EVALUATING EXTERNAL ENVIRONMENT

Political/Legal
Political stability Fairly stable
Regulation of  The business environment has improved in the recent past, especially with
industries reforms facilitated by the Private Sector Development Reform Programme
(PSDRP) that was domiciled at the Ministry of Commerce, Trade and
Industry from 2005 to 2012.

 The PSDRP facilitated a number of reforms to the business environment,

notably harmonising the number of licenses and processes that
entrepreneurs go through to set up and operate businesses.

 The Business Regulatory Review Agency (BRRA) ensures that the cost
associated with meeting business regulatory requirements is minimal.

Competition Zambia Competition Commission ensures that the rules of Competition and
policy Fair Trading Act are applied with the following objectives:
o Encouraging competition in the economy by prohibiting anti-
competition trade practices.
o Regulating monopolies to protect consumer welfare.
o Strengthening the efficiency of production and distribution of goods
and services.
o Securing the best possible conditions for the freedom of trade and
expansion of entrepreneurship base
Tax laws  Implementing agency is the Zambia Revenue
Authority (ZRA) who ensures that the rules of Income Tax Act are applied.

 The tax year (charge year) runs from 1st April to 31st March of the
following year.
 The ZRA requires that annual tax returns including accounts and supporting
schedules are submitted on or before 30th September in respect of the tax
year ended 31st March of the same calendar year.

 There are penalties for late submission of tax returns on or before the
stipulated date.

 The principal taxes include direct taxes (notably corporate tax, Pay-As-You-
Earn, other personal income), Customs and Excise duties, Value Added Tax
(VAT), property transfer tax and mineral royalty (Mines and Minerals Act
1995).

Exchange  Balance of payments regulations are monitored by Bank of Zambia.

controls
 The Bank of Zambia monitors the outflows and inflows of funds.

 In relation to outflows, the bank shall monitor:

o The value of any imported goods;
o The value of any imported services, including management services;
o Any amounts remitted out of the country whether unrequited
(gratuitous) or otherwise
o Loans granted to non-residents;
 o Trade credits from non-residents;
o Investments made in the form of equity and debt securities outside
the country by persons resident in Zambia;
o Profits or dividends paid to non-residents in respect of investments
made in Zambia;
o Payments of interest or principal on an investment on private external
debt.

 In relation to inflows, the bank shall monitor:

o The value of goods or services exported;
o Profits or dividends received in respect of investments abroad;
o Borrowings from non-residents;
o Investments in the form of equity from abroad; and
o Investments in the form of debt securities from abroad receipts of
both principle and interest on loans to non-residents.

 In relation to international transactions, the bank shall monitor the value

of:
o Imported or exported manufacturing services or goods to or from
non-residents;
o The net cost-effect of telecommunication services;
o International transport, courier and postal services; and
o International accommodation and other hospitality services to or from
non-residents international
o money transfers in and out of Zambia.

Labour Labour Commissioner responsible to the Minister for the administration of

legislation the Employment Act.
The Employment Act details the rules and law related to conditions of
employment of locals and expatriate.
Intellectual  Intellectual property laws in Zambia cover areas such as designs,
property rights marks,domain names, traditional knowledge, transfer of technology,
patents/copyrights, etc.

 Zambia is also party to several international intellectual property

agreements.
Government  Government is taking strong action against too much shoddy service
bureaucracy delivery and bureaucracy which the public has observed in some
Government institutions such as the Zambia Revenue Authority (ZRA),
Zambia Police Service (ZP), Department of Immigration and many others.

 The Government has spent in the last 2 years K200 million to construct
infrastructure for various departments in the new districts.

 The creation of districts will lead to robust infrastructure development as a

result of increased transfer of resources from central government, which
will in turn attract private sector investment in the new districts and
subsequently create job opportunities.

Economic
Economic  Average GDP growth rate of 6 percent was buoyed by good performance in
growth the mining, agriculture, manufacturing, services and construction sectors.

 Zambia’s average GDP growth rate was higher than that achieved in the
Sub Sahara Africa (SSA) region.
Commodities  In 2014 and first half of 2015, international prices of primary commodities
and FOREX were generally low, and it showed in Zambia’s lower than expected export
earnings.

 The resulting lower international reserves had a knock-on effect on the

foreign exchange rate of the Zambian Kwacha (ZMW). The Kwacha has
continued to depreciate against major currencies such as the USD, Pound
and Euro.
Level of interest  Interest rates stood at around 18%, still too high for most companies.
rates
 Alternative sources of financing become necessary, with the unaffordable
money market.
Level of inflation The yearend inflation was 6.8% in 2014 and 6.3% in 2015
FDI FDI inflows into Zambia rose from a low of USD 72 million in 2008 to a high
of USD 2,100 million in 2013, before going down to USD 1,300 million in
2014.
Tax rates  Corporate tax at the rate of 35%. However, income from the agricultural
sector and non-traditional exports (all exports except copper and cobalt) is
levied at 15%, while companies listed on the Lusaka Stock Exchange are
taxed at the rate of 33%.

 Personal income tax is levied in the range of 25-35%.

 VAT is levied at 16%. Some specified goods and services are zero-rated or
exempt.

 Import duties:
o 25% mainly for finished products
o 15% intermediate goods
o 0 – 5% raw materials and capital goods

Trade balance/  Zambia’s trade balance position deteriorated in the fourth quarter of 2014
import and and macroeconomic indicators were adversely affected.
export
 Zambia recorded a trade deficit of USD 169.5 million in the first half of
2015.

 Member of COMESA, SADC and EAC.

 Imports
o Value = $6.798 billion (2015 est.)
o Goods = Machinery, transportation equipment, petroleum products,
electricity, fertilizer, foodstuffs, clothing
o Partners = South Africa 34.5%, Democratic Republic of the Congo
18.2%, Kenya 9.7%, China 7.2%, India 4.4% (2015)

 Exports
 o Value = $6.316 billion (2015 est.)
o Goods = Copper/cobalt, cobalt, electricity; tobacco, flowers, cotton
o Partner = China 25.5%, Democratic Republic of the Congo 13%,
South Africa 6.4%, South Korea 4.9%, India 4.3% (2015)

Social/Socio-economic
Per capita By 2015 per capita GDP was USD1, 800.
income
Labour and  2012 Labour Force Survey: Working age population was 7.8 million people,
employment of which 76% was economically active.

 Of these, 5.5 million people were employed, mostly in rural agriculture,

forestry and fisheries sector.

 A total of 4.7 million people were employed in the informal sector while
only 0.8 million people were in formal sector employment, of which the
Central Government accounted for 28 percent.

 Out of the total labour force, 7.8 percent was unemployed (the proportion
in urban areas was twice as much at 14 percent compared to 3 percent in
rural areas).
Levels of Education expenditures is about 1.1% of GDP
education
Literacy rates:
Age 15 and over can read and write English
total population: 63.4%
male: 70.9%
female: 56% (2015 est.)
Levels of crime Zambia is the 76th least corrupt nation out of 175 countries, according to
and corruption the 2015 Corruption Perceptions Index reported by Transparency
International.

OSAC 2015 - Crime rating in Zambia is quite high with carjackings,

burglaries and the occasional home invasion are the being the most serious
crimes. occur throughout Zambia (although most particularly in Lusaka)

Technological
Levels of Well-developed IT platform continue to enhance the capability of
infrastructure organisations to deliver innovative services at a faster rate.
and technology
ICTs have also eased and simplified the process of monitoring service
delivery and measuring performance of organisations and products.
Communication Wide range of modes for communicating information and conducting official
business.
E-platform e-Government in place to enhance delivery of goods and services by
connecting all Government institutions through ICTs.
Climate Advances in Science and Technology have also raised expectations about the
quality of goods and services.

To remain relevant and competitive, organisations need to invest in

 appropriate technology to meet expectations of their clients in an efficient,
consistent and reliable manner

Environmental
Policy Zambia has a well-developed policy, legal and institutional framework to
regulate economic activities that have an impact on the natural
environment.

The Zambia Environmental Management Agency (ZEMA) is the lead agency

in this area.
Government The Sustainable Development Goals (SDGs) complement other international
role efforts to promote good corporate social responsibility and yield desirable
results.

The Zambian Government encourages investments that help promote and

protect public interests like the natural environment.
Private sector MSMEs will be encouraged to position themselves in high-value, high-growth
role niche markets like natural and organic products and environmentally friendly
services in tourism.

The effects of climate change may also require adaptation by Zambian

farmers to meet new regulatory requirements – and that is a cost.

Demographic
Population  15 Million (2015 est.)
 Growth rate: 2.88% (2015 est.)
Major urban  urban population: 40% of total population
areas
 Rate of urbanization: 4.15% annual rate of change (2010-15 est.)

 Lusaka (Capital) – 2.2 Million (2015 est.)

Age distribution  0-14 years: 46.12%
 15-24 years: 20.02%
 25-54 years: 28.6%
 55-64 years: 2.89%
 65 years and over: 2.38%

Gender 1 male(s)/female
distribution
Religious Protestant 75.3%, Roman Catholic 20.2%, other 2.7% (includes Muslim
orientation Buddhist, Hindu, and Baha'i), none 1.8% (2010 est.)
Languages  Official language is English.

 Bembe 33.4%, Nyanja 14.7%, Tonga 11.4%, Lozi 5.5%, Chewa 4.5%,
Nsenga 2.9%, Tumbuka 2.5%, Lunda (North Western) 1.9%, Kaonde
1.8%, Lala 1.8%, Lamba 1.8%, English (official) 1.7%, Luvale 1.5%,
Mambwe 1.3%, Namwanga 1.2%, Lenje 1.1%, Bisa 1%, other 9.2%,
unspecified 0.4%
 HIV prevalence Adult: 12.4% (2014 est.)

Key points to note:

I Significant depreciation of the Kwacha in second half of 2015

II National election scheduled in August 2016

E INDUSTRY FEATURES

I Agriculture

 13% contribution to the country’s Gross Domestic Product (GDP).

 Country’s first employer – 66.5% of labour force
 Zambia territory is 75 million hectares large, of which 58% is classified as
medium to high potential for agriculture production.
 Around 15% of this land is currently under cultivation.
 The Zambian agriculture sector comprises crops, livestock and fisheries.
 The country’s staple crop and most cultivated is corn (maize). Other major
crops include: cotton, soybeans, tobacco, groundnuts, paprika, sorghum,
wheat, rice, sunflower seeds, coffee, as well as sugar, fruits, other
vegetables and flowers.
 Zambia is also one of the biggest seed exporters in Africa, exporting a
recorded total of 17,891 tons of certified seeds to other African countries in
2011.
 The livestock sub-sector produces everything derived from cattle, as well as
dairy products, chicken, eggs, pigs, hides and skins. It represents about 7%
of GDP.
 Fisheries produce 70,000 metric tons of fish per year, accounting for about
3.2% of Zambia’s GDP. 87% of the production comes from capture fisheries
and 13% from the newly implemented aquaculture.
 Despite all its positive predispositions, agriculture in Zambia remains largely
underexploited with only 15% of its potential arable land under cultivation.
The Zambian fisheries sector currently produces less than half of its fully
exploited potential. Likewise, the livestock hasn’t fully exploited the total
landmass’ potential.
 Zambia National Agriculture Policy Draft 2013 aims to tackle the sector’s
issues through adequate strategies. These strategies include: increasing its
production and productivity, strengthening agricultural extension service
delivery, increasing the area of land under irrigation as well as levels of
 mechanization among smallholder farmers, improving the efficiency of
agricultural markets for inputs and outputs, promoting accessibility to
financing and credits, increasing the private sector’s participation, improving
food security, and implementing environment-friendly practices.

II Manufacturing

 Accounts for about 11% of GDP.

 Growing at an average annual growth rate of 3% in the last five years.
 Growth largely driven by the agro processing (food and beverages), textiles
and leather subsectors.
 Secondary processing of metals is another main activity in the sector,
including the smelting and refining of copper, and this has led to the
manufacturing of metal products.
 Fertilizers, chemicals, explosives and construction materials such as cement
are also produced in the sector.
 Undertaken by the private sector with government playing a proactive role.
 Government has put in place measures to support manufacturing activities,
such as the establishment of Multi-Facility Economic Zones (MFEZs) and
Industrial Parks (these are industrial areas for both export orientated and
domestic orientated industries, with the necessary support infrastructure
installed), and provision of sector-specific investment incentives. Government
also promotes small and medium enterprises in rural and urban areas so as
to enhance labor intensive light manufacturing activities in these areas.
 Sector has attracted significant investment in recent years (foreign direct
investment stocks in the sector totaled about US$ 805.7 million as of 2011).
 Manufactured goods contribute an average of 25 percent to the country’s
total exports.
 The main exports of manufactured goods are; engineering products,
processed and refined foods chemical and pharmaceutical products, scrap
metal and leather products.
 The main destinations of Zambia’s manufactured products are the Common
Market for Eastern and Southern Africa (COMESA) and the Southern African
Development Community (SADC) trade blocs, with the Democratic Republic
of Congo and the Republic of South Africa being the largest markets. Other
significant export markets outside Africa are China, Belgium, the Netherlands
and Switzerland.

III Mining

 Zambia possesses the world’s highest-grade deposits of copper and is ranked

7th largest copper producer in the world for producing copper.
 2013: 800,000 tons of copper produced.
 Copper production in Zambia projected to reach 1,500,000 tons by the year
2018 due to new projects.
 The mining contribution to GDP forecasted to grow over USD 1.35 billion by
2018.
 Lead and zinc are next important commodities produced by Zambia.
 Kabwe is one of the highest-grade lead and zinc deposits in the world.
 Coal output is estimated to grow from 281,000 tons in 2014 to more than 2
million tons by 2017.
 Sector attracted investment of approximately USD 8 billion since the 2000
employing over 80,000 in the recent years.
 Investment in mining sector of Zambia will reach USD 15 billion by 2017 due
to new projects under implementation.
 The Zambian government is focused on economic diversification to reduce its
reliance on the copper industry. The diversification program includes
promotion of using other components of Zambia’s resource base such as
agriculture, gemstone mining, tourism and hydropower.
 The main challenge in the sector is power. With rapid economic growth and
new mines development in Zambia, there has been a 36% demand increase
for power in the past decade. This increase in electricity demand means that
26% of Zambia is affected by load shedding usually at peak times.