investing in Zambia. In her obligatory essay entitled

a critical analysis of the Investment Act and the Investment Centre Sashi Nchito noted that the

definition of an investor was all embracing and encompassed both local and foreign investors on

one hand and individuals and corporate entities on the other9 .

2.5 The Investment Centre and Board.

Part two of the 1993 Act provided for the establishment of the Zambia Investment Centre (ZIC),

a body corporate which was the competent authority to facilitate for and promote investment as

provided for under section 6 10 . As aforementioned ZIC was firstly constituted under the repealed

8
Investment Act 1993, preamble
9
Nchito.24
10
Investment Act 1993,

- 11 -
1991 Investment Act and the 1993Act simply provided for the continued existence of it. The

functions of ZIC included promotion and coordination of government policies on, and

facilitating investment in Zambia so as to provide a one-stop facility 11 • Other functions of the

centre included the following; Promotion of Investment in Zambia; 12monitor performance of

enterprises approved by it and enforced compliance with the terms and conditions of investment

certificates approved under Act 13 ; establish and maintain institutional liaison arrangements 14 and

assist in securing from any Ministry, government department, local authority or other relevant

body any permission, exemption, authorisation, licence, bonded status, land and any other thing

required for the purpose of establishing or operating a business enterprise 15 .

Additionally the Center was mandated to keep records of all technology transfer agreements

. to mvestments
re1atmg . un der t h.1s Act 16 ; prov1"de consu1tancy servtces
. .
to mvestors 17
; co 11 ect an d

disseminate information on relevant laws and regulations, and technical matters, including

applicable standards, specifications and quality control procedures 18 ; and undertake economic

and sector studies, including market surveys, with a view to identifying investment

opportunities 19 • More also the Centre was tasked with the registration of investors20 ; and

implementation of decisions made by the Board21

11
Investment Act of 1993Section 5
12
Investment Act of 1993Section 5 subsection (2) (a)
13
Investment Act of 1993Section 5 subsection (2) (b)
14
Investment Act of 1993Section 5 subsection (2) (c)
15
Investment Act of 1993Section 5 subsection (2) (d)
16
Investment Act of 1993Section 5 subsection (2) (e)
17
Investment Act of 1993Section 5 subsection (2) (f)
18
Investment Act of 1993Section 5 subsection (2) (g)
19
Investment Act of 1993 Section 5 subsection (2) (h)
20
Investment Act of 1993Section 5 subsection (2) (i)
21
Investment Act of 1993Section 5 subsection (2) (j)

- 12-
The Investment Centre operated under the auspices of the Investment Board which was a body

corporate with perpetual succession and a common seal capable of suing and being sued in its

corporate name and with power to all such acts and things as a corporate bod/2 . The board was

tasked with the formulation and implementation of investment policies; establish guidelines for

the centre and issuance of investment certificates.

2.6 Procedure for Investment

The procedure for investment was outlined in part three of the 1993 Act. In particular section 8

provided that; any person investing in a business enterprise may apply for an Investment

Certificate23 . The application for an Investment Certificate was to be made to the Director-

General accompanied by a non-refundable fee determined by the Board24 . On receipt of the

application for Investment Certificate, the Director-General was mandated to submit the

application to the Board for its consideration25 . When the application satisfied all the

requirements, the Board was within six weeks of receipt of an application for an Investment

Certificate mandated to issue an Investment Certificate, with general or special incentives26 .

Further the applicant aggrieved by the decision of the board was allowed to appeal to the

. .
mmtster then to H"tg h Court27 .

Once the Investment Certificate was issued, it entitled the holder to make all the necessary

arrangements for the commencement of the business enterprise described therein. The certificate

contained terms and conditions of the certificate and any general or special incentives given; and

22
Investment Act of 1993section 6
23
Investment Act of 1993 section 8
24
Investment Act of 1993Section 9
25
Investment Act of 1993Section 17
26
Investment Act of 1993Section 19
27
Investment Act of 1993Section 21

- 13 -
was valid for a period of 12 months from the date of issuance subject to an application for

variation and extension? 8

If the holder of the certificate decided not to continue with the project, he could surrender the

certificate to the Board on an agreement 29 . The Board had the power to cancel or suspend any

certificate where the certificate was obtained by fraud, deliberate or through negligent

submission of false information, contravenes the Act, and failed to carry out venture for which

the certificate was issued 30 . Before taking any action in any of the circumstances above, the

Board was mandated to notifY the investor of its intention and the investor was also mandated to

show cause why such an action must not be taken 31 • In circumstances where the investor took

remedial measures, the certificate was not to be cancelled or suspended32 . The effect of

cancellation of a certificate was that all the rights and benefits flowing there under were totally

extinguished while the effect of suspension was that during the duration of suspension, the

certificate holder ceased to enjoy the rights and benefits conferred under the Act33 .

2. 7General Incentives

The Investment Act of 1993 as amended on I st April 1996 offered a wide range of incentives in

the form of tax allowances, exemptions & concessions for companies, which include; an investor

was taxed 15% on income received from farming 34 , an investor was taxed 15% on income which

originates from export of non-traditional products35 , income tax from rural enterprise was for the

28
Investment Act of 1993Section 10 and 11
29
Investment Act of 1993Section 12
30
Investment Act of 1993 Section 13
31
Investment Act of 1993 Section 13
32
Investment Act of 1993 Section 14
33
Investment Act of 1993section 15
34
lnvestment Act of 1993section 19
35
Investment Act of 1993section 20

- 14-
first time in 5years reduced by an amount that is equal to 1/7 of the amount chargeable 36 ,

buildings for Manufacturing, Mining and Hotels enjoyed initial allowance of 10% and an annual

5% wear & tear Allowance of the cost37 and Machinery for Farming, Tourism and

Manufacturing qualify for wear & tear allowance of 50% per annum for the first two years 38 .

Furthermore, capital expenditure on farm improvements enjoyed a 20% per year write off for the.

first 5 years 39 , while Capital Expenditure on the growing of tea, coffee, or banana plants, citrus

fruits or other similar plants or trees was entitled to a development allowance of 10% up to the 1st

year of production40 . Also an investor was entitled to a farm improvement allowance of 100% for

expenditure on farm land41 • Additionally dividends from farming were exempted from tax for

first 5 years 42 . In ascertaining income tax an investor was entitled to deductions for any payments

made for technical education of employees relating to business enterprise and on any expenditure

on research relating to that business enterprise43 .

Other incentives provided for were that, there was Customs Duty Exemption on machinery and

equipment for mining and agriculture 44 , Duty Free Imports of organic and inorganic chemicals,

rubber, steel and plastics; most other inputs at 5%45 , Farm Works Allowance 100% write off on

stumping, clearing, prevention of soil erosion, boreholes, wells, water conservation and aerial or

geographical surveys46 , Customs Duty on Intermediate Goods 15% and on Finished Goods

36
Investment Act of 1993section 22 (1) (a)
37
Investment Act of 1993section 22 (1) (b)
38
lnvestment Act of 1993 section 22 ( 1) (c)
39
Investment Act of 1993section 22 (2)
40
Investment Act of 1993section 23
41
Investment Act of 1993section 25
42
Investment Act of 1993 section 24
43
Investment Act of 1993 section 29
44
Investment Act of 1993 section 30
45
Investment Act of 1993 section 26
46
Investment Act of 1993 section 28

- 15 -
25%47 , and specific sector-related fiscal incentives and duty/tax concessions packaged for the

Mining, Manufacturing, Agriculture, Tourism and Energy sectors48 .

Some incentives relating to investments were also provided on the Lusaka Stock Exchange

(LuSE) and these include; Corporate Tax reduced to 33% compared to normal 35%, Foreign

Ownership - No restrictions on ownership levels, Shareholder Levels - No restrictions on

shareholder levels and no Capital Gains Tax49 .

2.8. Specific Incentives.

Specific incentives were provided for m part 6 of the Investment Act however the 1996

Amendment Act removed them 5°.

2.9. Investment Guarantees

Part 8 of the Investment Act of 1993 as amended by Act no 5 of 1996 dealt with Investment

Guarantees. It was guaranteed under the Act that no property of any description shall be

compulsorily acquired and no interest in or right over property of any description of an investor

shall be compulsorily acquired, except for public purposes under an Act of Parliament relating to

the compulsory acquisition of property which provides for payment of compensation in respect

thereof51 • This part of the Act conferred on a foreign investor who had registered foreign capital

47
Investment Act of 1993 section 27
48
Investment Act of 1993Section 27
49
Investment Climate in Zambia, provide by Zambia Development Agency;
http://zamcom.smetoolkit.org/zambia/en (accessed on may 5 2012)
50
Investment Amendment Act no 5 of 1996 ofthe laws of Zambia
51
Investment Act of 1993Section 31

- 16-
with the Bank of Zambia the right to transfer out of Zambia such capital in foreign currency and

after payment of relevant taxes 52 .

2.10. The Laws Establishing the Now Five Obsolete Bodies

2.10.1 The Zambia Privation Agency Act

With the introduction of free market economy in 1991, the MMD government passed the Zambia

Privation Agency Act in 1992. Section 3 of the said Act provided for the creation of Zambia

Privation Agency which was empowered to prepare State Companies for privatisation53 . It was

the only recognised Agency given power to sell state owned companies under the law. It is

imperative to note that the Zambia Privatisation Agency had an advocacy role to play,

particularly in maintaining good investor relations and providing a supportive environment. The

privatization process opened up Zambia to foreign investment and attracted multi-national

corporations from all over the world54 .

2.10.2 The Export Processing Zone Act number 7 of 2001

The Export Processing Zone Act was enacted in 2001 to create various processing zones with

special incentives to attract foreign investors. This Act was further aimed at attracting fresh

investment into the country as well as encouraging existing enterprises to expand exports. The

incentives under this Act were similar in many ways to those that existed under the Investment

Act of 1993 55 .

52
Investment Act of 1993 section 36
53
Privatisation Act 1992 section 6
54
Directory Publishers Zambia: A Review of Commerce, Industry and Tourism, (May 2000) : 13
55
Zambia Privations Agency progress report from (4th July 1992 to 31 51 December 1993):5

- 17-
2.10.3 Export Development Act No 29 of 1999

The Export Development Act was enacted to establish the Export Board of Zambia, define its

powers; and to provide for matters connected with or incidental to the forgoing 56 . The Export

Board of Zambia used to promote non-traditional export (NTEs) through programmes such as

identifying opportunities in favourable markets, undertaking demand and supply surveys,

coordinate trade fairs, and trade missions, in order to identify new buyers and markets 57 •

2.10.4 Small Enterprises Development Act no. 29 of 1996.

The Small Enterprise Development Act enacted in 1996 provided for the establishment of the

Small Enterprise Development Board as a body corporate with perpetual succession and a

common seal, capable of suing and being sued in its corporate name 5 8 • It further defined its

functions and established the Micro and Small Enterprise Development Fund. The Act went on

to provide for the Development of the macro and small enterprises and provided for their
. . 59
registration .

2.11 Overall weakness of the Investment Act

The raison d'etre behind the enactment of the Investment Act of 1993 was to provide a

comprehensive legal framework for investment in the country. This is evidenced by the speech

given by the then Minister of Commerce Honourable Hambayi.

He stated that the "Bill was before the House to seek, Revision of the law relating to
investment in Zambia so as to provide a comprehensive legal framework for
investment in the country; repeal the Investment Act 1991. The revision of the 1991
Act is intended to be a step further to improving the overall environment for
encouraging both local and foreign investment. The Investment Bill, 1993, compared
56
Export Development Act No 29 of 1999, section 4.
57
An Investment Guide for Zambia (April 2011) http// www.zda.org.zm {Accessed on 26th January, 2012).
58
Small Enterprises Development Act no 29 Of 1996 section 3
59
Small Enterprises Development Act no. 29 of 1996 section 5,7,8

- 18 -
 to the Investment Act. 1991 represents a restructured and simplified legal framework
which enhances and eases the administration of the various provisions. The bill is
important in two respects: firstly, the Government Policy is to diversify the economy
and make it less dependent on the mining industry which currently contributes more
than 25 per cent to GOP and over 90 per cent of foreign exchange comings for the
country. Secondly, Sir, the market for investment in the region is very competitive. In
addition to favourable financial and monetary incentives, offered by our competitors
in the region, some of the countries have superior infrastructure and other services
compared to those obtaining in Zambia. It is therefore important that Zambia provides
a legal framework like the Bill under consideration spelling out government policies
and giving details of investment incentives offered to all categories ofinvestors60 ".

However it was noted that there were a number of issues that the Act did not address adequately.

The major deficiency of the Act was that there was no National Investment Policy laid down to

provide guidelines for the role of investment in an economy and the nature of investment that the

Act sank to attract 61 • Another major problem which was experienced was with regards to the

Immigration Department, where ZIC would grant an investment licence, but the Immigration

Department would reject the investor's application for self-employment permit. 62

Further it was observed that the 1993 Act did not state the objectives of investment. This made it

not easy for the ZIC to scrutinise the investors coming into the country. Additionally the 1993

Act did not make registration with the Investment Centre compulsory. Consequently this made it

very difficult to keep an eye on Foreign Direct Investment inflows and to legalize lnvestment63 •

Another deficiency was that the 1993 Act did not clearly spell out what type of investment was

reserved for local investors. The reservation of certain types of investment to local people was

identified to have helped in the improvement of local production and efficiency hence providing

60
honourable Minister of Commerce and Trade Mr Hambayi national Assembly debts on the investment bill: 25th
February 1993 http// www.parliament.gov.zm (accessed on march 15, 2012)
61
Corporate Tax Incentives for FDI: A guide for Economies in Transitions published by ZDA: (2010): 6
62
Nchito,20
63
Nchito,22

- 19-
a livelihood for local people in other jurisdictions such as Botswana64 . Notable also is the fact

that the Act did not provide incentives for local investors which made it very difficult for them to

compete with their foreign counterpart. As much as attraction of FDI is of great focus to most

investment laws, such laws much at all time thrive to improve economic conditions for the local

people so as to alleviate povertl 5 •

Worth mentioning at this point is the fact that the Investment Act of 1993 did not provide for tax

holidays and tax exemptions which the repealed Investment Act of 1991 provided for. The lack

of these incentives did render Zambia to be a less favourable host country in the region 66 .

A step further, as earlier mentioned the Act did establish ZIC to operate as a one stop facility

however, it did not provide for inter institutional coordination. On the other hand other

jurisdictions such as Mozambique established an Investment Promotion Agency which provided

for inter institutional coordination. This helped a lot in the manner the Promotional Agency

handled its work and dealt with other relevant government departments. The lacks of this

statutory provision of inter institutional coordination made ZIC to face various problems in

providing services to investors67 •

Another shortcoming of the 1993 Act was that it did not provide for minimum investment

amounts. The rationale for providing minimum investment amounts is to encourage quality

64
David Ailola Investment Policy and Law in Zambia LLM Degree Thesis (UNZA 1983): 6
65
The Minister of Commerce, Trade and Industry (Mr. D. Patel) Daily Parliamentary Debates for the 5th session of
the 9th Assembly Tuesday, 141h march 2006, http// www.parliament.gov.zm (accessed on march 15, 2012).
66
Investment Climate in Zambia, provide by Zambia Development Agency;
http://zamcom.smetoolkit.org/zambia/en (accessed on may 5 2012)
67
Edward Sampa The Zambia Development Agency Act: Its Relevance and Applicability in Promoting Foreign
Direct Investment in Zambia 4th year Obligatory Essay, (UNZA 2008): 20

-20-
investment and to ensure that all investors will contribute to the econom1c growth and

development ofthe host nation which is the key benefit ofFDI 68 .

Yet another shortcoming of the Investment Act of 1993 was with regard to the protection against

expropriation of resources. The case in point is exemplified by section 36 which provides for the

transfer of funds which stated that;

"Notwithstanding the provisions of any other written law relating to externalisation of

funds, a foreign investor who has registered foreign capital with the Bank of Zambia
shall be entitled, in respect of a business enterprise to which the Investment
Certificate relates, to transfer out of Zambia in foreign currency and after payment of
the relevant taxes 69".

This was not sufficient if the capital was to be arrested. What the 1993 Act needed to do was to

specify a period after which capital could be transferred, whether speculative or not 70 •

Lastly, the Investment Act of 1993 did not have any provisions for dispute resolution procedures.

This caused a Jot of uncertainties as investors want to be sure that they are protected by the law

and that they have an identified means of dispute resolution 71 • It must be noted that although

Zambia is a member of the International Centre for the Settlement of Investment Disputes and

has domesticated the Convention on Settlement of Disputes under CAP 42 of the Laws of

Zambia72 , application of the Convention was dependent on the consent of the parties to the

dispute. The 1993 Act did not provide the foreign investors with a choice of procedures as

regards settlement of disputes.

68
Corporate Tax Incentives for FDI: A guide for Economies in Transitions (Published by ZDA): 8
69
Investment Act of 1993
7
°Kaunda. 39
71
Sampa. 18
72
Investment Dispute Convention Act

- 21 -
2.12. Conclusion

This Chapter has discussed the brief background of the enactment of Investment Act of 1993.

The chapter has further outlined the various salient features of the Act such as its objectives,

definition of an investor, the Investment Centre and Board, procedure for investment, general

incentives, and investment guarantees. The Chapter has also discussed in brief other statutes

which dealt with investment at that period. These statutes included; Export Development Act,

Zambia Privation Agency Act, Export Processing Zones Act, and Small Enterprises

Development Act. Further the Chapter has as well given a synopsis of the overall weakness of

the 1993 Act. The following Chapter will discuss the Zambia Development Agency Act.

-22-
 CHAPTER THREE

The Zambia Development Agency Act No 11 of2006

3.0 Introduction

This Chapter focuses on the Zambia Development Agency Act No 11 of 2006. The Chapter will

go in details taking into account of the policy behind the enactment of the ZDA Act. Further the

Chapter will look at its cardinal salient features. More also the efficacy of the various Statutory

Instruments passed pursuant to section 18 ofthe ZDA Act namely; the Roma Industrial Park, the

Lusaka South Multi-Facility Economic Zone, the Sub-Sahara Gemstone Exchange Industrial

Park and Lumwana Multi-Facility Economic Zone will be considered. The Chapter will conclude

by looking at the overall weakness of the Zambia Development Agency Act.

3.1 The Policy behind the Enactment of Act no 11 of 2006

As seen from the previous Chapter the Investment Act of 1993 had a number of short comings.

The Zambia Development Agency Act hereinafter referred to ZDA Act was enacted to deal with

such weakness. This is evidenced in the Report of the Committee on Economic Affairs and

Labour on the Zambia Development Agency Bill as follows;

"The main focus of the Zambia Development Agency Bill is to foster economic
growth and development by promoting trade and investment in Zambia through an
efficient effective and coordinated private sector led economic development strategy.
Further, to establish the Zambia Development Agency as a one stop facility which
ensures, among other matters, client focus, dialogue with the private sector and create
confidence in public sector support for business; to provide for the functions and
powers of the Agency; to attract and facilitate inward and after care investment.
Additionally the ZDA Act is to facilitate support to micro and small business
enterprises; to promote exports and globalisation; to streamline bureaucratic
procedures and requirements faced by investors; and to facilitate industrial

- 23-
 infrastructure development and local services. More also, to promote Greenfield
investments through joint ventures and partnerships between local and foreign
investors; and to promote and encourage education and skills training so as to
increase productivity in business enterprises. Lastly the Act is to encourage measures
to increase Zambia's capacity to trade enable business to participate in a competitive
global environment; and to ensure that the private sector takes advantage of and
benefits from international and regional trade agreements'".

3.2 Salient Features of the ZDA Act

As already alluded to above the Act was enacted to facilitate a one stop shop when it comes to

investment matters. To achieve this, the Act has a number of salient provisions as discussed

below.

3.3 Economic Objectives

The economic objectives of the ZDA Act include, harnessing existing skills, knowledge and

expertise, encourage investment inflows, and insure that targeted investment and trade related

services are achieved within Zambia in order to create wealth, jobs, and enhance economic

development. Furthermore another economic objective of the ZDA Act include development of

an internationally competitive Zambian economy through innovations that promote high skills,

productivity, investment and increased trade all based on a partnership between the government

and the private sector2 •

3.4 The Zambia Development Agency (administrative machinery)

Part two of the ZDA Act establishes the Zambia Development Agency hereinafter referred to as

the Agency. The Agency is a body corporate with perpetual succession and a common seal,

1
Report of the Committee on Economic Affairs and Labour on the Zambia Development Agency Bill, National
Assembly of Zambia, Daily Parliamentary Debates, Tuesday 141h of march 2006; www.parliament.gov.zm
(accessed on April25 2012)
2
Sampa .20

-24-
capable of suing and being sued in its corporate name 3 . The Agency among other things has a

myriad of functions. Firstly it gives advice to the Minister on matters relating to industry,

industry development and productivity, investments, exports of goods and services, operations of

multi-facility economic zones and matters relating to micro and small scale business enterprises4 •

Secondly, on the request of the government the Agency studies market access offers received

from trading partners under COMESA, WTO OR SADC and advice the government on

opportunities and challenges generated by those offers5 •

Further the Agency makes detailed impact analysis on select sectors of economy such as textiles,

agriculture, mining, tourism, education, skill training, communication, transport, infrastructure

development, automobiles, information technology, chemicals, steel and engineering goods,

through a multi-disciplinary team 6 • To add on, the Agency is tasked with developing

entrepreneurship skills and a business culture in citizens of Zambia, promote and facilitate the

development of micro and small business enterprises, formulate investment promotion strategies

and promote and coordinate Government policies on, and facilitate, investment in Zambia7 .

More also the Agency assists in securing from any State institution any permission, exemption,

authorization, licence, bonded status, land and any other things required for the purposes of

establishing or operating a business enterprise 8 • Remarkable of them all is that the Agency plans,

manages, and control the privatisation of State owned enterprises and oversee all aspects of the

3
Zambia Development Agency Act noll of2006 section 4
4
Zambia Development Agency Act noll of2006 section 5 subsection (2) (a)
5
Zambia Development Agency Act noll of2006 section 5 subsection(2) (b)
6
Zambia Development Agency Act noll of2006 section 5 subsection (2) (c)
7
Zambia Development Agency Act noll of2006 section 5 subsection (2) (e)
8
Zambia Development Agency Act noll of2006 section 5subsections (2) (g), (h), (i)

- 25-
implementation of the privatisation programme and monitor progress of the privatisation

programme in Zambia. It also monitors post privatisation activities to ensure compliance with

any agreement entered into for the privatisation of any state owned enterprise 9 . The Agency also

monitors and evaluates the activities, performance and development of enterprises operating in

multi-facility economic zones and prescribes and enforces measures, for the business or activity

carried out within a multi-facility zone so as to promote the safety and efficiency of its
• 10
operatiOns .

3.5. Entry and Post Entry Treatment of Investors

The ZDA Act introduces a mandatory investment threshold and restrictive screening procedure

for all the foreign investment. The Act makes a formal distinction between domestic and foreign

investors 11 • It requires both to apply to the newly established Agency for an investment

certificate by stating that a person who wishes to either develop premises as a multi-facility

economic zone, export prescribed goods and services, invest in any business enterprise, should

apply to ZDA Board for a license, permit or certificate ofregistration 12 . The circumstances under

which the investment certificate is issued to a foreign investor are so restrictive such that the

foreign investor needs to have a certain minimum amount of money 13 .

9
Zambia Development Agency Act noll of2006 section 5 subsection (2) (n)
10
Zambia Development Agency Act noll of2006 section 5 Subsection (2) (q)
11
Zambia Development Agency Act noll of2006 section 2
12
Zambia Development Agency Act noll of2006 section 68
13
Sampa. 44

-26-
3.6 Investment Promotions and Guarantees

The ZDA Act through the Board undertakes various investment promotions and guarantees. In

order to promote private investment the Board shall among other things; take measures and

actions which help to create and maintain a predictable and secure investment climate 14 • Further

the Board shall encourage foreign investment, including the formation of strategic alliances with

Zambian business enterprises. More also the ZDA Board Facilitate partnerships and joint

ventures by encouraging co-financing, encourages sector investment so as to promote foreign

investment and support capacity building strategies for national investors 15 • Additionally the

Board is mandated to give development services to investors so as to assist in creating a

responsive environment and information base to guide and encourage the flow of capacity 16 and

further endeavouring to conclude investment promotion and protection agreement with

prospective investors 17 • More to the point, investor's property is guaranteed not to be

compulsorily acquired except for public purposes under an Act of Parliament relating to the

compulsory acquisition of property which provides for payment of compensation for such

acquisition 18 •

3.7 Incentives

Another important feature of the ZDA Act is the provisions for incentives. These incentives are

obtained through the grant of an investment certificate, licence, or permit of registration by the

Zambia Development Agency 19 • However these incentives are valid for a period of five years

14
Zambia Development Agency Act noll of2006 section 17 subsection (a)
15
Zambia Development Agency Act noll of2006 section 17 subsection (b) (c) (d)
16
Zambia Development Agency Act noll of2006 section 17 subsection (e)
17
Zambia Development Agency Act no! 1 of2006 section subsection (i) U)
18
Zambia Development Agency Act noll of2006 section 19
19
Zambia Development Agency Act noll of2006 section 59.

-27-
from the grant of the licence, permit or certificate20 . These incentives include; incentives

specified under the Income Tax Act or Customs and Excise Act where an investor invests not

less than five hundred thousand United States Dollars or the equivalent in convertible currency in

a priority sector or product21 . Further Machinery or equipment acquired by a business enterprise

conducting operations in a priority sector or in respect of priority products or a rural enterprise

are exempted from customs duties as specified by or under the Customs and Excise Act22 .

Additionally and where a double taxation agreement exists between Zambia and another country,

foreign tax payable by an investor to the other country in respect of any foreign income shall be

as determined under that agreement. 23

3.8 Dispute Settlement

A very well drafted piece of legislation always has a provision which centres on dispute

resolution. As Ndulo has noted, whenever one encounters a piece of legislation or a contractual

document, there is the possibility of disagreements or disputes arising from its interpretation,

application or implementation24 . The ZDA act does have a dispute settlement provision which

largely refers to the Arbitration Act 25 . At this point it is imperative to note that the 1993

Investment Act repealed by the ZDA Act did not have a dispute settlement provision.

20
Zambia Development Agency Act noll of2006 section 55
21
Zambia Development Agency Act noll of2006 section 56
22
Zambia Development Agency Act noll of2006 section 57
23
Zambia Development Agency Act noll of2006 section Section 61
24
Muna Ndulo Foreign Investment Zambia Law Journal, Volume 112; (1980) 4
25
Zambia Development Agency Act noll of2006 section Section 21

- 28-
3.9Multi-facility Economic Zone

Section 18 of the ZDA Act authorises the Minister on the recommendation of the Board after

consultation with the Minister responsible for finance and with the approval of Cabinet, by

statutory instrument declare an area, premises or building to be a multi- facility economic zone.

The government sanctioned the establishment of Multi-Facility Economic Zones (MFEZs) in

Zambia in 2006 with the objective of catalysing industrial and economic development in the

manufacturing sector for the purpose of enhancing domestic and export oriented business26 • This

is a very unique feature of the current Investment Legal Framework unlike the repealed Legal

Framework.

3.10 What is a Multi-Facility Economic Zone?

A Multi-Facility Economic Zone hereinafter referred to as MFEZ is defined an area or premises

declared as a multi-facility economic zone in which industrial and commercial activities take

place27 . The meaning of Multi-facility Economic Zone is also applicable to an Industrial Park.

An Industrial Park is a smaller version of an MFEZ with the land area of at least 15 acres. Zones

or Parks are developed by the Government or licensed private sector28 . The zones or parks

provide superior industrial and business infrastructure including but not limited to ready-made

factory buildings, serviced landscaping, garbage disposal, street cleaning, illuminated perimeter

fence, a fully fledged municipality and 24 hours security29 . The types of MFEZ include;

production MFEZ where production and manufacturing activities will take place and Export

26
Sampa. 34
27
Zambia Development Agency Act Section 2
28
Banda. I
29
Banda. 2

-29-
Trade MFEZ which will ideally be located in the border areas with neighbouring countries.

These will house enterprises conducting export commercial activities30 .

3.11 Purposes of MFEZ

Multi-facility Economic Zones have been identified to have a myriad of purpose which includes;

attracting FDI in the country, acting as an avenue for value addition, providing conduit for

technology transfer, and making Zambian exports more competitive in the regional and

international foreign markets 31 . Further, to create employment opportunities for Zambians and

thus contribute poverty reduction increase the skill of labour, provide opportunities for joint

ventures with companies, and provide options for value addition in locally produced raw

materials 32 • Additionally MFEZ help in the Creation of new industries to strengthen the

economy, as well as provide markets for local industries for raw materials or sub components

and increase exports thereby contributing to increased export earnings 33 •

3.12 Main Conditions of MFEZ

There are mainly 3 conditions ofMFEZ and these are; firstly, an investor may require to provide

and maintain in a multi facility economic zone or industrial park, standard infrastructure, ready-

made standard factory buildings and related infrastructure, warehouse, telecommunication, water

and sewerage net works, uninterrupted power supply source, internal roads, and waste water

treatment and such other facilities as are required for the effective and efficient operations of the

30
Banda. 2
31
Banda. 4
32
Banda 5
33
Zambia Development Agency, Zambia, Africa's new Frontier for Investment and Profits
www.zambia.or.jp/docs/Investor%20guide-%20Zambia (accessed on march 13 2012)

- 30-
multi-facility economic zone or industrial park34 . Secondly a business enterprise may, m

accordance with the conditions attached to its licence, produce for export or local market, any of

the goods or services specified in the license35 . And lastly an investor shall not within a multi

facility economic zone or industrial park, carry on any activity not authorised by the licence or

permit36 .

3.13 Location of MFEZ

An investor is free to identifY and suggest any location in the country where it is deemed

economical for such development. Areas where MFEZ!Industrial Parks have been declared

include Lusaka, Ndola, Chambeshi and Lumwana in Solwezi. Other sites under consideration

include Livingstone, Kabwe and Kasumbalesa in Chililabombwe37 .

3.14 Qualification Criteria to locate in MFEZ I Industrial Park

Any investor whether foreign or local qualifies to develop a Multi Facility Economic Zone or an

Industrial Park or operating an existing Multi Facility Economic Zone upon demonstrating that

the investment he is undertaking relates to MFEZ priority sector38 and will provide the following

benefits; level of local and FDI of US$ 500,000 and above, attraction of local and FDI, quality

and amount of local employment creation, extent of skills development and transfer to local

entrepreneurs and communities, extent to which the project will lead to expansion of local

production, and level of utilization of local raw materials and intermediate goods 39 .

34
Banda.3
35
Banda.3
36
Banda. 3
37
Zambia Development Agency,Zambia, Africa's new Frontier for Investment and Profits
www.zambia.or.jp/docs/Investor%20guide-%20Zambia (accessed on march 13 2012)
38
Banda.3
39
Banda 8

- 31 -
More also the investor must guarantee the introduction and transfer of technology, the production

of new products, and the extent to which the project will lead to the diversification of the

econom/0 • Furthermore the investor must clearly demonstrate the impact the proposed

investment is likely to have on the environment and where necessary, the measures proposed to

deal with an adverse environmental consequence in accordance with the Environmental

Protection and Pollution Control Act, and the extent to which the project will lead to the

.
d1vers1'fi1catwn
. of t h e economy41 ,

3.15 MFEZ Incentives

The MFEZ have the most favourable incentives which have made them o attract a considerable

amount of investors in the country. To this effect companies undertaking Zambia Development

Agency identified MFEZ Priority sectors will be granted the following incentives;

Zero tax on profits made by companies in the Priority Sector for a period of five years from the

first year profits are made. For years 6 to 8 only 50 percent of profits will be taxed and for years

9 and 10, 75 percent of profits will be taxed 42 . Furthermore, zero percent tax rate on dividends

of companies operating under the MFEZ I Priority Sector for a period of five years from the year

of first declaration of dividends. From year 6 to 8, only 50 percent of profits will be taxed and for

years 9 and 10, 75 percent of profits will be taxed 43 . Additionally MFEZ grant a zero percent

import duty on raw materials, capital goods, machinery including trucks and specialised vehicles

for five years for all Priority Sectors44 , deferment of VAT on machinery and equipment

including trucks and specialised vehicles imported for investment in the MFEZ I Priority

40
Banda 8
41
Ibid 8
42
1bid 8
43
1bid .8
44
Ibid .8

- 32-
Sector45 , and remove Withholding Tax on management fees, consultancy fees, interest re-

payments and foreign contractors': 6 .

In addition to the tax incentives mentioned above, provided under the ZDA Act, the following

incentives shall apply to developers of, and investors in the MFEZs and industrial parks;

• Zero rate suppliers to developers ofMFEZs and industrial parks47 .

• Exempt foreign suppliers to the MFEZs and industrial parks from reverse VAT Charge48 .

• Exempt from Customs and Excise Duty, materials, equipment, machinery and accessories

imported for the development of the MFEZs and Industrial parks49 .

In 2009 during the National Budget the following incentives for MFEZ development were

announced. The removal of withholding tax on management fees, consultancy fees, and interest

repayment to foreign contractors, zero rates for VAT supplied to developers of MFEZ, exempt

foreign supplies to MFEZ from reversed VAT charge, and exempt equipment and machinery

imported for development of MFEZ from customs duty 50 . This measure is intended to enhance

the expansion of the industrial base of the country and increase the competitive stance of

Zambian firms in the region.

45
Banda. 8
46
lbid 8
47
lbid 8
48
lbid. 8
49
Ibid. 8
50
Speech given by the minister of finance when presenting the budget before parliament in 2009,http//
www.parliament.gov.zm (accessed on march 15, 2012)

- 33-
3.16 Status of MFEZ Development in Zambia

The government has since 2006 declared 6 locations for MFEZ/Industrial Park development

namely; Chambeshi, Lusaka East (Lusaka Sub Zone), Roma Industrial Park, Lusaka South, Sub-

Sahara Gemstone Exchange Industrial Park and Lumwana.

3.17 Chambeshi MFEZ

The Zambia-China Cooperation Zone is an MFEZ with a total area is 4100 hectares located in

Chambeshi in the Copperbelt Province of Zambia. It was the first MFEZ to be declared through

Statutory Instrument No. 16 of 2007. This MFEZ is currently been established by China

Nonferrous Metal Mining Group with the support of both the Governments of Zambia and

China51 • Already several enterprise mainly Chinese businesses have been established in the area,

including a copper smelter providing more than 3500 local jobs which are expected to increase

as enterprises locate in the zone. By the year 2015, the Chambeshi MFEZ is poised to

accommodate fifty to sixty zone enterprises with an output volume exceeding US$ 1.5 billion of

which more than US$ 600 million will be exported while employing more than 6,000 locals 52 •

3.18. Lusaka East MFEZ

The Lusaka East MFEZ is situated 2 kilometres adjacent to the Kenneth Kaunda International

Airport. It is an extension of the Chambeshi MFEZ on the Copperbelt and was declared through

Statutory Instrument No 50 of 2010. It covers an area of 5.7 square kilometres and is being

developed by the developers of Chambeshi, ZCCZ. The Lusaka East MFEZ final master plan

indicates that the sub zone will specialise in logistical activities such as warehousing, show

51
Zambia Development Agency, Zambia, Africa's new Frontier for Investment and Profits
www.zambia.or.jp/docs!Investor%20guide-%20Zambia (accessed on march 13 2012)
52
Zambia Development Agency, Zambia, Africa's new Frontier for Investment and
Profitswww.zambia.or.jp/docs/Investor%20guide-%20Zambia (accessed on march 13 2012)

- 34-
rooms, conference centres, hotels, value addition activities, light manufacturing activities,

bonded warehouses and hospitality facilities 53 .

3.19. Lusaka South MFEZ

The Lusaka South MFEZ (LS MFEZ) is different from others because it is being promoted by

the Government of the. Republic of Zambia through its Ministry of Commerce, Trade and

Industry in partnership with the private sector for its development. It was declared by SI No 47

of 201 0 and it has a total of 2100 hectares piece of land located in the southern part of Lusaka.

The master plan of LS MFEZ was developed by JICA and the Malaysian Kulim Hi-Tech Park

(KTPC) with the assistance of Zambian Local Expert Team comprising of members from the

relevant planning and construction authorities54 .

This MFEZ is to be the model on which upcoming MFEZ developments will be based on and is

therefore expected to have infrastructure of world class standard. A master plan proposes a

phased development approach and phase one of the construction works has commenced where

access roads to the site are being constructed5 5 . A special purpose vehicle will be incorporated in

which private sector is expected to participate under a Private Public Partnership (PPP) frame

work in developing, marketing and managing the LS-MFEZ. The special vehicle to be known as

Lusaka South MFEZ Development Corporation Limited will engage service providers such as

LWSC/ZESCO/ZAMTELI Mobile phone and internet providers in servicing the area with the

utility services 56 . The zone will accommodate fifty to sixty zone enterprises with an output

53
Banda.8
54
Ibid 9
55
Ibid 9
56
Ibid 9

- 35-
volume exceeding US$1.5 billion of which more than US$ 600 million would be exported while

employing more than 6,000 local people 57 .

3.20. Lumwana MFEZ

The Lumwana MFEZ was declared through SI No. 51 of 2010 and will be developed by

Lumwana Property Development Company with an investment outlay amounting to US$ 1.2.

billion. The zone is expected to create 13,000 employment opportunities. This MFEZ is a 350 sq

km area which focuses on light and heavy industries. Some notable activities that the MFEZ will

house include; agro processing, horticulture, fisheries, hotel accommodation, among others58 .

The developers of this MFEZ have commenced construction works in the MFEZ area.

3.21. Sub Sahara Gemstone Exchange Industrial Park

The Sub Sahara Gemstone Exchange Industrial Park located on 130 hectares in Ndola is being

developed by Phoenix Materials a wholly Zambian owned company. It was declared through SI

No. 49 of 2010 and aims at creating a streamlined export procedure that would assist the buyers,

sellers and producers of routine transactions 59 • This would inevitably make gemstone mining in

Zambia a sustainable venture to bring wealth to the national as a whole. Other light industries

including logistical centres have been attracted to the park which will also house enterprises in
. m
th e service . d ustry 60 .

57
Banda. 10
58
Zambia Development Agency, Zambia: Africa's new Frontier for Investment and Profits
www.zambia.or.jp/docs/lnvestor%20guide-%20Zambia (accessed on march 13 2012)
59
Banda. 10
60
Zambia Development Agency, Zambia' Africa's new Frontier for Investment and Profits,
www.zambia.or.jp/docs/lnvestor%20guide-%20Zambia (accessed on march 13 2012)

- 36-
3.22. Roma Industrial Park

Roma Industrial Park was declared through SI No.48 of 2010 and is being developed by CPC

Properties Limited which is a private enterprise61 . The Industrial Park is located along Zambezi

Road in the Roma area of Lusaka and will be developed at the cost of US$ 54 million. The

developers have since commenced the development of the park with fencing having been
' '

accomplished covering the entire 130 hectares62 . It is expected to create 4000 job opportunities.

Notable enterprises will include light industries, housing estates and shopping malls. The park

will also include an Incubation Center for SME development. A total of US$ 48.6 million

investments are expected to be undertaken in the Roma Industrial Park over the next 3 years, and

employ 4,000 people63 •

3.23. Weaknesses of the Act

Despite the enactment of this Act having been a landmark decision which had been awaited for

long, it suffices to note that there are numerous shortfalls and lacunas in the provisions of the

Act. These shortfalls and lacunas are said to encumber the effectiveness of the implementation of

the ZDA Act. The first shortfall is the fact that, the Bill was rushed through Parliament with

inadequate stakeholders' involvement. To exemplify this, is the fact that the parliamentary

committee on the ZDA bill made certain observations and recommended changes which were

not considered64 •

61
FAQ Roma Park, http:// romapark.co.zm (accessed on march 7 2012)
62
Zambia Development Agency, Zambia, Africa's new Frontier for Investment and Profits,
www.zambia.or.jp/docs!Investor%20guide-%20Zambia (accessed on march 13 2012)
63
Zambia Development Agency, Zambia, Africa's new Frontier for Investment and Profits
www.zambia.or.jp/docs/Investor%20guide-%20Zambia (accessed on march 13 2012)
64
Richard Chakaba. Is the Zambia Development Agency Act an effective Instrument of development through a one
stop shop facility, 4th year obligatory Essay, (UNZA, 2008): 34

- 37-
Secondly, the Zambia Development Agency Board is tilted towards government with a majority

of government representative thus defeating the government's proclamation of a private sector

led economic development agenda. It has been observed that the foregoing has caused at lot of

problems especially in awarding investment certificate and the running of the Agency as a

whole 65 . A private tilted Board will bring in a more business atmosphere in guiding

management66 . Further, the ZDA Act is not clear on how individuals will be appointed to the

board and it has become of great concern that the 16 members of the Board are than necessarl 7 .

Notable as a weakness is section 6 (2) which is an evidence to the fact that the Act confers

excess powers on the government particularly to the Minister. More also stakeholders are of the

view that ZDA is not a body corporate as such as stated in the Act, instead it is just one of the

departments in the Commerce Ministry68 • Additionally it has been argued that the creation of

ZDA is more appropriate as a facilitator, and not an implementer of programs69 . The staff at

ZDA should merely facilitate the implementation of programmes by respective and capable

agencies either in the private sector, Government and indeed international agencies. Should ZDA

try to do it all, this would hamper and not promote exports70 •

Another shortfall of the ZDA Act is the fact that the threshold to qualify for access to incentives

is 500,000 USA dollars or equivalent in convertible currency. This technically excludes kwacha

investment because kwacha is not convertible. That is to say that the kwacha cannot be used on

65
Interview with Sibajene k. Munkombwe Senior Research Officer at Zambia Development Agency on March 13
2012
66
Daily parliamentary Debates. Tuesday, 14/03/2006www.parliament.gov.zm (accessed on April25 2012)
67
Banda. 8
67
Chakaba.36
68
Sampa.44
69
Banda. 14
70
Banda. 14

- 38-
the international market for purposes of foreign exchange. This shows that the incentives earned

after achieving the threshold are only applicable to foreign medium-sized and large enterprises,

with no support for enterprises owned by Zambian citizens71 • This is based on the fact that part

V of the Act does not qualify them for incentives due to the threshold. This has seen the civil

society urging the government to provide incentives in the 2008 national budget whereby

Zambians that want to invest in production sectors could be exempted from paying duty on

imported equipment for example72 . More also the requirement for 250,000 USA dollars and 200

employees for an enterprise to qualify for self-employment permit and expatriate personnel are
.
a1most 1mposs1.bl e to attam
. 73 .

It is also important to note as a shortfall the fact that the second schedule of the Act which lists

priority sectors and products which qualify for incentives leaves out imperative sectors such as

those already recognised in the 61h National Development Plan and Vision 2030, such as

agriculture, Gemstone industry, and tourism74 . Notable as a weakness ofthe Act, is section 5 (t)

which provides for the promotion of transfer of appropriate technology is not adequate and

precise. The previous Act in section 4 was very precise on matters relating to transfer of

technolog/ 5.

To add on in analysing the ZDA Act, it was observed that the Act does not clearly define what

export promotion is. This means that someone may have to interpret the actual meaning which in

71
Banda.l4
72
Banda.l4
73
Banda.l4
74
Banda.6
75
Interview with Mr. Mudenda Lecturer in the School of Law at the University of Zambia on May 3 2012

- 39-
effect dilutes the role of the Agency in exporting promotion consequently affecting exports 76 •

Another weakness of the Act is that the export promotion machinery is tilted in favour of the big

exporters. Furthermore the Agency has done little to educate the citizens on its functions and

incentives. To many Zambians, investment is a myth and only attributed to foreign nationals.

This kind of mentally has largely deterred investment in most parts of the country especially

rural areas.

3.24. Conclusion

This chapter has looked at the Zambia Development Agency Act as a legal framework for

attracting and promoting FDI in Zambia. It brought out the nature and imperative salient

provisions of the Act especially the Multi-Facility Economic Zones which is a very unique

feature of the current legal framework. The chapter has also looked at the dispute clause and the

administrative structure of the Act. Furthermore this chapter has also given a synopsis of the

weakness of the Zambia Development Agency Act

76
Sampa 47

-40-
 CHAPTER FOUR

A Comparative Analysis of the ZDA Act No 11 of2006 and the Repealed Investment Act of

1993

4.0 Introduction

This chapter centres on comparatively analysizing the Zambia Development Agency Act No II

of 2006 and the repealed Investment Act of 1993. The chapter will go in details highlighting

whether the existing Investment Legal Framework is adequate to deal with the problems faced in

promoting both local and Foreign Direct Investment. The analysis will be made based of the

salient features of the ZDA Act and the Repealed Investment Act of1993 hereinafter referred to

as the 1993 Act.

4.1 Objectives

The main aim of the repealed Investment Act of 1993 was to provide a comprehensive legal

framework for investment in Zambia. On the other hand the Zambia Development Agency Act

has various objectives and these include; the Zambia Development Agency Act is to foster

economic growth and development by promoting trade and investment in Zambia through an

efficient effective and coordinated private sector led economic development strategy. Further, to

establish the Zambia Development Agency as a one stop facility which ensures, among other

matters, client focus, dialogue with the private sector and create confidence in public sector

support for business; to provide for the functions and powers of the Agency; to attract and

facilitate inward and after care investment. Additionally the Act is to facilitate support to micro

- 41 -
and small business enterprises; to promote exports and globalisation; to streamline bureaucratic

procedures and requirements faced by investors; and to facilitate industrial infrastructure

development and local services. More also, to promote Greenfield investments through joint

ventures and partnerships between local and foreign investors; and to promote and encourage

education and skills training so as to increase productivity in business enterprises. Lastly the Act

is to encourage measures to increase Zambia's capacity to trade enable business to participate in

a competitive global environment; to ensure that the private sector takes advantage of and

benefits from international and regional trade agreements. Notable is that the provision for

Transfer of Technology contained in the 1993 Act was adequate and precise unlike the one

contained in the current Act which requires the promotion of the transfer of appropriate

technology. The problem which this section introduces is who determines appropriate

technology? From this it is very evident that the ZDA Act has a lot of objectives which are over

reaching while the 1993 Act did not.

4.2 Administrative Machinery

To achieve its objective part II of the 1993 Act provided for the establishment of the Zambia

Investment Centre (ZIC), a body corporate which was the competent authority to facilitate for

and promote investment as provided for under section 6 1• The functions of ZIC as discussed in

Chapter two segment 2.9 included promotion and coordination of government policies, and

facilitating investment in Zambia so as to provide a one-stop facilitl.

1
Investment Act 1993 section 4
2
Investment Act 1993 Section 5

-42-
Other functions of the centre included the following; promote investment in Zambia; 3 monitor

performance of enterprises approved by it and enforced compliance with the terms and

conditions of investment certificates approved under Act4 ; establish and maintain institutional

liaison arrangements 5 , assist in securing from any Ministry, government department, local

authority or other relevant body any permission, exemption, authorisation, licence, bonded

status, land and any other thing required for the purpose of establishing or operating a business

enterprise6 ; and keeping records of all technology transfer agreements relating to investments

under this Ace. More also provide Consultancy services to investors 8 ; collect and disseminate

information on relevant laws and regulations, and technical matters, including applicable

standards, specifications and quality control procedures 9 , undertake economic and sector studies,

including market surveys, with a view to identifying investment opportunities 10 ; register

investors 11 ; implement decisions made by the Board 12 ; and exercise all functions and powers and

perform all duties which under or by virtue of this Act or any other written law are, or may be,

vested or delegated to it 13 .

The Investment Centre operated under the auspices of the Investment Board which was a Body

corporate with perpetual succession and a common seal capable of suing and being sued in its

corporate name and with power to all such acts and things as a corporate body 14 . The Board was

3
Investment Act 1993 Section 5 (2) a
4
Investment Act 1993 Section 5 (2) b
5
Investment Act 1993 Section 5 (2) c
6
Investment Act 1993 Section 5 (2) d
7
Investment Act 1993 Section 5 (2) e
8
Investment Act 1993 Section 5 (2) f
9
Investment Act 1993 Section 5 (2) g
10
Investment Act 1993 Section 5 (2) h
11
Investment Act 1993 Section 5 (2) i
12
Investment Act 1993 Section 5 (2) j
13
Investment Act 1993 Section 5 (2) k
14
Investment Act 1993 section 6

-43-
tasked with the formulation and implementation of investment policies; establish guidelines for

the centre and issuance of investment certificates.

Similarly for the ZDA Act to achieve its objectives part two of the Act establishes the Zambia

Development Agency hereinafter the Agency. The Agency is a Body corporate with perpetual

succession and a common seal, capable of suing and being sued in its corporate name 15 . The

Agency among other things has a myriad of functions. Firstly it gives advice to the Minister on

matters relating to industry, industry development and productivity, investments, exports of

goods and services, operations of multi-facility economic zones and matters relating to micro and

small scale business enterprises 16 . Secondly on the request of the government the Agency

studies market access offers received from trading partners under COMESA, WTO OR SADC

and advice the government on opportunities and challenges generated by those offers 17 • Further

the Agency makes detailed impact analysis on select sectors of economy such as textiles,

agriculture, mining, tourism, education, skill training, communication, transport, infrastructure

development, automobiles, information technology, chemicals, steel and engineering goods,

through a multi-disciplinary team 18 .

To add on, the Agency is tasked with developing entrepreneurship skills and a business culture in

citizens of Zambia, promote and facilitate the development of micro and small business

enterprises, formulate investment promotion strategies and promote and coordinate Government

15
Investment Act 1993 Section 6
16
Zambia Development Agency Act noll of2006 section 4
17
Zambia Development Agency Act noll of2006 section 5
18
Zambia Development Agency Act noll of2006 section 5

-44-
policies on, and facilitate, investment in Zambia 19 • More also the Agency assists in securing

from ant State institution any permission, exemption, authorization, licence, bonded status, land

and any other things required for the purposes of establishing or operating a business

enterprise20 .

Remarkable of them all is that the Agency plans, manages, and control the privatisation of State

owned enterprises and oversee all aspects of the implementation of the privatisation programme

and monitor progress of the privatisation programme in Zambia. It also monitors post

privatisation activities to ensure compliance with any agreement entered into for the privatisation

of any state owned enterprise21 • The functions of ZDA are far reaching and it has taken over all

the functions which were previously undertaken by different institutions namely the Zambia

Investment Centre, Zambia Privation Agency, Export Processing Zones Authority, and Small

Enterprises Development Board. This has made the Agency a one stop shop facility making it

easy and expedient for investors to go about their investment issues.

In the analysis of the above it can be said that the functions of the 2 administrative machineries

are almost the same.

4.3 Entry and Post Entry Treatment of Investors

While the 1993 Act only provided for the manner of obtaining an investment certificate without

any other solemn requirement, the ZDA Act introduces a mandatory investment threshold and

restrictive screening procedure for all the foreign investment. The Act goes further to make a

19
Zambia Development Agency Act noll of2006 section 5 subsection (2) (a)
20
Zambia Development Agency Act noll of2006 section 5 subsection (2) (b)
21
Zambia Development Agency Act noll of2006 section 5 subsection (2) (d)

-45-
formal distinction between domestic and foreign investors22 • It requires both to apply to the

newly established ZDA for an investment certificate by stating that a person who wishes to either

develop premises as a multi-facility economic zone, export prescribed goods and services, invest

in any business enterprise, should apply to ZDA Board for a license, permit or certificate of

registration23 • The circumstances under which the investment certificate is issued to a foreign

investor are so restrictive such that the foreign investor needs to have a certain minimum amount

of money24 . This has enabled the country to have a good quality of investors investing in the

country.

4.4 Investment Promotions and Guarantees

Both the 1993 Act and the ZDA Act provide a wide ranging investment promotion guarantees

and incentives. However the ZDA Act goes further to provide for tax holidays in certain

instances.

4.5 Dispute Settlement

As afore mentioned a very well drafted piece of legislation always has a provision which centres

on dispute resolution. As Ndulo has noted, whenever one encounters a piece of legislation or a

contractual document, there is the possibility of disagreements or disputes arising from its

interpretation, application or implementation25 • Despite Zambia being- a member of the

International Centre for the Settlement of Investment Disputes and has domesticated the

Convention on Settlement of Disputes under CAP 42 of the laws of Zambia26 the 1993 Act did

not have any provisions for dispute resolutions procedures. This caused a lot of uncertainties as

investors were not sure that they were protected by the law and that they had an identified means

22
Zambia Development Agency Act noll of2006 section 2
23
Zambia Development Agency Act noll of2006 section 68
24
Sampa.44
25
Ndulo.4
26
The Investment Dispute Convention Act

-46-
of dispute resolution27 . On the other hand, the ZDA act does have a dispute settlement provision

which largely refers to the Arbitration Act28 .

4.6 Multi-facility Economic Zone

Multi-Facility Economic Zones have been identified as the conspicuous important feature ofthe

ZDA Act. It is cardinal to note that in the 1993 Act there was no provision for Multi-Facility

Economic Zones. As mentioned in chapter 3 segment 3.9, the government sanctioned the

establishment of Multi-Facility Economic Zones (MFEZs) in Zambia in 2006 with the objective

of catalysing industrial and economic development in the manufacturing sector for the purpose

of enhancing both domestic and export oriented business29 . This is achieved through various

incentives afforded to investors investing in these zones. Presently six multi-facility economic

zones have been created with one being wholly owned by Zambia citizens.

4. 7 Present Investment in Zambia

Since the enactment of the ZDA Act in 2006 there has been an increase in the inflows of FDI in

the country. In the year 2000 the total Foreign Direct Investment was 1122 million USA dollars;

in 2001 it was 72 million dollars FDI while in 2002 the total amount of FDI was 298 million

USA dollars. Further in 2003 the total FDI was 347 million USA dollars while in 2004 the total

income from FDI only amounted to 364 million USA dollars. Additionally in 2005 total FDI

income amounted to 357 million USA dollars. In 2006 just after the enactment of the ZDA Act

the amount of FD I income doubled to 612 million USA dollars and even increasing further to

1322 million USA dollars in 2007. In the year 2008 and 2009 the world experienced an

economic meltdown which also affected Zambia, therefore in these years the amount of FDI

27
Sampa.l8
28
Zambia Development Agency Act noll of2006 Section 21
29
Sampa.34

-47-
income decreased to 939 million USA dollars and 694 million USA dollars respectively. This

economic meltdown only lasted for two year and in 2010 the amount ofFDI income reached an

unprecedented amount of 1729 million USA dollars 30 .

From these figures it is evident that after the enactment of the ZDA Act in 2006 the investment

inflows in Zambia increased dramatically by 51%. This has been attributed to the landmark

provisions of the current investment framework. It is important to note that the drop in FDI

inflows in 2008 and 2009 was due to global economic crisis which was experiences worldwide.

Currently the Zambia Development Agency has not yet come up with the total investment sum

for the year 2011; however they have predicted that the amounts are bound to increase especially

after the experienced Asian FDI inflows31 • With all these it is still felt that the current investment

framework is not adequate to enable effective and efficient FDI inflows in the country which will

help Zambia meet its economic endeavours as set out in the vision 2030.

4.8 Conclusion

This chapter has illustrated that there is a difference in the repealed Act and the current Act.

These differences are demonstrated by the dispute settlement provision, the manner in which

investors are treated on entry and after entry in the country as well as the Multi-Facility

Economic Zones. The Chapter has also given a synopsis of the statistics of the FDI income prior

and after the enactment of the ZDA Act in 2006. Most importantly of all the chapter has

concluded that the current ZDA Act is not adequate to enable effective and efficient FDI inflows

in the country which will help Zambia meet its economic endeavours as set out in the Vision

2030

31
Interview with Sibajene k. Munkombwe Senior Research Officer at Zambia Development Agency.

-48-
 CHAPTER FIVE

General Conclusions and Recommendation

5.0 Introduction

Having come to the end of the road in this journey which discusses a comparative analysis of the

Zambia Development Agency Act and the repealed Investment Act of 1993, it is imperative at

this point to take stock of the discourse in the preceding chapters with a view firstly to explicate

findings.

5.1 Findings

The extensive objectives of the study (1) to (3) as set out in Chapter one are now returned as

follows;

1. In Chapter two the Investment Act of 1993 was discussed taking into consideration its

brief ground, its salient features and other laws which regulated investment at that time.

Further the chapter went into details giving a synopsis of the overall weakness which the

Act had.

2. In chapter 3 the current investment legal framework was considered as well as the policy

behind the enactment of the Zambia Development Act. more also the Chapter considered

the functions of the Zambia Development Agency the efficacy of the various Statutory

Instruments passed pursuant to section 18 of the Zambia Development Agency Act

namely; the Roma Industrial Park, the Lusaka South Multi-Facility Economic Zone, the

Sub-Sahara Gemstone Exchange Industrial Park and Lumwana Multi-Facility Economic

Zone.

- 49-
 3. In Chapter four, has illustrated that the current Zambia Development Agency Act has

improved on the previous Act hence managing to attract an increasing number of both

local and Foreign Investors in the country. Furthermore in this Chapter it was conclusion

that the Current Investment Legal Frame Work is not adequate to enable effective and

efficient FDI inflows in the country which will help Zambia meet its economic

endeavours as set out in the Vision 2030.

5.2. Recommendations

As aforementioned, despite the Zambia Development Agency Act being landmark investment

legislation in Zambia since independence it has its own shortfall. In this segment of the discourse

the writer will recommend the best solutions to the short falls of the Zambia Development

Agency Act and possible steps to be taken so as to ensure Zambia achieve its economic

endeavours as set out in the Vision 2030.

Procedure to Approve Licenses

The first recommendation is that the function of the Agency with regards to approvals and

licensing must be detailed and legalised through the amendment of the Act so as to enable

transparency in such dealing.

Sensitisation of the General Public

Secondly the Agency must take necessary steps to educate the public on its functions so that all

stakeholders are well versed with government policy so as to appreciate and appropriately

respond to legislation.

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Decentralisation of the Agency

Another recommendation related to the above is that the Agency which is only located in Lusaka

must be established in all Provincial Headquarters of the country. This will further the

sensitisation of many citizens around the country.

Technology Transfer Provision

It is a fact that Technology Transfer is the recent common way of doing business especially in

developed countries. Therefore it is important that our Investment Legal frame work must have a

comprehensive section adequately addressing matters relating to Technology Transfer.

Quality and not Amount of Investment

Furthermore the Act should stress more on the quality and relevance of investment unlike

emphasising on the amount of investment. This will enable the country to receive quality and

relevant investors thus accommodating local investors enabling them to participate in the

development of the country.

Independence of the Agency

Further steps must be taken to enable the Agency to work independently. Currently, from the

composition of Board it can be concluded that the Agency is simply one of the departments in

the Ministry of Commerce and Trade.

Officers of the Agency

The Zambia Development Agency should recruit professional and qualified people to handle the

intricate problems of developing and coordinating the Agency. Notable is also the fact that the

number of the board members must be reduced as 16 is perceived as a very big number and must

comprise of more persons from the private sector. This is so to enable the private sector to be the

driving force of the Agency.

- 51 -
Sectors Covered by the Act

Lastly, steps must be taken to enable the Act to carter for indigenous entrepreneurs and Informal

sector.

5.3. Conclusion

In a nutshell it is of the essence to note that FDI is very important in the development of any

given economy especially third world countries. It is thus necessary for Zambia to ensure that it

has a legal frame work which promotes investment. This has been reflected in the current

landmark investment legal framework which is a one stop facility with diverse investment

promotions, guarantees, and incentives. One important feature in promotion of economic growth

and development is the creation of multi-facility economic zones in which local and foreign

investors are given equal incentives. It has been shown that since 2006 when the ZDA Act was

enacted there has been a drastic increase in the inflows of investors in the country. However for

Zambia to achieve its target as a Prosperous Middle Income Country as visualised in the Vision

2030 a more precise and adequate legal framework is require. This legal frame work can be

achieved by putting into consideration the above mentioned recommendation.

-52-
Sectors Covered by the Act

Lastly, steps must be taken to enable the Act to carter for indigenous entrepreneurs and Informal

sector.

5.3. Conclusion

In a nutshell it is of the essence to note that FDI is very important in the development of any

given economy especially third world countries. It is thus necessary for Zambia to ensure that it

has a legal frame work which promotes investment. This has been reflected in the current

landmark investment legal framework which is a one stop facility with diverse investment

promotions, guarantees, and incentives. One important feature in promotion of economic growth

and development is the creation of multi-facility economic zones in which local and foreign

investors are given equal incentives. It has been shown that since 2006 when the ZDA Act was

enacted there has been a drastic increase in the inflows of investors in the country. However for

Zambia to achieve its target as a Prosperous Middle Income Country as visualised in the Vision

2030 a more precise and adequate legal framework is require. This legal frame work can be

achieved by putting into consideration the above mentioned recommendation.

-52-
 BIBLIOGRAPHY

Books

Dawson Catherine. Practical Research Methods, New Delhi: UBS Publisher's Distributors 2002

Dolzer, Rene' & Schreuer Cannon. Principles of International Investment Law. London: Oxford

University Press, 2008.

Kaoma, Kenneth: Contemporary issues in Corporate and Investment Law. Washington: Penn

Press, 2000

Sornarajah, Muthucumaraswamy. The International Law on Foreign Investment. London:

Cambridge University Press, 2004.

Journal Articles

Kaunda Kennedy. Legality Journal; the Washington Consensus: A Critical Discussion of its

Benefits to Zambia in Attracting Foreign Direct Investment. Zambia: University of Zambia, Law

Association, 2005

Ndulo Muna. Foreign Investment. Zambia Law Journal, Volume 12, 1980

Reports and Articles

Banda Buzz Robert. Multi-Facility Economic Zones (MFEZs) Program in Zambia. Zambia:

ZDA 2011.

-53-
ZPA progress report from 4th July 1992 to 31st December 1993

Chongwe Rogers. Review of Kenneth Kaoma Mwenda, Zambia's Stock Exchange and

Privatisation Programme: Corporate Finance law in Emerging Markets. H-SAfrica. H-Net

Review. July 2001.

Husain Fatum. Investment Guide to Zambia: Opportunities and Conditions. Zambia: mission

press, 2006

Dissertations and Obligatory Essays (unpublished)

Ailola .David, Investment Policy and Law in Zambia LLM Degree Thesis UNZA 1983

Chakaba Richard. Is the Zambia Development Agency Act an effective Instrument of development

through a one stop shop facility, 4th year obligatory Essay, UNZA, 2008.

Nchito Sashi, A Critical Analysis of the Investment Act and the Zambia Investment Centre 4th

year Obligatory Essay, UNZA, 2003

Mwenda Winnie. Sithole, The Efficacy of the Zambia Investment Act (no 5 of 1986) in the

Attraction of Private Foreign Investment for Development LLM THESIS UNZA 1990.

-54-
Mweenda Kaoma, Kenneth, Direct Investment, the Stock Exchange and Privation MBA THESIS

UNZA

1994

Sampa Edward, The Zambia Development Agency Act: Its Relevance and Applicability in

Promoting Foreign Direct Investment in Zambia 4th year Obligatory Essay, UNZA 2008.

Websites

Minister of finance in the daily parliamentary Debates of 14/03/2006

http// www.parliament.gov.zm

Investment Climate in Zambia, provide by Zambia Development Agency;

http://zamcom. smetoo lkit.org/zam bia/en

Zambia, Africa's new Frontier for Investment and Profits 2nd edition published by the ZDA 20 I 0

http://zda.org.zm

Investment Climate in Zambia, provide by Zambia Development Agency;

http://zamcom.smetoolkit.org/zambia!en

An Investment Guide for Zambia (April2011) http// www.zda.org.zm

Honourable Minister of Commerce and Trade Mr Hambayi national Assembly debts on the

investment bill: 25 1h February 1993 http// www.parliament.gov.zm

-55-
Report of the Committee on Economic Affairs and Labour on the Zambia Development Agency

Bill, National Assembly of Zambia, Daily Parliamentary Debates, Tuesday 14th of march 2006;

www.parliament.gov.zm

The Minister of Commerce, Trade and Industry (Mr. D. Patel) Daily Parliamentary Debates for

the 5th session of the 9th Assembly Tuesday, 14th march 2006, http// www.parliament.gov.zm

Interviews

Interview with Sibajene K. Munkombwe a Senior Research Officer at Zambia Development

Agency.

Interview with Mr. Banda Buzz Robert MFZE Manager at Zambia Development Agency

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 *Property of UNZA Library

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