Zambia

Profile

The territory of Northern Rhodesia was administered by the [British] South Africa Company from 1891 until it was taken over by the UK in 1923. During the 1920s and 1930s, advances in mining spurred development and immigration. The name was changed to Zambia upon independence in 1964.

In the late 1960s it was the third largest copper miner, after the US and the Soviet Union. World copper prices collapsed in 1975 with devastating effects on the economy. The World Bank has urged Zambia to develop other sources of revenue - including tourism and agriculture. Even so, copper accounts for most of Zambia's foreign earnings and there is optimism about the future of the industry, which was privatised in the 1990s. Electronics manufacturers have fuelled demand and investment in mines has grown.

Elections in 1991 brought an end to one-party rule, but the subsequent vote in 1996 saw blatant harassment of opposition parties. The election in 2001 was marked by administrative problems with three parties filing a legal petition challenging the election of ruling party candidate Levy MWANAWASA. The new president launched an anticorruption investigation in 2002 to probe high-level corruption during the previous administration. In 2006-07, this task force successfully prosecuted four cases, including a landmark civil case in the UK in which former President CHILUBA and numerous others were found liable for USD 41 million. MWANAWASA was reelected in 2006 in an election that was deemed free and fair. Upon his abrupt death in August 2008, he was succeeded by his Vice-president Rupiah BANDA, who subsequently won a special presidential election in October 2008. (CIA World Fact Book)

AIDS is blamed for decimating the cream of Zambian professionals - including engineers and politicians - and malaria is a major problem. Millions of Zambians live below the World Bank poverty threshold of $1 a day.

Zambia hosts tens of thousands of refugees who have fled fighting in the Democratic Republic of Congo.

Geography & Climate

Zambia is a land locked country surrounded by other countries along its extensive frontier. It shares borders with Zaire to the North, the United Republic of Tanzania to the North east, Malawi to the East, Mozambique to the South east, Zimbabwe to the South, Botswana and Namibia to the South west and Angola to the West. The country is located on a high plateau in Central Africa between latitudes 8 and 18 degrees South of the Equator and between longitudes 22 and 36 degrees East.

Zambia's land surface area is 752,620 square kilometres made up of three main topographic parts: mountainous range, high plateau and low valley areas.

Zambia and Zimbabwe share a manmade lake at Kariba built to generate hydro
electric power. On the border with Zaire to the North, lies a long mineral rich stretch, especially copper, cobalt and emeralds, known as the Copperbelt.

The country's vegetation is mainly Savannah, with areas of tropical grassland and woodland comprising a variety of grass and tree species.

Several seasonal flood areas also exist in flat swampy and marshy plains such as the Kafue flats and the Bangweulu and Lukanga Swamps.

Climate

Zambia has extensive areas between 900 m/3,000 ft and 1,500 m/5,000 ft above sea level. Only in the valleys of the major rivers: the Zambesi, which forms the border between Zambia and Zimbabwe; the Limpopo, which is the border between Zimbabwe and South Africa; and their tributaries, such as the Shire in Malawi, are there areas of land below 600 m/2,000 ft.

In these lowland areas the climate is typically tropical with no real cool season and high temperatures during the period of overhead sun between October and February. This period of high sun is also the rainy season in all these countries. The climate of these lowlands is oppressive and sultry, particularly during the rainy season. It has a bad reputation for the health of humans and animals, because of the prevalence of both malaria and sleeping sickness.

By contrast the lower temperatures on the upland plateaux are much more healthy and pleasant. Above 1,200 m/4,000 ft temperatures around the year are typical of warm-temperate rather than tropical climates. During the long dry season there is abundant sunshine and the sun's rays are more powerful as a consequence of the altitude. The air temperature however, is rarely so high as to cause stress or discomfort, and it is mitigated by the generally low humidity.

The most uncomfortable season is the period from November to February, when both temperature and humidity are greatest and there is a smaller daily temperature range so that nights are not so cool. At altitudes above 1,000 m/4,000 ft and 1,500 m/5,000 ft frost is not uncommon at night during the dry season from April to August. This is a period of low sun and some days may be chilly if there is much cloud.

Rainfall is largely confined to the period October to March, with a maximum in the months December to February, when the inter-tropical belt of cloud and rain is farthest south. It then lies across southern Zambia and Malawi. Much of the rain is heavy and showery and accompanied by thunder, but periods of almost continuous rain lasting two or three days are by no means unusual. Except in the higher mountainous areas of Malawi, rainfall is very rare during the period April to September.

In northern Zambia the rainy season is a few weeks longer than elsewhere, since it is
nearest to the equator.

Economics

Copper mining and processing has historically been the largest source of export revenues for Zambia, together with cobalt, electricity, tobacco cotton and flowers. Agriculture remains a significant contributor to GDP (17.4%) and by far the largest source of employment (85%). The main agricultural products are corn (maize), sorghum, rice, peanuts, sunflower seed, vegetables, flowers, tobacco, cotton, sugarcane, cassava (tapioca) coffee, cattle, goats, pigs, poultry, milk, eggs and hides.

Zambia's economy has experienced strong growth in recent years, with real GDP growth in 2005-08 about 6% per year. Privatization of government-owned copper mines in the 1990s relieved the government from covering mammoth losses generated by the industry and greatly improved the chances for copper mining to return to profitability and spur economic growth. Copper output has increased steadily since 2004, due to higher copper prices and foreign investment.

In 2005, Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately USD 6 billion in debt relief. Zambia experienced a bumper harvest in 2007, which helped to boost GDP and agricultural exports and contain inflation. Although poverty continues to be significant problem in Zambia, its economy has strengthened, featuring single-digit inflation, a relatively stable currency, decreasing interest rates, and increasing levels of trade. The decline in world commodity prices and demand will hurt GDP growth in 2009, and elections and campaign promises are likely to weaken Zambia's improved fiscal stance.

The World Bank provides a range of analytical and advisory services that are designed to provide Zambia with experiences from around the world in order to help it improve its policy environment and accelerate its development efforts.

Smallholder Agriculture Commercialization (SACS) study shows that smallholder agriculture has demonstrated potential in Zambia as increased competition in world markets implies that the comparative advantage of Zambian agricultural exports will continue to rely on low production costs of smallholder production systems. However, the majority of smallholders will not be able to independently access increasingly sophisticated global value chains without the support of agribusinesses. The success of smallholder commercialization in Zambia is closely associated with the ability and willingness of private sector enterprises to continue investing in the sector and work directly with smallholders.

Addressing constraints for smallholder commercialization will require thus interventions that benefit smallholder and the large scale commercial agriculture sector, as well as agricultural/nonagricultural enterprises in rural areas.

The World Bank plays a supportive role in boosting productivity in Zambia’s agricultural sector and has invested significantly ( $120m ) in improving the road network , allowing rural communities to access markets

Investment Climate

Zambia is a multi-party democracy and provides a market oriented liberalized economic environment. The Zambian Government has designed a package of incentives aimed specifically at creating a sound investment climate for increased domestic economic growth.

• Continuous political stability since attaining independence in 1964
• Abolition of Controls -Price, Interest Rate, Foreign Exchange and free repatriation of earnings and repayments
• Guarantees and Security to investors with statutory rights to full and fair compensation
• Duty Free Access to Regional, wider African and the USA markets under SADC, COMESA/FTA, AGOA (African Growth and Opportunity Act), and Cotonou Agreements respectively
• Double Taxation Agreements with number of European, North American, African and Asian countries
• Government has successfully privatized most of the previously state owned enterprises thus encouraging an entrepreneurial spirit.

Investment Incentives

The Investment Act of 1993 (amended 1st April 1996) offers a wide range of incentives in the form of tax allowances, exemptions & concessions for companies, which include:

• Buildings for Manufacturing, Mining and Hotels enjoy initial allowance of 10% and an annual 5% wear & tear Allowance of the cost.
• Machinery for Farming, Tourism and Manufacturing qualify for wear & tear allowance of 50% per annum for the first two years.
• Dividends from farming exempt from tax for first 5 years
• Capital Expenditure on farm Improvements -20% per year write off for the first 5 years
• Farm Works Allowance - 100% write off on stumping, clearing, prevention of soil erosion, boreholes, wells, water conservation and aerial or geographical surveys.
• Customs Duty Exemption on machinery and equipment for mining and agriculture
• Duty Free Imports of organic and inorganic chemicals, rubber, steel and plastics; most other inputs at 5%.
• Customs Duty on Intermediate Goods 15% and on Finished Goods 25%.
• Specific sector-related fiscal incentives and duty/tax concessions packaged for the Mining, Manufacturing, Agriculture, Tourism and Energy sectors.

Legal Framework for Investment Protection

The Investment Act of 1993 (amended 1st April 1996) assures investors that property rights shall be respected. No investment of any description can be expropriated unless Parliament has passed an Act relating to the compulsory acquisition of that property. Also, in case of expropriation full compensation shall be made on market value and shall be convertible at the current exchange rate.
Zambia is a signatory to the Multilateral Investment Guarantee Agency (MIGA) of the World Bank and other international agreements. This guarantees foreign investment protection in cases of war, strife, disasters, and other disturbances or in cases of expropriation. Zambia has signed bilateral reciprocal promotional and protection of investment protocols with number of countries.

Some incentives relating to investments on the Lusaka Stock Exchange (LuSE):

• Corporate Tax reduced to 33% compared to normal 35%
• Foreign Ownership - No restrictions on ownership levels
• Shareholder Levels - No restrictions on shareholder levels
• No Capital Gains Tax

The Stock Market

The Lusaka Stock Exchange has a market cap of U.S.$4.7bn and traded 20 companies’ shares ( Nov 08)

Doing Business in Zambia

Zambia is ranked overall 90 out of 183 economies in the Ease of Doing Business survey

Ease of...	Doing Business 2010 rank	Doing Business 2009 rank	Change in rank
Doing Business	90	99	9
Starting a Business	94	72	-22
Dealing with Construction Permits	151	146	-5
Employing Workers	116	129	13
Registering Property	94	94	0
Getting Credit	30	68	38
Protecting Investors	73	70	-3
Paying Taxes	36	39	3
Trading Across Borders	157	157	0
Enforcing Contracts	87	88	1
Closing a Business	83	83	0

Taxation

Corporate tax is charged at a standard rate of 35%, reduced to 15% for income from farming.

Politics & Government

Zambia is a multi-party democracy with a uni-cameral National Assembly .

Mr Rupiah Banda became president with a narrow victory in elections called on October 2008 after the death of President Levy Mwanawasa. Mr Banda's predecessor, Levy Mwanawasa, became president after a narrow election win in 2001.

Mr Mwanawasa made the fight against corruption a centrepiece of his presidency.

Western donors praised him for boosting economic growth to above 5%, cutting Zambia's foreign debt, and attracting foreign investments, helped by his anti-graft campaign.

The next election is scheduled for 2011