Doing Business in Zambia A unique flavour - Deloitte

Doing Business in Zambia A unique flavour

March 2013

Table of contents 1. Forward

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2. Introduction

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3. High-level overview of Zambia 5 Introduction 5 Political and judicial environment 7 Economic environment 8 - Overview 8 - Mining 13 - Agriculture 16 - Energy 20 - Financial services 24 - Tourism 30 - Transport 32 - Telecommunications 34 Stock exchange 37 4. General business regulations Company registration ZDA Investment license Exchange Controls Employment permit Temporary employment permit Sector specific permits Minimum wages and conditions of employment Social security Mergers and acquisitions Accounting and auditing

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39 39 42 42 43 43 44 46 46 47 48

5. Taxation 50 Introduction 50 Tax administration 50 PAYE 51 Company Tax 52 WHT 55 Capital Gains Tax 55 VAT 56 Customs & Exercise 57 PTT 58 Investment incentives 59 Company vs. Branch 62 6. About Deloitte The global firm Deloitte in Zambia

63 63 64

7. Key Deloitte contacts

65

8. Glossary of terms

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Doing Business in Zambia – A unique flavour

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1. Forward I am delighted to present the first edition of Doing Business in Zambia, which I trust will be handy for businesses and individuals seeking an understanding of the Zambian business environment. Zambian’s economic performance over the past decade has been impressive, driven by: •• Improved macro-economic management. This has resulted in general economic stability in contrast to pre 2000 years of significant foreign exchange rate volatility, high inflation, rapid currency depreciation and high interest rates. •• Low debt levels. In 2005, Zambia qualified for significant debt relief under the World Bank’s Highly Indebted Poor Countries (“HIPC”) debt relief initiative. This has provided the country a major impetus for sustained economic growth. GDP now stands at approximately US$20 billion, nearly double what it was in the mid-2000’s. •• A resurgence of the mining industry, propelled by increased global demand for metals, particularly in China. The outlook for mining looks bright, with sector growth expected to accelerate over the next three to four years. Based on current pipeline of major investments, Zambia’s copper output may almost double by 2016.

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Chisanga Chungu Managing Partner [email protected]

Zambia has undergone an unprecedented period of robust economic growth over the past several years, a trend which appears set to continue

Looking to the future, I see Zambia’s economic outlook as promising. According to the Economist Intelligence Unit (“EIU”), Zambia’s economic growth trajectory is expected to continue at a robust annual rate of about 7% over the period 2013 to 2016. The one significant bottleneck to Zambia’s future economic growth is the relatively underdeveloped infrastructure particularly in the power and transport sectors. Recognising this challenge, the Zambian Government has embarked on a significant 5 year investment program, which should assist un-lock Zambia’s economic growth potential:

•• Road infrastructure is projected to improve significantly as a five-year US$5.6 billion project to upgrade approximately 8,000km of road network (20% of the country’s road network) is implemented, under the Link Zambia 8,000 Programme. As I present our first edition of this booklet, I thank all the Deloitte professionals who have worked tirelessly and taken time to share their insights.

•• Based on current planned projects, Zambia’s power generation capacity could increase to approximately 4,700 MW over the next 5 years, from the current c.1,800MW.


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2. Introduction Purpose of booklet The primary purpose of this booklet is to provide potential investors, businesses and interested individuals with information fundamental to doing business in Zambia. The information we present in this booklet is intended to be a guide and accordingly, is not exhaustive.

Deloitte section of this booklet. Finally, this booklet is necessarily based on conditions existing at the date of publication and will continuously evolve as changes occur in the Zambian economic and regulatory environment.

Readers are strongly advised to seek professional advice prior to relying on any information contained herein. To contact Deloitte in Zambia please refer to the Contacts section of this booklet. For information on how Deloitte can assist you in Zambia including details of our core service offerings, please refer to the About

This booklet is aimed at providing information relevant to Doing Business in Zambia to potential investors, businesses and other interested individuals

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Located in Southern Africa, Zambia is a landlocked country covering a landmass of approximately 750,000 sq. km, with a population of some 13.6 million people

Zambia - Key statistics Population (millions): 13.6 million Land mass: 752,614 sq. km Number of neighboring countries: 8 No. of ethnic groups: 72 Year attained independence: 1964 Business language: English Primary exports: Copper & Cobalt Capital City: Lusaka Currency: Kwacha Time zone: GMT + 2 Zambia is a landlocked country in the Southern Africa sub-region. It is bordered by Tanzania in the North East, Malawi in the East, Mozambique in the South-East, Zimbabwe in the South, Botswana and Namibia in the South-West, Angola in the West and the Democratic Republic of Congo in the North.

It is estimated that approximately 40% of the water resources in Central and Southern Africa are found in Zambia, which gives the country immense irrigation and hydro-power potential. Zambia’s climate is characterised by three distinct seasons: cool and dry from May to August, hot and dry from September to November and hot and wet from December to April. Average monthly temperatures remain above 20°C for most of the year.


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3. High-level overview of Zambia Zambia’s population is estimated at 13.6 million and comprises approximately 72 Bantu-speaking ethnic groups

Introduction Zambia was a former colony of Great Britain and attained political independence on 24 October 1964. Zambia’s population is estimated at 13.6 million, with approximately 46% of the population representing an active and productive workforce, aged between 15 and 64 years. The population comprises approximately 72 Bantu-speaking ethnic groups. Almost 90% of Zambians belong to one of nine main ethno-linguistic groups namely; Nyanja-Chewa, Bemba, Tonga, Tumbuka, Lunda, Luvale, Kaonda, Nkoya and Lozi. English remains the official business language for the country. Zambia’s key export products are copper and cobalt. However the country also has a number of non traditional exports including, sugar and sugar confectionaries, dairy products, bird’s eggs and natural honey. Zambia has significant world class tourism attractions including the Victoria Falls to the South and 19 national game parks strewn around the country.

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Zambia

The Zambian Government is undertaking economic diversification to exploit other components of the country’s rich minerals resource base Zambia’s economy has experienced strong growth in recent years, with real GDP growth of more than 6% per year for the past five years. Privatization of government-owned copper mines in the late 1990s relieved the Government from sustaining mammoth losses generated by the industry and greatly increased copper mining output and profitability to spur economic growth. In 2005, Zambia qualified for debt relief under the Highly Indebted Poor Country Initiative, consisting of approximately US$6 billion in debt relief. Nevertheless, poverty remains a significant problem in Zambia with approximately 60% of the population below the poverty line, despite a stronger economy. However, the medium-term economic outlook appears favourable, with inflation projected to remain in single digits. The current inflation rate is estimated at 6%.

The Zambian economy has historically been based on the copper mining industry. However, the Zambian Government is undertaking economic diversification to reduce the economy’s reliance on the copper mining industry and exploit other components of Zambia’s rich resource base by promoting agriculture, tourism, gemstone mining, and hydro-power. In 2012, the Government raised USD750 million via a Eurobond issue to cover a funding gap for infrastructure projects. The infrastructure investment is expected to boost growth by up to two (2%) percentage points per annum. The Zambian Government recently took advantage of the current low level of inflation and relatively stable economy to rebase the Zambian currency by dividing every denomination by 1,000, effective 1 January 2013.


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Zambia operates a multi-party democratic system, with Presidential and Parliamentary elections held every five years The Political and Judicial Environment Political Overview System of Government

Republic, Universal Suffrage

No. of parliamentary seats

158, with 8 members appointed by the President

Date of last Presidential election

September 2011

Year of next election

2016

Name of current ruling party

Patriotic Front

Duration of Presidential term

5 years

Current Head of State

Mr. Michael Chilufya Sata

Main opposition parties

Movement for Multi Party Democracy United Party for National Development

System of governance and arms of Government •• Zambia is a multi-party democratic country, with three separate arms of Government namely, the Executive, Legislature and the Judiciary. •• The Executive is headed by the President, who has the prerogative to appoint a Vice President. •• Both the President, who must belong to a registered political party, and members of Parliament are elected via national elections. •• The President is elected by popular vote for a five-year term. Presidents are eligible for a maximum of 2 five year terms.

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•• Cabinet Ministers are appointed by the President from the pool of both elected and nominated members of Parliament. •• Parliament is headed by a Speaker and comprises 150 elected and up to 8 members nominated by the President. •• The Zambian legal system is based on English common law and customary law principles. •• The Supreme Court is the highest court of appeal and is headed by the Chief Justice. The justices are appointed by the President.

Zambia’s GDP now stands at US$20 billion, nearly double what it was in the mid 2000s The Economic Environment - Overview Recent trends in economic performance •• Since 2004, Zambia has undergone improved macro-economic stability in contrast to previous years of significant foreign exchange rate volatility, high inflation, rapid currency depreciation, and high interest rates. •• In 2005, Zambia qualified for significant debt relief under the World Bank’s Highly Indebted Poor Countries debt relief initiative. The Highly Indebted Poor Countries relief has provided withtöbb a major impetus 6-10 11-20Zambia 20-nál for sustained economic growth. GDP now stands at US$20 billion, nearly double what it was in the mid 2000s.

Historical GDP/inflation movement (%)

20 18 16 14 12 10 8 6 4 2 0

2004 2005 2006 Inflation

2007

2008 2009

2010

2011

2012

Real GDP Grow

Source: Bank of Zambia

9,0 8,5

Recent historical economic trends

8,0 7,5

Indicator

2008

2009

2010

2011

2012

Nominal GDP (US$ m)

14 705

6,5 13 398

16 855

19 742

20 939

1 540

1 643

1 737

13,0

13,3

13,6

7,0 6,0

GDP per capita (US$ at PPP)

1 408

1 479

Population (m)

12,2

4,5 12,5

5,5 5,0 4,0

Forex rate (ZMK: US$)

4 832

4 641

2013f4 796

External debt stock (US$ m)

2 975

3 039

3 689

2014f 5 117 2015f

4 619

5 0892016f 5 442

Source: EIU, Deloitte analysis

800 000


8 9 000

8 000

Despite unfavourable global economic conditions, the Zambian economy has remained resilient, with annual GDP growth of 7% for 2012 •• Despite the recent adverse global economic conditions, Zambia has continued to experience strong output performance. In 2011, GDP grew by 6.8%. GDP growth has continued to remain resilient with a growth of 7% forecast for 2012. •• Inflation has declined significantly from c.18% in the mid-2000’s to c.6% in 2012. •• Further, Zambia’s exchange rate has remained relatively stable over recent years, with the currency depreciating by less than c.7% between 2008 and 2012. •• This low level of inflation and relatively stable exchange rate provided the country’s Central Bank,

BOZ, an opportune time to rebase the Zambian currency by dividing every denomination by 1,000, effective 1 January 2013. •• In September 2012, Zambia had a successful maiden entry into the international bond market through the US$750 million bond issuance with a coupon of 5.375%, one of the lowest prices ever for an inaugural issue by a Sub-Sahara African country. The bond issue was 15 times over subscribed. •• In order not to undermine long-term debt sustainability, the Government proposes to apply the bond proceeds primarily on energy and transport infrastructure as summarised in the table opposite.

Application of proceeds from the US$750m issue

Project Energy (generation and transmission)

255.0

Transport (road and rail)

430.0

Human capital and access to finance Fees and transaction costs Discount premium Total Source: 2013 Zambia Budget speech

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US$ million

49.0 1.4 14.6 750.0

Zambia’s economic outlook appears bright, on the back of increasing investments in various core sectors of the economy Economic forecasts

Indicator

2012

2013f

2014f

2015f

2016f

Nominal GDP (US$ m)

20,939

21,528

23,713

30.1

31.9

GDP per capita (US$ at PPP)

1 ,737

1 ,859

2,014

2,087

2,164

Population (m)

13.6

13.9

14.2

15.2

15.7

Forex rate (ZMK: US$)

5 ,089

5 ,712

5,787

5,756

6,135

External debt stock (US$ m)

5 ,442

5 ,995

6,601

n/a

n/a

n/a: data not available Source: EIU, Deloitte analysis

Economic outlook •• According to the EIU, Zambia’s economic growth trajectory is expected to continue at a robust annual rate c.7% over the period 2013 to 2016. The growth will be led by increasing investments in mining, agriculture, power and construction: - Growth in mining is expected to accelerate in 2014-15 as investments at the Kansanshi, Lumwana and Konkola mines, as well as First Quantum’s new Trident mine, approach completion. - Agricultural production, especially of the country’s staple food, maize, looks set to be strong in 2012-13 supported by Government’s continued efforts to assist the sector yield results.

- Based on current planned projects, Zambia’s power generation capacity may increase to c. 4,700 MW over the next 5 years, from the current c.1,800MW. - Road infrastructure is projected to improve significantly as a five-year US$5.6 billion project to upgrade approximately 8,000km of road network (20% of the country’s road network) is implemented, under the Link Zambia 8,000 Programme. - Construction growth will be driven mainly by planned investments in mining, power and the road network.


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20 18 16 14 12 10 8 6 4 2 0

Inflation is projected to average c.6.4% between 2013 and 2016, down from 8.3% in 2011 2004 2005 2006 2007 2008 2009 2010 2011 6-10

11-20

2012

20-nál több

•• The Kwacha’s value is expected to be supported by robust growth in copper production levels over the period to 2016, significant Foreign Direct Investment (“FDI”) and public borrowing (e.g. the successful bond issue of US$750 million in September 2012).

Forecast GDP / Inflation movement (%)

9,0 8,5 8,0 7,5 7,0 6,5

•• Inflation which averaged 8.3% in 2011, is forecast to decline further, averaging c.6.4% over the period 2013 to 2016

6,0 5,5 5,0 4,5 4,0 2013f

2014f

2015f

Inflation

2016f

Real GDP Grow

Source: EIU, Deloitte analysis

800 000

9 000

700 000

8 000 7 000 6 000

500 000

5 000

400 000

4 000

300 000

3 000

200 000

2 000

100 000 -

US$ / MT

MT

600 000

1 000 2008

2009

2010

2011

2012e

-

11

7 000

60

The Zambian Government aims to create some one million jobs over the five-year period to 2017, underpinned by the National Strategy for Industrialisation and Job Creation •• As part of the newly formulated National Strategy for Industrialisation and Job Creation, the Government has identified four priority areas of focus for growth and job creation; namely, Agriculture, Tourism, Infrastructure and Manufacturing. Under this initiative, the Government aims to create approximately one million new jobs over the next five years.

Jobs to be created over five-year period to 2017

Sector

No. of new jobs over 5 year period

Agriculture

255.0

Tourism

300,000

Infrastructure (energy & transport)

110,000

Manufacturing Tourism

90,000 300,000

Total

1,050,000

Source: 2013 Zambia Budget speech


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6-10

11-20 11-20

20-nál több

2004 2005 2006

2007

2008 2009

2007

2008 2009

2010 2010

2011

2012

2011

2012

20-nál több 9,0 8,5 9,0 8,0 8,5 7,5 8,0 7,0 7,5 6,5

7,0 6,0 The mining sector is the cornerstone of Zambia’s economy, 6,5 5,5 6,0 with copper and cobalt being the main metals mined 5,0 5,5 4,5 5,0 4,0 2013f

4,5

The Economic Environment - Mining

2014f

2015f

2016f

4,0 2013f

2014f

2015f

2016f

Overview

700 000 800 000

8 000 9 000 7 000 8 000 6 000 7 000 5 000 6 000 4 000 5 000 3 000 4 000 2 000 3 000 1 000 2 000 1 000

500 000 600 000 400 000 500 000 300 000 400 000 200 000 300 000 100 000 200 000

-

2008

2009

Copper exports (MT) 2008 2009

2010 2010

2011

2012e

Average copper price (US$/MT) 2011 2012e

Historical cobalt exports and prices 7 000

60

6 000 7 000 5 000 6 000 4 000 5 000 3 000 4 000 2 000 3 000 1 000 2 000 1 000

50 60 40 50

-

30 40 20 30 10 20 2008 2008

2009 2009

Cobalt exports (MT)

2010 2010

2011 2011

2012e

10 -

Average cobalt price (US$/lb)

Source: 2008 to 2012 Budget speeches, BOZ, CSO reports, Deloitte analysis

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2012e

US$ / lb US$ / lb

100 000

US$ / MT US$ / MT

9 000

600 000 700 000

•• The outlook for mining looks bright, with sector growth expected to accelerate over the next three to four years. Based on current pipeline of major investments, Zambia’s copper output could almost double by 2016. •• On the pricing side, although copper prices weakened somewhat in 2012, most forecasts indicate that copper prices will remain robust over the medium term, driven by demand in China.

800 000

MT

•• Zambia is one of the world’s largest producers of copper and cobalt. It also has considerable reserves of selenium and silver, in addition to minor quantities of gold.

Historical copper exports and prices

MT

•• Zambia has a vast endowment of metals, gemstones, industrial minerals and potential energy resources including coal, hydrocarbons, and more recently, uranium.

MT

5

6-10

MT

-5

2004 2005 2006

2 0

With a number of significant projects currently underway, the outlook for Zambia’s mining industry appears bright

Zambia: Key copper mining companies

Entity

Ownership

Konkola Copper Mines Plc

Kansanshi Mining Plc

Mine name / location

Annual 2011 production (MT ‘000)

Vedanta Resources Plc (51%)

Konkola

166

Zambia Copper Investments (28.4%)

Nchanga

ZCCM Investment Holdings Plc (“ZCCM-IH”) (20.6%)

Napundwe

First Quantum Minerals Ltd (80%)

Kansanshi

ZCCM-IH (20%) Mopani Copper Mines Plc

230

Sentinel

Glencore International Plc (73.1%)

Nkana, Mufulira

250

First Quantum Minerals Ltd (16.9%) ZCCM-IH (10%) Lumwana Mining Corporation

Barrick Gold Corporation (100%)

Solwezi

146

NFC Africa Mining Plc

China Non Ferrous Metals Mining Group Limited (85%)

Chambeshi

90

ZCCM-IH (15%) Source: Respective company websites, Deloitte research


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Based on current pipeline of major investment, Zambia’s copper output may almost double by 2016 Key players in Zambia’s mining sector

Future outlook

•• Historically, the copper mines in Zambia were owned by the state-controlled Zambia Consolidated Copper Mines Limited (“ZCCM”).

•• There are a number of significant projects currently underway, which are expected to transform the copper mining landscape in Zambia:

•• By the early 2000’s, the Government had privatised the state-owned copper mines in an attempt to return the industry to profitability and to boost economic growth.

- Konkola Copper Mines, owned by London listed Vendeta, is investing US$180million at Nchanga, which is expected to breath an additional 25 years of life in the mine.

•• Zambia’s mining sector is currently dominated by entities owned by multinationals, as depicted in the table opposite.

- Canadian-owned First Quantum’s Sentinel project is expected to initially produce 150,000 MT of copper per annum, subsequently rising to 300,000 MT of copper per annum. The capital cost is expected to be in the region of US $1 billion. - Swiss-owned Mopani (Glencore) is projecting an additional 150,000 tonnes per annum and has finalised a feasibility study on a new project to invest an additional US$1.5 billion in Zambia.

•• The above projects, coupled with other on-going investments in the sector, could nearly double Zambia’s copper output to c.1.6 million tonnes by 2016.

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7,000 6,000 5,000 4,000 3,000 2,000 1,000

Zambia’s agricultural sector, which- is 2003 dominated by maize, accounts 2004 2005 2006 2007 2008 2009 2010 for a fifth of national GDP

2011

The Economic Environment - Agriculture Introduction

Zambia: GDP contribution by sector

•• Zambia’s agricultural sector accounts for 21% of GDP, with the balance coming from industry (35%) and services (44%).

21%

•• It is estimated that the agricultural sector employs about 70% of the population. •• The sector has immense potential to drive economic growth, given the country’s vast expanses of arable 2010 2011 land 2012 and free flowing easily accessible water supplies: - Zambia has approximately 752,000 sq.km of landmass of which 58% is arable. Yet only 15% of its of arable land is currently used for farming. - Small scale farmers supply about 70% of national crop output, despite limited access to finance.

44%

Agriculture 35%

Industry Services

Source: EIU

Zambia’s top five crops by production (MT ‘000)

Crop

2009 / 2010

2010 / 2011

% change

Key crops produced

3 000 Maize

2 795

3 020

8%

•• Zambia’s primary agricultural output crop is maize, the country’s staple. This is partly driven by:

Wheat 2 500

172

237

38%

253

147

-42%

Groundnuts

165

139

-16%

Soya beans

112

116

4%

2016f -

Generous guaranteed minimum prices; and

- Provision of subsidised inputs to small and medium scale producers. •• Agricultural experts state that crop yield 9rates 000 are currently low compared to global standards. 8 000

3 500

Sweet 2 000

potatoes

1 500 1 000

Source: Ministry of Agriculture & Livestock statistics Note: 500 In addition to the above, sugar is another key agricultural output for Zambia. Production is dominated by Zambia Sugar Plc, which accounts for over 90% of the country’s output. c.55% of sugar production is exported, 10%, to the EU. Annual sugar output is Maize tonnes. Wheat Sweet estimated at 450,000 potatoes

7 000


6 000

2009 / 2010

MT

5 000

16

2010 / 2011

Groundn

4,000

30%

3,000 20% 2,000 10%

1,000 -

2003

2004

2005

2006

2007

2008

2009

2010

2011

0%

A number of initiatives are being implemented to improve yields 21%

•• Government has embarked on a number of initiatives to improve yields, including: 44%

- Investment in training of small scale famers;

5%

- Investment in research and development; and

5%

- Promotion of local production of key 35% inputs such as fertilisers and seeds.

Zambia’s top five crops by production (MT) 3 500 3 000 2 500 2 000 1 500 1 000 500 Maize

Wheat

Sweet potatoes

2009 / 2010

20

17

18

Groundnuts

Soya beans

2010 / 2011

18

18 16

15

16 14

12

14

13

Zambia’s agricultural sector has a number of players including the Ministry of Agriculture and the Food Reserve Agency

Key players in Zambia’s agricultural sector •• Key players include: The Ministry of Agriculture & Livestock: Sets policies and provides farmer input support. - Food Reserve Agency: Responsible for crop marketing and food storage. - Commercial farmers: There are various commercial farms in the country including:

Zambia’s top 5 crops yield rates (MT per Ha)

Crop

2009 / 2010

2010 / 2011

% change

Maize

2.25

2.23

-1%

Wheat

6.33

6.31

0%

Sweet potatoes

3.57

3.23

-10%

Groundnuts

0.61

0.62

2%

Soya beans

1.80

1.90

6%

Source: Ministry of Agriculture & Livestock statistics

- Mpongwe Farms, a division of Zambeef which produces over 50,000 tonnes of crop (wheat, maize, soya) ; and - Zambia Sugar Plc, the country’s largest sugar producer with a milling capacity of 450,000 tons per annum. - Small-scale farmers i.e. those with less than two hectares of land: The are fragmented and currently account for c.70% of national crop output. - Various associations: These aim to protect the interest of their members and include the Zambia

National Famer Union and Zambia Coffee Growers Association.


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The Zambian Government recognises the agricultural sector’s significant potential and has implemented targeted incentives to support growth Government incentives •• The Government is keen to support growth in the agricultural sector given its immense potential to alleviate poverty. 52% of the approximately one million jobs that the Government targets to create over the next five years, are in the agricultural sector. •• Promoting agriculture is one of the Governments key strategies to diversify the economy from over reliance on mining. Agriculture related incentives include: - Agricultural activities currently enjoy concessionary corporation tax rates of 10% compared to the standard rates of 30% – 35%; - Dividends from agricultural activities are exempt from WHT for the first 5 years; and - Designated farm blocks have been set up that can be accessed by both local and international investors. These are pre surveyed blocks for agro purposes where Government is providing/installing basic infrastructure such as roads, schools, health facilities, dams, and electricity. •• A number of crops have been prioritized for investment including coffee, cotton, tobacco, sugarcane, pineapples, floricultural and horticultural crops. 19

Zambia’s agricultural regions

Province

Annual rainfall

Suitable crop / activity

Southern and parts of Eastern and Western

Less than 800 mm

Maize, cotton, sesame, millet, sorghum, groundnuts, beef, dairy

Lusaka, Central, Southern and Eastern

800 mm to 1,000 mm

Maize, cotton, soya beans, wheat, beef, dairy, vegetables, tobacco

Western

800 mm to 1,000 mm

Maize, rice, cashew nuts, cassava, millet, vegetables, timber, beef, dairy, poultry, fish

Northern, Luapula, Copperbelt, North-Western

1,000 mm to 1,500 mm

Maize, pineapples, millet, rice, sorghum, coffee, beans, sugarcane, cassava, groundnuts and fish farming

Source: Ministry of Agriculture & Livestock website

Zambia’s power output is dominated by hydro primarily generated by the state owned ZESCO The Economic Environment - Energy Power generation capacity

Power station

Current capacity (MW)

Projected capacity by 2018 (MW)

Estimated completion date

Type

Kafue Gorge

990

990

Existing

Hydro

Kariba North Bank

720

720

Existing

Hydro

Victoria Falls

108

108

Existing

Hydro

LHPC

55

300

2018

Hydro

CEC

80

880

2018

Gas/Hydro

Other ZESCO small hydros

24

68

2018

Hydro

Kafue Gorge Lower

_

750

2017

Hydro

Kariba North Bank Extension

_

360

2013

Hydro

Itezhi-Tezhi

_

120

2015

Hydro

Ndola Energy Company

_

100

2013

HFO

300

2015

Coal

Maamba Total

1,869

4,696

Source: ZESCO, Maamba, CEC websites & other Deloitte research sources


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Based on current planned projects, Zambia’s power generation capacity is to increase by two and a half times over the next five years, from the current c.1,800MW Overview

Projected power capacity

•• Zambia has abundant hydroelectric resources and has historically met most of its electricity needs from its own hydroelectric stations, which are operated by the state-owned ZESCO Liimited (“ZESCO”).

•• Zambia’s current installed hydro-power capacity is less than 2000MW, while resource potential stands at an estimated 6000MW.

•• Hydro power accounts for 99% of electricity production with the major sources being Kafue Gorge, Kariba North Bank and Victoria Falls power stations. •• Zambia’s mining sector is the single largest power consumer of power taking up over 50% of Zambia’s total power output. •• Zambia was a large regional electricity exporter, but in November 2005 ZESCO was forced to suspend exports, as generation capacity fell owing to the start of rehabilitation work on the country’s ageing main hydroelectric power stations. •• The fall in generation was so steep that electricity had to be imported from South Africa and the DRC. Matters were worsened in 2007 when South Africa suspended its own power exports as the region fell victim to widespread power shortages.

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•• Based on projects currently in the pipeline, Zambia’s power generation capacity could increase to c. 4,700 MW over the next five years. This excludes the Batoka Gorge project in respect of which the Zambezi River Authority (“ZRA”) has recently invited Expressions of Interest to perform a feasibility study and environmental and social impact assessments. Should Batoka go ahead, it will be a 1,600-MW hydroelectric project and is expected to take seven to eight years from date of construction. Output will be shared equally between Zambia and Zimbabwe. •• ZESCO has recently announced that it intends to raise up to ZMK10 trillion (US$2 billion) through a mixture of different type financing instruments to support various hydro power generation projects in the country.

The electricity supply industry primarily comprises the vertically integrated state utility, ZESCO, and an energy service company CEC that purchases power from ZESCO and supplies it to the mines Key players in Zambia’s electricity sector •• The key players in Zambia’s electricity industry include: - ZESCO: A vertically integrated generation, transmission, distribution state utility which currently accounts for 99% of the country’s electricity generation capacity. The company produces the bulk of its power from three main hydro power plants, namely Kariba North bank, Kafue Gorge and Victoria Falls power stations. In addition, ZESCO generates limited amounts of power from mini hydro power stations including Chishimba, Lusiwasi and Shiwang’andu. - CEC: A LuSE listed company that was created following the privatisation of ZCCM power division in 1997. Currently, CEC’s principal assets comprises transmission and distribution assets in the Copper belt region of Zambia. It is estimated that the company purchases 55% of the power generated by ZESCO, which it supplies to the mines. As part of its growth strategy, CEC has recently announced that it would be partnering with a Nigerian investment bank to develop

the Kabompo gorge hydro-power project in northwestern Zambia (34MW) and five Luapula river hydro power projects with an estimated combined capacity of 800MW. - LHPC: A privately owned independent power producer created following the privatisation of ZCCM. The Company has an installed capacity of 55MW and currently sells all its power to ZESCO under a power purchase agreement. LHPC’s vision is to grow generation capacity to more than 300MW by 2018. - ERB: The regulating body of Zambia’s energy sector, including power.


22

Zambia’s other key energy sources comprise petroleum and coal Other key energy sources •• Apart from electricity, Zambia’s other key energy sources comprise: •• Petroleum: Zambia imports all of its petroleum needs primarily via a 1,700km pipeline which runs from Dar es Salaam to Ndola, in the country’s Copperbelt Province. The country has one petroleum refinery plant with a design capacity of 800,000 tonnes per annum •• Coal: proven coal deposits are estimated at over 30 million tonnes. Maamba Collieries Limited is the largest coal mining company in Zambia and it is in the process of investing in a coal based 300MW power generation plant at an estimated capital outlay of approximately US$750 Million.

23

There have been a number of new entrants into Zambia’s banking sector over the past few years, following improvements in the financial services regulatory framework macro-economic management The Economic Environment - Financial Services Overview •• Pre-2006, the banking system was small and under-developed. However, over the past few years a number of new banks have entered the market including: - Access Bank of Nigeria; - Ecobank from West Africa - First National Bank of South Africa - United Bank of Africa of Nigeria; and

•• Currently, there are 33 micro-financial institutions in Zambia excluding leasing, building societies and bureau de change, which all fall under the non-bank financial institutions category. Non-bank financial institutions refers to institutions or persons authorised by law or the Bank of Zambia to engage in banking business not involving the receipt of money on current account subject to withdrawal by cheque.

- Rabo Bank of Netherlands who have acquired 49% of Zambia National Commercial Bank. •• Improvements in the financial services regulatory framework coupled with improved macro-economic stability have had a positive impact on Zambia’s financial system over the recent past. •• Among the group of seven foreign banks, three large banks (Barclays, Standard Chartered and Stanbic Bank), play a dominant role in Zambia’s financial system.


24

Barclays, Finance Bank and ZANACO, have the widest branch network in Zambia Branch network for commercial banks

Registered Bank

Number of branches

AB Bank

1

Access Bank Zambia

5

African Banking Corporation

6

Bank of China

2

Barclays Bank Zambia

55

Cavmont Capital

16

Citibank Zambia

2

Ecobank Zambia

5

Finance Bank Zambia

51

First National Bank Zambia

9

First Alliance Bank

5

Indo-Zambia Bank

18

International Commercial Bank

2

Intermarket Banking Corporation

7

Investrust Bank

19

Stanbic Bank Zambia

19

Standard Chartered Bank

20

United Bank for Africa Zambia Zambia National Commercial Bank Source: Bank of Zambia

25

4 59

2 000 2 500 1 500 2 000 1 000 1 500 500 1 000 -500 Maize

Wheat

Sweet potatoes

-

Groundnuts

Soya beans

The total Maize number of banks has increased fromGroundnuts 10 in 1990 Soya beans Wheat Sweet potatoes to 18 in 2012 2009 / 2010 2010 / 2011 Number of Banks: 1990 - 2012 2009 / 2010

20

18

2010 / 2011

18

18 16

15

10

20

18

16 14

18

15

14 14

10

18

13

16

12

14

12

16 13

10 10 5

0

5 1990

1992

0 Bank of Zambia Source: 1990 1992

1994

1996

1994

1998

1996

2000

1998

2000

2002

2004

2002

2004

2010 2010

2012 2012

Loans and advances historical development 14,000

12,000 14,000

1

10,000 12,000 8,000 10,000 6,000 8,000 4,000 6,000 2,000 4,000 ‐ 2,000 ‐

2008

2009

2010

2012

ZMK 'b 2008

2009

2010

2012

ZMK 'b Source: Bank of Zambia 2011 annual report


26

140

1.2%

120

1.0%

100

0.8%

80 0.6% 60 0.4%

40 The responsibility to regulate Zambia’s0.2% financial system lies with 20 the BOZ,- as provided under the Bank of Zambia Act, of 1996 0.0% 2003 2004 2005 2006 2007 2008 2009 2010 2011

Regulation

New capital adequacy framework

•• Zambia’s financial system is regulated by the BOZ, whose stated mission is “ to achieve and maintain price and financial systems stability for balanced macroeconomic development”.

•• The BOZ issued a new capital adequacy framework in January 2012. Prior to January 2012, the minimum capital requirement for commercial banks operating in Zambia was ZMK12 billion (US$2.4 million). The new capitalisation requirement are linked to the shareholding structure as follows:

•• The BOZ draws its 8%authority from the Bank of Zambia Act, of 1996.

21%

10%

•• As the country’s Central Bank, the BOZ’s primary functions include: - Licensing, supervision and regulation of the activities of banks and financial institutions;

- For foreign-owned banks the minimum requirement is now ZMK520 billion (US$104 million); and

- Issuance of notes and coins and regulation of all currency related matters;

- For local banks , a lower threshold of ZMK104 billion (US$20 million)

- Supporting the efficient operation of the exchange system; and

•• A foreign owned bank refers to a bank with more than 49% of its equity by foreign entities.

61%

- Acting as adviser to the Government on matters relating to economic and monetary management. 2011 Loans and advances by sector 20% 29%

Personal Loans Agriculture 5%

Manufacturing Wholesale & Retail Trade

5%

Transport, Storage & Comms 10%

18% 12%

Source: BOZ 2011 annual report 27

Financial Services

9.00

Others

8.50 8.00 7.50 7.00 6.50 6.00

Effective 1 January 2013, Zambia rebased its currency, an initiative expected to bring several benefits to individuals, organisations and the country as a whole Currency rebasing •• On 23 January 2012, GRZ gave approval to BOZ’s recommendation to rebase the Zambian Kwacha, effective 1 January 2013. •• The rebasing involved dividing Zambia’s currency, the Kwacha, by one thousand (1,000). To illustrate, ZMK50,000 became ZMW50 following the rebasing exercise. •• The key drivers for implementing the rebasement are as follows: - To facilitate easier business transactions: Use of smaller units simplifies accounting and reduces the risk of errors arising from data input and time spent reviewing such financial data. - To increase confidence levels in the Zambian currency: People tend to have less confidence in currencies with numerous zeros. - To reduce the costs associated with adapting standard accounting packages: Most accounting packages are developed in countries where currencies have significantly fewer zero’s compared to Zambia. Accordingly, Zambian entities purchasing these accounting packages, are required to customize them by increasing the field size to accommodate multiple zeros, at a cost.

- To encourage an efficient payment system: The adoption of a rebased currency will enable easier use of vending machines, car park meters and other related technologies. In addition it will avoid the need to carry large sums of money for transactions. - To facilitate the introduction of coins: The rebasing of the currency will enable the BOZ to re-introduce the use of coins, which are significantly more durable compared to notes. •• The currency rebasing transition period will run from 1 January to 30 June 2013. During this period both the new and old currencies will circulate simultaneously. Further, both currencies will be used for the purchase of goods and services. •• During the period 1 January 2013 to 30 June 2013, an interim symbol (“KR”) will be used to denote prices in the new currency while the current symbol (K) will denote prices in the old currency. Post-30 June 2013, the interim symbol (KR) will cease to be used. •• The simultaneous circulation of currencies will cease on 1 July 2013 and effective this date the old currency will no longer be accepted for the purchase of goods and services. Doing Business in Zambia – A unique flavour

28

29% 5% 5% 5% 5% 10%

18%

10%

18%

12%

Zambia’s insurance industry comprises several private players in 12% addition to the state-owned ZISC The insurance industry •• The Pensions and Insurance Authority (“PIA”) is the regulatory and supervisory authority for the pensions and insurance industry in Zambia. The PIA was created by the Pension Scheme Regulation Act no. 28 of 1996 and the Insurance Act No. 27 of 1997. •• The PIA’s stated mission is “to regulate the conduct of the pensions and insurance industry through prudential supervision in order to protect the interest of pension scheme members and insurance policyholders Soya beans and to foster the industry’s growth, development and stability.” Soya beans

ts

•• Zambia’s insurance industry is relatively small and comprises the state owned Zambia State Insurance Corporation (“ZISC”) and several private sector players including Madison, African Life and PICZ.18 16

9%

22%

4%

4%

22%

9%

ZISC Madison

25%

36%

25%

36%

16

PICZ NICO Goldman ZIGI

Life insurance top players by gross premiums 1% 9%

9%

1%

16%

18

13

General insurance top players by gross premiums 4% 4%

29% 29%

16%

13 ZISC Madison PICZ Aflife ZIGI

2004 2004

2010 2010

46%

2012

Source: BOZ 2011 annual report 46%

2012

29

1 000 000

52% 52%

There is significant growth potential in Zambia’s tourism industry. The Zambian Government aims to create some 300,000 jobs in tourism over the five-year period to 2017 The Economic Environment - Tourism •• Tourism is becoming an increasingly important foreign exchange earner, although it currently contributes only around 5% of Zambia’s GDP. •• Growth in the sector is seen by the Government as having great potential for diversifying the Zambian economy. •• The principal challenges that have limited Zambia’s tourism potential have included the relatively underdeveloped infrastructure, as well as, inadequate supply of competitive accommodation. •• The Government is attempting to remedy this and the prospects are improving. As part of the recently announced 2013 Budget, the Government has unveiled plans to create 300,000 jobs in tourism over the next five years. In addition, Zambia’s tourism sector has benefited from the political challenges in neighbouring Zimbabwe.

•• Most tourists are keen to see the Victoria Falls, which is located on the border between Zambia and Zimbabwe. New hotels in Zambia are cashing in on the influx, and this is raising revenue collection and creating new jobs. •• In addition to the Victoria Falls, Zambia is home to 19 national game parks and 34 game management areas covering 22.4m hectares. •• Tourism will receive a boost in 2013 from the UN World Tourism Organisation Conference, with visitor numbers expected to increase significantly.


30

6.50 6.00 5.50 4%

4%

5.00 2007

22%

9%

Zambia is aiming to grow the number of tourist arrivals to 4 million by 2015, which compares with just under 1 million in 2011 25%

36%

Zambia tourism sector snap shot

Key highlights Travel and Tourism as a % of GDP 1%

5.5%

9%

Government 2013 tourism expenditure allocation

ZMK21.1 billion 29%

Revenue from international tourists (2010)

US$125 million

16%

Targeted revenue from international tourists (2015)

33%

US$550 million

Visitor arrivals (2011)

910,000 52%

Visitor arrivals (2015)

4000,000

Targeted new jobs in tourism over next four years to 2017

300,000

Targeted Travel and Tourism as a % of GDP (2015)

8.0% 15%

46%

Zambia’s visitor arrivals 1 000 000 800 000 600 000 400 000 200 000 0

2004

2005

2006

2007

2008

2009

Sources: EIU, “Zambia Country Report” (2008); World Travel and Tourism Council, “Travel & Tourism Economic Impact (2009), Tourism ministry website

31

2010

2011

Zambia’s transport sector is expected to receive a major boost over the next five years driven by major planned investment in road and rail infrastructure The Economic Environment - Transport Overview •• Zambia is a landlocked country with several natural lakes and rivers. Imports, exports and local commerce are significantly dependent on road and air transport to facilitate trade. Zambia’s lakes, rivers and canals present significant potential for development of transport infrastructure that can enhance and facilitate trade with neighbouring countries. •• In 2012, the GRZ issued a US$750 million bond from the international capital market. 57% of the proceeds of the bond has been allocated to investment in the transport sector. Furthermore, customs duties have been eliminated for importation of locomotives, carriages, rail traffic control equipment, canoes, cruise and ferry boats, dredgers, pontoons, motor cycles and new motor vehicles for certain tourism enterprises.

•• Approximately 14% of the 2013 national expenditure budget is earmarked for investment in the transport sector, amounting to ZMW 3.4 million. •• A five-year plan to enhance the existing road network by 8,000 kilometers is in the offing. The GRZ announcement to increase investment in rail will decongest existing roads and reduce road maintenance costs. •• As shown below, diesel and petrol prices have fluctuated significantly in recent years, accentuated by uncertainty in global commodity markets.


32

%

Zambia’s transport sector comprises several players including RDA and RSTA Key players

Average retail pump price pr litre (ZMW)

•• The key players in Zambia’s transport industry include:

9.00

- Road Development Agency (“RDA”): Responsible for the care, maintenance and construction of public roads in Zambia. - National Council for Construction (“NCC”): Administration and registration of road contractors. - Ministry of Communications and Transport: Formulation and administration of transport sector policies. - Road Traffic and Safety Agency (“RTSA”): Implementation of policy on road transport, traffic management and road safety.

8.50 8.00 7.50 7.00 Unleaded petrol

6.50 6.00

Diesel

5.50 5.00 2007

2008

5%

29% 33%

52%

2010

Source: Energy Regulation Board website

- Zambia Railways and Tanzania Zambia Railway (“TAZARA”): Railway operators.

33

2009

2011

2012

7.00 6.50 6.00 5.50 4%

4%

5.00 2007

22%

%

2008

2009

Zambia’s ICT sector is regulated by ZICTA 25%

%

The Economic Environment - Telecomms Regulation •• The Zambia Information and Communications Technology Authority (“ZICTA”) is an ICT Regulatory body responsible for regulating 1% 9% the Information and Communications Technologies (“ICT”) Sector in Zambia.

Market share of mobile market based on subscription

29% •• ZICTA’s stated visions is: “To be the catalyst of a better Zambia transformed through the use of ICTs in all sectors of the economy”.

•• ZICTA derives its mandate from the three Acts, the Postal Services Act No. 22 of 2009, Electronic Communications and Transactions Act No. 21 and the Information and Communications Technologies (ICT) Act 46%No. 15 of 2009 to regulate ICTs, postal and courier services in Zambia.

2005

2006

2007

2008

33%

52%

MTN ZAMTEL

15%

Airtel

Sources: ZICTA website 3 February 2013

2009

2010

2011 Doing Business in Zambia – A unique flavour

34

2010

Increasing competition in the Zambian telecommunications sectors has led to lower price tariffs, and increased investments Mobile phone sector •• The mobile phone sector has boomed in recent years, with competition between the three providers, the state-owned ZAMTEL and the privately owned MTN and Airtel Zambia resulting in major improvements in coverage and quality together with significantly lower prices. •• The country’s telecommunications market is dominated by mobile network operator Bharti Airtel which

has a market share around 52%, with MTN and ZAMTEL in second and third place respectively. •• All operators have intensified efforts to cover rural areas, and nearly all ten provinces can now be reached by mobile phones on one of the networks. •• The Government of Zambia has recently confirmed it intends to license a fourth mobile network operator in the near future and aims for the new player to be in place before the end of 2013.

Mobile voice market: subscription & penetration levels

70%

9,000 8,000

Subcribers (‘000)

7,000

Penetration levels

60% 50%

6,000 5,000

40%

4,000

30%

3,000 20% 2,000 10%

1,000 -

2003

2004

2005

2006

Sources: ZICTA website 3 February 2013 35

2007

2008

2009

2010

2011

0%

011

0.8% 80 0.6% 60 0.4%

40

0.2%

20 -

2003 2004 2005 2006 2007 2008 2009 2010 2011

Zambia’s fixed line sector is controlled by state owned ZAMTEL 70% 60% 50% 40%

Fixed telephony

Market share of internet subscription

8%

•• The fixed line telephone sector is a monopoly controlled by the state-owned ZAMTEL.

21% 10%

•• As depicted opposite, the number of fixed lines in the country is low, 30% with the number of lines at less than 100,000. 20% 10% 0%

•• Penetration levels are less than 1%. Internet sector

Africonnect

•• Zambia has recently gained access to international submarine fiber optic cables for the first time, which has already led to some significant retail price reduction for broadband services.

ZAMTEL

•• Third generation (3G) mobile broadband services were launched in early 2011 and national fiber networks are being rolled out by a number of different companies. Several ISPs have rolled out W/MAX wireless broadband networks. •• These developments are set to increase broadband penetration significantly in the coming years.

ZAMNET Other

61% Mobile voice market: subscription & penetration levels

140

1.2%

120

1.0%

100

0.8%

80

20% 29%

60

0.4%

40

0.2%

5% 20 5%

0.6%

2003 2004 2005 2006 2007 2008 2009 2010 2011

0.0%

Sources: ZICTA website 3 February 2013

10%

18%

%

%

12% Doing Business in Zambia – A unique flavour

36

0.0%

The Lusaka Stock Exchange was opened in 1994 and currently has 21 listed companies The Stock Exchange •• The Lusaka Stock Exchange (“LuSE”) was established in 1994 as a modern stock exchange based on the most current international standards and practices. These include: - Use of a central share depository system. - Trade-for-trade netting clearing and settlement process. - Rolling settlement three days after the trade (T+3). •• The primary objectives of LuSE include: - To enable local businesses raise longer term capital. - Citizenship empowerment through shares ownership. - To attract foreign direct investment (FDI). - To enable companies achieve wider share ownership and good corporate governance.

37

•• There are currently 21 listed companies on LuSE. Ten of these were triggered by Zambia’s privatisation process in the 1990’s / early 2000’s. •• Notably Shoprite, which should benefit from rising consumer demand in the country, represents over half of LuSE market capitalisation making it by far the largest company on this basis, driven by the dual listing of its holding company on the LuSE and the Johannesburg Stock Exchange. •• Overall supervision of the Zambian capital market including licensing and registration falls under the ambit of the Securities and Exchange Commission (“SEC”), which was established in 1993.

The total market capitalization of LuSE is aproximately US$9.5 billion

Lusaka Stock Exchange (LuSE) – Key stats

Crop Date opened

21 February 1994

Main stock index

LuSE All Share Index

Total number of listed entities

21

Total market capitalisation

ZMK49,364 billion (US$9.5billion)

Most liquid sectors

Banking

Top 5 listed companies by market capitalisation

Shoprite Holdings Limited (US$5,900 million)

Celtel Zambia Plc (US$722 million) Lafarge Cement Zambia Plc (US$316 million) Zambia Breweries Plc (US$285 million) ZCCM IH Plc (US$220million)

Source: LuSE website monthly flash reports


38

4. General business regulations Company registration is governed by the Companies Act, 1994

Company registration

Private Limited Companies

•• The registration of companies is governed by the Companies Act, 1994 and is done at the Patents and Companies Registration Office (“PACRA”). Registering a company typically takes between three to five working days.

•• The following are the types of Private Limited Companies that can be incorporated:

•• The process starts with completing a Name Clearance Form requesting for a particular proposed name to be cleared. •• There is no law that requires foreign companies to partner with locals, as is the case in other jurisdictions. •• There are broadly two types of companies that can be incorporated in Zambia, namely: - Private Limited Companies; and - Public Limited Companies (“PLCs”).

39

1. Company Limited by Shares: This is a company incorporated for purposes of carrying on business driven by a profit. Currently, the minimum required authorised capital for a private company other than banks, insurance and other financial institution, is ZMK5 million. A Private Limited Company may not have more than fifty (50) shareholders. It nevertheless may have the capacity to enter into any type of legal activities as long as its articles do not restrict it. This type of company is however prohibited from making any invitation to the public to purchase its shares or debentures. In the event that it winds up and its assets are insufficient to cover its liabilities, the liability of its shareholders is limited to the amount left unpaid on their shares.

These are three types of Private Limited Companies that can be incorporated; namely: Company Limited by Shares, Company Limited by Guarantee and an Unlimited Company 2. Company Limited by Guarantee: A Company Limited by Guarantee does not have share capital and is not permitted to carry on business for the purpose of making a profit for its members or for anyone concerned in its promotion or management. This type of company is normally formed in order to help the community benefit from a certain project. Typically, these are organisations such as churches, foundations and trusts. At the time of formation, each member must sign a declaration of guarantee, specifying the amount that the member undertakes to contribute if the company is wound up. And in case it winds up, and the assets are insufficient to cover its liabilities, the liability of its members is limited to the amount so guaranteed.

3. Unlimited Company: An Unlimited Company is one that has share capital but whose members have unlimited liability for the company’s debts and other liabilities. In other words, whatever is incurred by the company, is also deemed to have been incurred by the members. An Unlimited Company may not have more than fifty (50) shareholders.


40

Registration of a company involves the submission of an application for incorporation, together with a number of supporting documents Public Limited Company •• A Public Limited Company is required to have an authorised minimum share capital capital of ZMK50 million. It has the capacity of entering into any business activity unless restricted by its articles of association. Its name always ends with the words “Public Limited Company” frequently abbreviated to “PLC”. The articles of association are required to specifically state that the company is a” Public Limited Company”. •• A PLC can invite the public to buy its shares and accordingly it can list its shares on the Stock Exchange. If it winds up and its assets are not sufficient to cover its liabilities, the liability of the shareholders is limited to the amount left unpaid on their shares. Company registration documentation requirements •• To register a company, the following documents are required to be submitted together with the application for incorporation: - Proposed Articles of Association of the company – These are regulations that govern the relationship between the company and its members;

41

- A signed consent from each person named in the application as a director or secretary of the company; - A declaration of guarantee by each subscriber if the Company is to be limited by guarantee; and - A statutory declaration that the requirements of the Companies Act have been complied with. Eligibility to incorporate a company in Zambia •• Any two (2) or more persons associated for any legal purpose may form an incorporated company by subscribing their names to an application for incorporation and lodging it with the Registrar. •• The following are not eligible to subscribe to an application for incorporation: - Persons under eighteen years of age; - An undischarged bankrupt person; and - Anyone who is of unsound mind and has been declared so by the court or a court of competent jurisdiction of another country.

The ZDA is responsible for fostering economic growth and development in Zambia through promoting trade and investment The ZDA & investment licenses •• The Zambia Development Agency (“ZDA”) is responsible for fostering economic growth and development in Zambia through promoting trade and investment and has the challenge to develop an internationally competitive Zambian economy through innovations that promotes high skills, productive investment and increased trade. •• To be eligible for an investment license application, investors must invest not less than US$500,000 in Zambia. Investment licenses attract various tax benefits as discussed in the Taxation section under “Investment incentives”.

•• Applications for an investment licence in some sectors of the economy require proof that application for subsidiary permits from relevant institutions or ministries have been lodged.

Exchange Controls •• Exchange control regulations were abolished in Zambia, effective 29 January 1994. As a result, no restrictions are imposed on the import or export of capital. Repatriation payments can be made in any currency. Both residents and non-residents can hold bank accounts in any currency.

•• All applications for investment licences must be submitted to the ZDA and must submit the following documents: - Copy of Certificate of Incorporation, issued by the Registrar of Companies; - Certificate of Share capital; - Official list of shareholders / directors; - Proof of finance (certificate of deposit at bank or latest bank statement); and - Detailed business plan. - Proof of having secured a place / land to operate from (Lease Agreements or Title Deed or Letter of Offer)


42

Any non- Zambian individual who resides, enters and re-enters Zambia for purposes of employment must obtain an employment permit Employment permit

- Certified photocopies of professional certificates;

Public Limited Company

- Copy of letter of offer of employment/ contract; and

•• An employment permit allows an individual to reside, enter and re-enter Zambia while in employment during the validity of the permit. •• Employment permits are issued by the Department of Immigration to foreigners working in Zambia. Zambian law requires that applicants secure their employment permits while outside the country. However, Government employees, volunteers, missionaries and investors may apply for their permits whilst in the country. •• Work permits are issued within about a month, but it may take significantly longer depending on specific circumstances. Application steps •• In order to obtain a Zambian employment permit, the following information is required to be submitted to the Department of Immigration: - A duly completed employment permit application form; - Two recent passport size photographs; - Police clearance certificate from applicant’s country of permanent residence proving that applicant has no previous criminal record; 43

- Certified photocopies of the passport.

Temporary employment permit Overview •• This permit is issued to any business visitor intending to remain in Zambia for a period exceeding thirty (30) days. The period granted shall not exceed six (6)months in any period of twelve (12) months. Application steps •• Applying for temporary employment permit involves submission of the following information: - A duly completed employment permit application form; - Two recent passport size photographs; - Certified photocopies of current passport; and - Covering letter to the Director General of Immigration from the employer indicating the nature of work the applicant intends to undertake in Zambia.

Operating in certain sectors requires specific permits to be obtained from relevant regulatory bodies Sector specific permits •• Energy sector: The Energy Regulation Board is the primary regulatory board in the energy sector and has overall responsibility for issuing energy licenses. Energy license applications are required to be supported by: - A five - year business plan; - Latest audited financial statements; - Details of subsequent significant capital outflows including major decommissioning costs; and - Estimates of net annual cash flows. •• Financial sector: The Bank of Zambia, as Zambia’s Central Bank and agency for executing Government’s monetary policy, is responsible for issuance of banking licences. Key information requirements from applicants of

- Disclosure of any criminal record for all principal managers and directors; - Business plan with three-year financial projections (profit & loss account, cash flow and balance sheet); - Curriculum vitae for all principal managers and shareholders; - Copy of the company’s Certificate of Incorporation; - Copy of the company’s Articles of Association; and - Approval by the home country supervisors (usually another Central Bank), if the applicants are foreign registered financial institutions

a banking licence include: - Minimum capital requirement of ZMK520 billion (US$104m) for foreign owned banks or ZMK104 billion (US$20 million) for a local bank; - Complete questionnaire for principal managers and directors;


44

Operating in certain sectors requires specific permits to be obtained from relevant regulatory bodies •• Mining sector: The Ministry of Mines and Mineral Resources is responsible for the issuance of permits and licences relating to investment in the mining sector. The licences and permits issued include: - Large-scale mining licence; - Small-scale mining licence; - Prospecting permit; and - Gemstone licence and sales certificate. •• Applications for the mining sector permits and licences must be supported by the following documents, as appropriate: - Topographical maps of the area; - Certificate of incorporation and Articles of Association; - Photocopies of passports of directors and shareholders; - Bank statements and reference letters from applicants’ bank; - Programme of operations and estimated costs; and - Statement of mineral deposit in the mining area.

•• Telecommunications sector: Telecommunication service licenses are provided in three distinct categories, under ZICTA’s mandate: - Type A: Licenses that require service providers to install, own and operate public switched telephone network (“PSTN”) infrastructure e.g. network facilities for basic local or national long distance services. - Type B: Licenses that do not require ownership of public networked telephone facilities in order to provide services e.g. Internet Service Providers (“ISPs*). - Type C: Licenses that require ownership of infrastructure facilities for cellular mobile services. •• The application procedure, involves: - Submission of a duly completed application form to ZICTA; - Evaluation of the application form by ZICTA; - If approved, ZICTA subjects the application to comments from the public and other interested parties where necessary; - For successful applications, a license is issued following payment of the appropriate license fee; and - Unsuccessful applicants may appeal against the decision of the Authority to the Minister of Communications and Transport.

45

Operating in certain sectors requires specific permits to be obtained from relevant regulatory bodies. •• Tourism sector: Investment projects that have to be located in a Game Management Area will require a permit issued by the Zambia Wildlife Authority (“ZAWA”). Applications for the permit should be supported by the following documents: - Project proposal; - List of Shareholders; - Information on promoters’ business experience; - Recommendation letter from the District council; - Letter of Consent from the chief (Game Management Areas fall under traditional land which is under the jurisdiction of the local chief); - Project proposal; and - Building drawings.

Minimum wages and conditions of employment •• The Minimum Wages and Conditions of Employment Act Cap 276 enables the Government to determine minimum conditions of employment for various categories of employees including general workers, drivers and clerks.

Social security •• Zambia’s public pension scheme is administered by the National Pension Scheme Authority (“NAPSA”). Membership to NAPSA is compulsory for all regularly employed persons. The scheme is financed by both the employer and employee contributions at the rate of 5% each, subject to a ceiling determined annually.


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Mergers and acquisitions that meet certain criteria require pre-approval by the Competition and Consumer Protection Commission Mergers and acquisitions •• Mergers and acquisitions in Zambia are governed, from an approval perspective, by the Competition and Consumer Protection Act, 2010 (the “Act”), which is administered by the Competition and Consumer Protection Commission (the “Commission”). •• Section 24 of the Act defines a merger transaction as where an enterprise directly or indirectly, acquires or establishes, direct or indirect, control over the whole or part of the business of another enterprise, or when two or more enterprises mutually agree to adopt arrangements for common ownership or control over the whole or part of their respective businesses. •• Section 24 of the Act further states that a merger could occur where an enterprise purchases shares or leases assets in, or acquires an interest in, any shares or assets belonging to another enterprise or where a joint venture occurs between two or more independent enterprises.

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•• Section 26 of the Act states that parties to a merger transaction that meets the threshold for authorization of a proposed merger shall apply to the Competition and Consumer Protection Commission (the “Commission”) for authorization of the proposed merger. •• The quantum of the Threshold is stipulated in Part V Section 8 (1) of Statutory Instrument No. 97 of 2011, which states: A merger transaction shall require authorisation by the Commission where the combined turnover and assets, whichever is higher, in Zambia of the merging parties, is at least fifty million fee units in their latest financial year, for which figures are available. Currently one fee unit is equivalent to ZMK180. •• Section 28 gives reference to negative clearance and mandates that parties to a transaction seeking clarification as to whether the proposed merger requires the authorisation of the Commission under this law may apply to the Commission for negative clearance.

Zambia’s accounting profession is regulated by the Accountants’ Act of 2008 through the Zambia Institute of Chartered Accountants Accounting and auditing •• The accounting profession in Zambia is regulated by the Accountants’ Act of 2008 through the Zambia Institute of Chartered Accountants (“ZICA” or the “Institute”). •• ZICA provides standards for public practice and accountancy education in Zambia. All individuals who wish to practice as public accountants or auditors are required to apply for a practicing certificate with ZICA. •• ZICA is a member of the International Federation of Accountants (“IFAC”). IFAC is a global organization committed to protecting the public interest by supporting the development of all sectors of the accountancy profession around the world. •• All members of ZICA, including those holding a certificate of public practice are mandated to undertake activities to further Continuing Professional Development (”CPD”) in order to remain competent and relevant to the accounting profession. CPD is the continuous maintenance, development and enhancement of the professional and personal knowledge and skills which members of ZICA require throughout their careers in accounting.

•• The Accountants’ Act of 2008 states that a practicing certificate will be awarded once an individual has been a member of ZICA continuously for a period not less than 12 months; and before or after, or partly before or partly after admission to membership of ZICA, he/she has completed a period, being not less than 30 months of approved accountancy experience under supervision of an approved principal in the office of a public accountant. •• The experience should be: - Of a wider and deeper nature than that required for ZICA Membership; - Gained in four of the following areas: accounting, auditing, taxation, incomplete records, computer systems and operations, and sources of finance; - Reviewed by an approved principal; and - Confirmed by a supervising principal.


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Zambia’s accounting profession is regulated by the Accountants’ Act of 2008 through the Zambia Institute of Chartered Accountants Accounting standards •• The local accounting framework is the International Financial Reporting Standards (“IFRS”). The Companies Act 1994 (as amended) also provides for company accounting regulations. Entities are required to use one of three tiers for financial reporting purposes as shown below:

Type of entity

Financial reporting framework

Listed companies, public interest entities and Government-owned enterprises

Full IFRS

Economically significant companies – companies that are not public companies or quoted on the stock exchange with turnover greater than ZMW 20 million

IFRS for SMEs or Full IFRS at the Company’s discretion

Micro and small entities – defined as entities with turnover less than ZMW 20 million.

Zambian Financial Reporting Standard for micro and small entities

Auditors and audited financial statements

•• All audits in Zambia are required to be conducted in terms of International Standards on Auditing (“ISA”). Only registered public accountants and auditors who are chartered accountants are permitted to carry out statutory external audits.

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•• .An external audit is a statutory requirement for all companies with limited liability. All companies must lodge an annual return with the Registrar of companies accompanied by an audit report . •• Companies whose annual financial statements are audited are required to submit audited accounts to the ZRA when filing their income tax returns.

5. Taxation Zambia operates a source-based system of taxation whereby every person receiving income from a source within or deemed to be within Zambia, is liable to income tax in Zambia on that income Introduction •• This information is based on existing tax legislation and the 2013 Budget Address delivered by the Minister of Finance, Honourable Alexander Bwalya Chikwanda, MP, to National Assembly on 12 October 2012.

Tax administration •• Zambia operates a source-based system of taxation. Every person receiving income from a source within or deemed to be within Zambia, will be liable to income tax in Zambia on that income. The concept of residence is of secondary importance in that it only extends the tax net to cover interest and dividend income received from a foreign-source by Zambian residents.

•• The tax year for both individuals and companies currently runs from 1 January to 31 December. •• Income tax is divided into PAYE, Tax on Self-employed Individuals and Company Tax. A 3% income tax on all commercial imports was introduced from 1 April 2007. The Minister, however, has the authority to determine when this tax will not be applicable.

•• The tax system is administered by the Zambian Revenue Authority (“ZRA”), an agency established in 1994. Where disputes arise between taxpayers and the ZRA under the Income Tax Act, Value Added Tax (“VAT”) Act and the Customs and Excise Act, the aggrieved party has a right of appeal to the Revenue Appeals Tribunal (“RAT”), a statutory body that hears and determines the settlement of tax cases. A party dissatisfied with the decision of the RAT can appeal to the High Court of Zambia. Doing Business in Zambia – A unique flavour

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PAYE is collected at source from individuals in gainful employment Pay As You Earn (PAYE) Overview

Tax on self-employed Individuals

•• PAYE is collected at source from individuals in gainful employment. The employer deducts the tax from the employee’s salary or wages and is required to remit it to the ZRA by the 14th of the month following the month of deduction.

•• This tax is levied on business profits of individuals running business ventures as sole proprietors, or partners in a partnership, at the graduated PAYE rates.

•• The Government has again maintained the graduated four-band system for taxing income from employment but the PAYE exempt threshold has been increased from ZMK24 million per month to ZMK26.4 million per month.

•• For individuals earning both business income and emoluments, business income that has been taxed under turnover tax is (as from 1 April 2007) no longer added to emoluments that are subject to PAYE but remains under the turnover tax system. The tax treatment for income that exceeds the annual threshold is not clear.

Non-residents •• The rates opposite are also applicable to non-residents in respect of employment and business income earned in Zambia. In addition, certain payments made to non-residents are subject to WHT.

2013 PAYE regime PAYE Rates for Individuals: From 1 January 2013 Annual Taxable Income as exceeds

But does not exceed

Rate

ZMK

ZMK

%

0

26 400 000

0 %

26 400 000

36 000 000

25%

36 000 000

70 800 000

30%

70 800 000+ 51

35%

Company tax is levied on business profits of incorporated companies and branches of foreign companies Company tax Overview •• Company tax is levied on business profits of incorporated companies and branches of foreign companies. Taxpayers are required to compute taxable income on an actual basis by reference to the charge year. •• A company that has an accounting year-end other than 31 December, can apply to the ZRA to base its tax return on the accounting year-end. The final tax returns are due by 30 June following the end of the respective charge year. •• New listings on the LuSE attract a 2% discount on the above income tax rate applicable and a further 5% discount where Zambians hold at least 33% of the shares.

•• Where companies operate in the priority sectors under the Zambia Development Agency Act, they are allowed the following: - Exemption from income tax for five years from the first year that taxable profits are made, 50% in years six to eight and then 25% in years nine to ten. - Dividends will be exempt from tax for a period of five years from date of commencement of operations. - Capital expenditure on the improvement or upgrading of infrastructure will qualify for an improvement allowance of 100% of such expenditure.

•• Zambian transfer pricing rules require that transactions between associated persons be on arm’s length terms. The tax authorities can replace “actual conditions” with “arm’s length conditions” for commercial or financial transactions between associated persons.


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Companies listed on the LuSE attract a 2% reduction on the relevant sector, company tax rate 2013 Income tax rates for companies Income Tax Rates : January 2013 to December 2013 Rate of Tax Basic rate Companies listed on the LuSE (year of listing)

35% 2% less than the sector rate

Banks

35%

Mobile telecommunications operators - First K250 million profit

35%

- Balance of profit

40%

Charitable organisations - Income from commercial activities

15%

Farmers, exporters of non-traditional products, producers of chemical fertilisers

10%

Manufacturers and others

35%

Rural enterprises

30%

Businesses with turnover up to K200 million, excluding consultancy (“Presumptive Tax”)

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3%

Mining companies are taxed at a reduced rate of 30%, which compares with 35% from other companies Mining tax regime •• The regime for the taxation of mining companies is as follows: - A basic rate of 30% (other companies remain at 35%). - Variable profit tax of up to 15% on taxable income that is above 8% of gross income. - A mineral royalty rate on base metals at 6% on gross value. - The Government has proposed to increase the WHT rate from 15% to 20% on payments of management or consultancy fees and royalties to non-resident contractors with effect from 1 January 2013.

- A reference price is applied for the purposes of assessing mineral royalties and any transaction for the sale of base metals, gemstones or precious metals between related or associated parties. The reference price is to be based on the London Metal Exchange or other commodity exchange prices. - Cash accounting basis for VAT. - Transfer pricing law will be enhanced to specifically apply to related party borrowings by mining companies in addition to the existing thin capitalisation rules (effective from 1 January 2012).

- WHT on dividends at 0%. - Capital expenditure deductions: forming equipment, plant, machinery and other capital expenditure will be claimed at the rate of 25% per annum, from the year that the asset is brought into use (previously given at 100% of capital expenditure incurred).


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Whilst there is no CGT in Zambia, when an asset is sold, the excess of the proceeds from the asset over the tax written down value is treated as a balancing charge which is combined with the entity’s taxable income WHTs •• Certain payments to residents and non-residents, whether individual or corporate, are subject to WHT.

Capital Gains Tax (CGT) •• There is no CGT in Zambia. However, where an asset is sold in respect of which capital allowances have been or could have been claimed, the excess of the proceeds from the asset over the tax written-down value is treated as a balancing charge which is combined with the entity’s taxable income. In each instance, the balancing charge is restricted to the allowances previously claimed. •• For mining companies, the Government has proposed to introduce PPT at 10% on the transfer or sale of a mining right granted under the Mines and Minerals Development Act, 1994 (effective 1 January 2013).

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2013 WHT WHT rates Residents

Non-residents

Commission paid to non-employees

15%

15%

Dividends, royalties, rental income, management and consulting fees

15%

15%

_

15%

15%

15%

_

15%

Entertainers and sportspersons Interest Non-resident contractors

The standard rate for VAT is 16%. VAT registration is voluntary for businesses with an annual taxable turnover below K800 million

VAT •• The VAT registration threshold has been increased from K200 million to K800 million per annum effective 1 January 2013. Therefore, Companies and individuals dealing in taxable supplies and with a turnover exceeding ZMK800 million per annum are required to register for VAT. Registered suppliers should submit returns to the ZRA for each calendar month within 21 days of the end of the month and account for the excess of output over input VAT. •• The standard rate for VAT is 16%. VAT registration is voluntary for businesses with an annual taxable turnover below ZMKK800 million.

•• VAT exemptions include infant formula, health, education, domestic house rentals, water, transport, financial and insurance services, conveyancing services, funeral services, statutory fees and insurance brokering. •• Proposed changes to take effect from 1 January 2013 include: - The VAT registration threshold is increased from ZMK200 million to K800 million per annum; - Goods supplied to, or imported by, businesses operating in an MFEZ or industrial park have been standard rated.

•• VAT registered suppliers with an annual taxable turnover of ZMK1 billion and above are required to submit input tax schedules electronically and in the approved manner. •• Supplies of goods and services are taxable at standard rate, zero-rated or exempt. Input tax paid on purchases to produce exempt supplies is not recoverable.


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Customs duty is levied on goods imported into Zambia at rates ranging from 0% to 25% Customs and Excise •• The importation of goods into Zambia is subject to import or customs duty. All goods are categorised as to whether they are raw materials, intermediate or finished goods, and taxed at rates in the range 0% to 25% on cost, insurance and freight value (or value for duty purposes). •• Excise duties are levied on specific classes of goods manufactured in, or imported into, the country by reference to value using pre-determined rates contained in the Harmonised Commodity Description and Coding System plus the customs duty payable on those goods. From 1 January 2011, a 10% excise duty on plastic bags was introduced.

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•• Proposed changes to take effect from 1 January 2013 include: - The customs duty rate on flat-rolled products of iron or non-alloy steel not clad, plated or coated, used in the manufacture of roofing sheets has been increased from 0% to 15 percent; - Customs duty on flat rolled products of iron or non-alloy steel, clad, plated or coated excluding those coated with tin and lead, has been increased from 0% to 25%t; - Customs duty on importation of multiple or cabled yarn (knitting wools) of synthetic staple fibers has been increased from 0% to 15 percent; and - Duty has been removed on wide range of medical, mechanical and electrical tools, plant, machinery and equipment.

Transfer of property attracts PTT at a rate of 5% of the realised value of the property being transferred PTT •• PTT is charged at 5% on the realised value of the property being transferred. It is payable by the transferor. Property includes any land (including any buildings, structures, or other improvements thereon) and any share issued by a company in Zambia that is not listed on the LuSE. •• The realised value is the price at which the shares or land could, at the time of transfer, reasonably have been sold on the open market. There is a discretionary exemption for transfers of property within the same group of companies, provided the transferee is a company resident in Zambia and the transfer is for the purposes of effecting internal group reorganisation. •• Effective 1 January 2013, the Government has proposed to introduce Property PPT at 10% on the transfer or sale of a mining right granted under the Mines and Minerals Development Act, 1994.


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Agricultural activities are taxed at a reduced rate of 15%

Investment Incentives Agriculture

Manufacturing

•• Income taxed at a reduced rate of 15% (10% from 1 April 2012) (except for cotton lint - the income tax rate on profits from export of cotton lint is 35%).

•• Refund of Zambian VAT on export of Zambian products by non-resident businesses under the Commercial Exporters Scheme.

•• Dividends paid out of farming exempt from tax for the first five years of the distributing company commencing farming. •• VAT deferment on importation of some agricultural equipment and machinery. •• No import duty on irrigation equipment and reduced duty rates on imports of other farming equipment. •• Reduced customs duty at 5% on premixes, being vitamin additives for animal feed. •• Company income tax rate applicable to the manufacture of organic fertiliser has been reduced from 35 percent to15 percent(effective 1 January 2013).

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•• Guaranteed input tax claim for two years prior to commencement of production. •• Income from chemical manufacturing of fertilizers is taxed at a reduced rate of 15%. •• Import duty on certain textile machinery has been reduced to 0% and all woven fabrics of polyester imported for further processing, all imported sewing threads and grey fabric has duty reduced to 0%. •• Import duty on PVC lining and eyelets used in the manufacture of shoes has been reduced to 5%. •• Import duty on semi-refined wax and cerechlor used in the manufacturing of paint, and on tapioca starch with dextrose powder which is used in the manufacture of biscuits, has been reduced 15%.

Tourism attracts various incentives including zero import VAT on all goods temporarily imported into the country by foreign tourists Tourism

General incentives

•• Zero-rate of VAT on tour packages throughout Zambia.

•• Import VAT relief for VAT registered businesses on imports of eligible capital goods (i.e. VAT Deferment).

•• Zero-rate of VAT on other tourist services provided to foreign tourists other than those included in tour packages. •• Refund of VAT for non-resident tourists and visitors on selected goods. •• No import VAT on all goods temporarily imported into the country by foreign tourists. •• Inadequate infrastructure, service delivery and limited marketing activities addressed by the development of Kasaba Bay, Livingstone and Mfuwe tourist areas and future refund of certain expenses incurred in showing movies that promote the country. •• In order to leverage the maximum benefit from hosting the 2013 United Nations World Tourism Organisation Conference, Government proposes to suspend duty up to 31 December 2013 on the following goods:

•• Zero rate of VAT on export of taxable products. •• Guarantee of VAT refund within 30 days of lodgment of adequately supported claims within 30 days of submission of the claim. •• Relief of VAT on transfer of business as a going concern. •• Equal treatment of services for VAT irrespective of domicile of supplier (i.e. reverse VAT). •• Cash accounting for VAT for members of the Association of Building and Civil Engineering Contractors. •• Guaranteed VAT input tax claim for three months prior to VAT registration for businesses that have already commenced trading. •• Reintroduction of voluntary registration for compliant businesses whose turnover is below ZMK800 per annum subject to conditions stated above.

- New motor vehicles for tourism enterprise that offer transport services.

•• Registered businesses allowed to re-claim 20% of input VAT paid on petrol.

- New articles and equipment needed to furnish or refurbish accommodation and catering facilities for businesses licensed as tourism enterprises.

•• Exemption of interest component of finance leases from VAT. •• Reduction of VAT rate for investors in manufacturing, agriculture, commercial banking and insurance operating in tax-free zones. Doing Business in Zambia – A unique flavour

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Qualifying companies operating under the Zambian Development Agency (ZDA) Act attract various investment incentives Concessions for companies operating under the Zambian Development Agency (ZDA) Act

•• Further concessions for developers and investors in the MFEZ and industrial parks (introduced last year) include:

•• Profits made in designated zones are 100% exempt from income tax for five years from the date when the approved investment commences operations, 50% in years six to eight, 25% in years nine to 10 and then 0% thereafter.

- Removal of WHT on management fees, consultancy fees, and interest re-payments to foreign contractors.

•• 0% tax on dividends for five years from the date when the approved investment commences operations. •• 0% import duty rate on raw materials, capital goods and machinery (including trucks and specialised motor vehicles) for five years. •• Deferment of VAT on machinery and equipment (including trucks and specialised motor vehicles).

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- Zero-rating of supplies to developers of MFEZ and industrial parks. - Foreign suppliers to MFEZ and industrial parks exempt from reverse VAT charge. - Exemption from customs duty of equipment and machinery imported for the development of MFEZ and industrial parks.

Dividends paid by a Zambian Company are subject to a 15% WHT which, however, does not apply on repatriation of profits made by a branch to its Head Office. This makes operating a Branch more attractive from a tax perspective Company vs. Branch •• For most practical tax purposes a registered branch and a resident company are treated similarly in that the same rates of tax apply to effectively the same quantum of profit. •• However, there is an important difference between a company and a branch which arises on the repatriation of profits. In the absence of a favourable double taxation agreement the payment of dividends by a subsidiary would be subject to deduction of withholding tax, currently at a rate of 15%.

•• This would give an effective tax rate of 44.75% (being 35% company income tax and 15% withholding tax) on any profits repatriated outside the Republic. By contrast, a branch can repatriate its profits with no tax withholding, giving an effective Zambian tax rate of 35%. •• Additionally, a company requires the appointment of at least two directors, whereas a branch requires only one. For both a company and a branch, more than 50% of the directors must be resident in Zambia.


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6. About Deloitte The global firm

Deloitte is a global professional services provider, with a strong presence in Zambia

Kitwe Lusaka

EMEA US$ 10.0 billion 62,700 people

Asia Pacific US$ 3.6 billion 34,000 people

Americas US$13.0 billion 72,850 people

Zambia 2 Cities > 100 people

Over 152 countries

Two main offices in Zambia

Aggregate global revenues of US$ 31.3 billion

Professionals working across

Approximately 195,000 people globally

Audit, Tax, Financial Advisory Services and Consulting

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Deloitte in Zambia

Deloitte Zambia offers world class professional services via 4 core service line... •• Financial statement audits

•• Business Tax

•• Accounting advisory

•• Indirect Tax

•• Assurance services

•• International Tax •• Transfer Pricing Tax

Audit

Clients

Financial Advisory

Consulting

•• Corporate Finance Advisory •• Human Capital

•• M&A Transactions Services

•• Strategy & Operations

•• Forensic investigations

•• Technology

•• Restructuring Services

•• Ad hoc consulting

•• Valuation Services

Deloitte Zambia’s depth of capability is impressive, but what differentiates us is a consistent ability to integrate service capability with deep industry sector insights. Doing Business in Zambia – A unique flavour

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7. Contacts

Chisanga Chungu

Humphrey Mulenga

Chief Executive Officer

Financial Advisory Services & Consulting

Office: Lusaka Email: [email protected] Tel: +260 211 228677


Alice Jere Tembo

Victor Muhundika

Audit

Tax



Fellystons Nchimunya Audit Office: Kitwe Email: [email protected] Tel: +260 212 222688

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8. Glossary of Terms BOZ Bank of Zambia c. Circa (approximately) CEC Copperbelt Energy Corporation PLC DRC Democratic Republic of Congo EBZ Export Board of Zambia EIU Economist Intelligence Unit ERB Energy Regulation Board FDI Foreign Direct Investment GDP Gross Domestic Product GRZ Government of the Republic of Zambia HFO Heavy Fuel Oil IFAC International Federation of Accountants KCM Konkola Copper Mines Plc LHPC Lunsemfwa Hydro Power Company Limited Maamba Maamba Collieries Limited MP Member of Parliament NAPSA National Pension Scheme Authority PACRA Patents and Companies Registration Office PAYE Pay As You Earn PIA Pensions and Insurance Authority PICZ Professional Insurance Corporation Zambia Limited PPT Property Transfer Tax SEDB Small Enterprises Development Board Telecomms Telecommunications UN United Nations USD United States Dollar VAT Value Added Tax WT Withholding Tax ZAWA Zambia Wildlife Authority ZCCM Zambia Consolidated Copper Mines Limited ZCCM-IH ZCCM Investment Holdings Plc ZEPZA Zambia Export Processing Zones Authority ZESCO ZESCO Limited ZIC Zambia Investment Centre ZICA Zambia Institute of Chartered Accountants ZICTA Zambia Information and Communications Technology Authority ZMK Old Kwacha, pre -1 January 2013 ZMW The new re-based Kwacha, effective 1 January 2013 ZPA Zambia Privatisation Agency ZRA Zambia Revenue Authority ZSIC Zambia State Insurance Corporation Limited


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Deloitte provides audit, tax, consulting, and financial advisory service to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte’s more than approximately 195,000 professionals are committed to becoming the standard of excellence. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. © 2013 Deloitte & Touche