Investment opportunities in Zambia

Zambia is becoming an attractive destination for business and investment. With rich natural resources, a growing economy and supportive government policies, the country offers many opportunities for both entrepreneurs and investors.

Why invest in Zambia?

Reasons why you should invest in Zambia include:

• Abundant Natural Resources Zambia is rich in natural resources including copper, cobalt and other minerals. The mining sector, especially copper mining, makes a significant contribution to the country's economy.
• Political Stability Zambia has a relatively stable political environment compared to some other countries in the region. This stability provides a favorable climate for investment and business operations.
• Growing economy. Despite the challenges, Zambia's economy is growing steadily, driven by industries such as mining, agriculture and services. This growth potential offers investment opportunities in various industries.
• Strategic Location Situated in the heart of South Africa, Zambia serves as a gateway to several neighboring countries. Its strategic location can be advantageous for businesses wishing to access regional markets.
• Investment incentives. The Zambian government offers various incentives to attract foreign investment, including tax breaks, duty-free imports for certain industries and support for export-oriented businesses.
• Young and growing population. Zambia has a relatively young population, which provides opportunities for businesses targeting consumer markets, especially in sectors such as retail, telecommunications and financial services.
• Infrastructure development. The Zambian government is investing in infrastructure projects such as roads, energy and telecommunications that can improve communications and facilitate business transactions.
• Regional integration Zambia is a member of regional economic communities such as the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA). This integration provides access to larger markets and trading opportunities.

Investment incentives

The Zambia Development Agency (ZDA) Act 2006, as amended in 2014, offers a wide range of incentives in the form of tax exemptions and incentives for companies. The law provides for investment thresholds that allow one to qualify for tax and non-fiscal benefits. There is only one category of investors who can be considered for investment benefits under the ZDA, while the rest receive only non-tax benefits.

Fiscal incentives

Investors who invest at least US$500,000 in Multi-Facility Economic Zones (MFEZ) or a priority sector or product under the ZDA Law are eligible for the following tax benefits:

• Zero percentage import duty on capital equipment and machinery, including trucks and specialized vehicles, for 5 years
• Accelerated depreciation of capital equipment and machinery, including trucks and specialized vehicles, over 5 years

Non-fiscal incentives

Investors who invest at least US$250,000 in a multi-site economic zone, industrial park, priority sector and rural enterprise investment under the ZDA Law are eligible for the following non-fiscal benefits:

• Investment guarantees and protection from state nationalization
• Free assistance in applying for immigration permits, secondary licenses, land acquisition and utilities

Zambia's vast resource reserves offer enormous commercial opportunities in Zambia's developing economy, particularly in agriculture, energy, mining, infrastructure, information and communications technology and tourism.

Lobito Development Corridor

In October 2023, the US government, the European Union, the African Finance Corporation (AFC), the African Development Bank and the governments of Zambia, Angola and the Democratic Republic of Congo (DRC) signed a seven-party memorandum of understanding (MOU). The agreement was signed to formalize its shared commitment to develop a modern railway line connecting the mineral-rich regions of the DRC and Zambia with the Angolan port of Lobito on the Atlantic Ocean.

The project aims to build 550 kilometers of new railway from Solwezi in the northwestern province of Zambia to the Angolan border; and repair 1,300 kilometers of railways from this border point to the port of Lobito. It is planned that the feasibility study of the project will be completed by the first quarter of 2025.

The US$5 billion Lobito-Zambia railway line will be an important trade corridor for Zambian and DRC imports and exports. The construction of the railway line will create ample opportunities for concluding contracts for construction and related services.

The Memorandum of Understanding also calls for the project to promote sustainable investment along the corridor in agriculture, energy, ICT, healthcare and other sectors.

Key sectors for investment

Agriculture

Zambia has 42 million hectares of arable land, of which only 14% is currently cultivated. Agricultural yields in Zambia are generally low due to lack of mechanization, limited access to quality inputs, poor agronomic practices and government intervention in the sector. This undermines private sector investment and the development of a commercially sustainable network of agricultural input dealers.

However, given Zambia's fertile soil and consistent rainfall (November & March), it has the potential to significantly increase production of staple and cash crops.

There are also significant investment opportunities in value-added processing, cold storage and food processing, targeting large regional markets including the DRC and South Africa.

Energy

In 2022, Zambia produced 19.4 million megawatt-hours (MWh) of energy, of which the state-owned Zambia Electricity Supply Corporation Ltd (ZESCO) provided 11.6 million MWh (60%) and the rest was produced independent power producers (IPP). However, since 83% of Zambia's electricity is generated from hydroelectric power plants, electricity availability may fluctuate depending on the season.

Given a combination of seasonality, climate variability and financial constraints, seasonal load shedding may occur in some years. Due to the energy-intensive nature of Zambia's mining operations, electricity production needs to increase significantly to support the government's plan to dramatically increase copper production. The country is a member of the South African Power Pool and has contracts to export electricity to Botswana, Zimbabwe, Namibia and the DRC totaling US$430 million.

Independent power stations seeking to sell electricity through the grid must sell it to ZESCO. Due to financial mismanagement and corruption under the previous administration, ZESCO experienced serious financial difficulties, operated at a loss and accumulated significant debt.

However, as of December 2023, ZESCO has reduced its payables to IPP from a peak of US$1.7 billion in December 2021 to US$647 million. Once this debt is paid off, ZESCO will be operating profitably and will be able to invest in upgrading and expanding the network.

Mining

Zambia is the world's ninth largest copper producer, producing 763,550 tonnes in 2022 (4% of global copper production). Although Zambia has some of the world's most important mineral deposits, developing these reserves has been challenging due to government intervention in the sector, the lack of a transparent and competitive mining concession process, and a corrupt and dysfunctional cadastral system.

The investment climate in the mining sector has improved under President Hichilema's administration. The President said Zambia aims to produce 3 million tonnes of copper per year by 2032.

However, industry representatives are skeptical that Zambia will be able to achieve this overly ambitious target without further significant changes in policy and practice. Despite these challenges, new investment has been made in Zambia's mining sector in 2023 and opportunities remain in exploration, production, processing and ancillary services.

The country also has significant deposits of other valuable minerals, including cobalt, gold, nickel, manganese, graphite, beryllium, sulfur, zinc, graphite, coal, iron ore, steel, limestone, uranium and other platinum group metals. Zambia currently does not have mineral processing capacity, but developing this capacity is a government priority.

The state also has significant deposits of precious stones, including: emeralds, amethysts, aquamarines, garnets, tourmalines, rose quartz, agate, amazonite, colored quartz and others.

Infrastructure

Zambia cannot use debt financing for any new significant infrastructure projects due to the country's government's debt status. However, infrastructure development remains one of the government's top priorities, and construction remained the country's largest industrial sector in 2022 — it accounted for 10.9% of GDP. The government is looking for public-private partnership investors to finance new infrastructure projects.

Information and communication technologies (ICT)

By December 2022, Zambia had 16.4 million active cellular mobile connections, equivalent to more than 80% of the population. By the beginning of 2023, Internet penetration in Zambia was 21.2%, and the number of Internet users was 4.3 million.

The Global System for Mobile Association (GSMA), a non-profit industry body that promotes global connectivity, has selected Zambia as one of six nominees for its 2023 government leadership award. GSMA noted the progress of the Zambia Information and Communications Technology Authority (ZICTA) in improving nationwide connectivity, infrastructure, transparency and spectrum roadmap.

ZICTA reported that from 2021 to 2022, the number of mobile money subscriptions in Zambia increased from 9.8 million to 11.2 million, a growth rate of almost 14%. During the same period, mobile money transactions increased by nearly 75% to nearly $14.8 billion.

Tourism

Zambia's tourism sector is built on its diverse environment, which includes the world-famous Victoria Falls, extensive wildlife resources (20 national parks), diverse landscapes, cultural tourism, adventure activities and hunting.

About 30% of Zambia's 752,614 square kilometers is designated for wildlife conservation. In addition, the country has many museums that house priceless historical artefacts, such as the Lusaka National Museum, the Moto-Moto Museum and the Livingstone Museum. Zambia also boasts a variety of traditional ceremonies that take place at different times of the year and showcase its rich cultural heritage.

In 2019, before the COVID-19 pandemic, travel and tourism accounted for 7.7% of Zambia's GDP and supported almost 500,000 jobs. In 2021, the sector accounted for 4.3% of GDP and created an estimated 340,000 jobs, with international tourist numbers still 56% below pre-pandemic levels.

Although there is significant potential for increased tourism in Zambia, the sector's growth is hampered by Zambia's inadequate infrastructure, the relatively high cost of international travel to the country, relatively expensive domestic air travel, and onerous licensing requirements for lodges and hotels. Zambia has tried to position itself as an upscale niche safari destination with relatively expensive accommodation and tour packages.