ZambiaInvest interviewed Mukula Makasa, Director General of the Zambia Development Agency (ZDA) from September 2020 to January 2022. Mr. Makasa discusses the economic growth and development of Zambia and opportunities for trade and investment.
Zambia is renowned for its extractive industries, particularly for the mining of copper. However, the current National Development Plan (7NDP) for the period 2017-2021 aims to make Zambia “a diversified and resilient economy for sustained growth and socio-economic transformation, driven among others by agriculture, tourism, manufacturing, energy, and infrastructure”. What is the underlying strategy and what are the challenges ahead?
The thrust of our work is to provide advice to the government on economic recovery post-Covid-19 based on ZDA’s strategic position as the practical link between Government and the private sector. This includes:
- Supporting the development and implementation of industrial development strategies based on research and innovation, oriented towards reverse engineering and in line with the priority sectors stipulated in the Seventh National Development Plan.
- Re-investment by promoting the expansion of existing business enterprises in Zambia as a competitive strategy to reduce unit costs through economies of scale.
- Repositioning Zambia’s international business by focusing on unique resources and Zambia’s comparative and competitive advantage to create sustainable and export-oriented business enterprises.
- Arising from the population of Zambia, which creates a limited market, export focus and promotion of non-traditional export products would be paramount with a focus on untapped markets of the Democratic Republic of Congo, Zimbabwe, Angola, and southern Tanzania.
Which incentives are in place for investors to venture in these strategic sectors?
Under the ZDA Act No. 11 of 2006, investors who invest not less than USD 500,000 in the priority sectors such as Manufacturing, Tourism, Agriculture, including Energy and Infrastructure Development can access numerous fiscal incentives, which include:
- Zero percent import duty rate on capital equipment and machinery that will be required for the business for the first five years of operation.
- Accelerated depreciation on capital equipment and machinery.
These incentives are granted based on the Agency’s recommendation to the Ministry of Finance.
However, this tax incentive structure is not exhaustive, there are other incentives provided for under the Zambia Revenue Authority (ZRA).
In 2020, the World Bank ranked Zambia as the 5th best country to do business in Sub-Saharan Africa out of 48 countries. How do you explain such an impressive performance?
As you may be aware, the World Bank Ease of Doing Business Ranking is a quantitative measure of how conducive the business environment is by analyzing ten (10) indicators that measure aspects of the business regulatory framework. These are: 1) Starting a Business; 2) Access to Electricity; 3) Registering Property; 4) Access to Credit; 5) Protecting Minority Investors; 6) Paying Taxes; 7) Trading across Borders; 8) Enforcing Contracts; 9) Dealing with Construction Permits, and 10) Resolving Insolvency.
As you have correctly indicated, Zambia improved its ranking from 87 out of 190 countries in 2019 to 85 in 2020, making it the 5th highest rated country in sub-Saharan Africa. This improvement is evidence of the Zambian Government’s interest to address issues that affect the cost of doing business. In particular, our rating in 2020 improved due to the following reasons:
- Enforcing Contracts
Zambia made enforcing contracts easier by making judgments rendered in commercial matters at the Supreme Court level available to the general public online.
- Protecting Minority Investors
Zambia strengthened minority investor interests by increasing shareholders’ rights and role in major corporate decisions as well as clarifying ownership and control structures.
- Resolving Insolvency
Zambia made resolving insolvency easier by introducing a reorganization procedure and granting debtors the possibility of obtaining post-commencement finance.
In addition, the Zambian Government has applied substantial efforts in improving the Business Regulatory Framework through the enactment of the Business Regulatory Act No. 3 of 2014.
This has made doing business easier by ensuring that proposed Government policies and measures do not affect the cost of doing business, thus facilitating improvements to infrastructure such as roads, telecommunications, energy and water, as outlined in the Seventh National Development Plan.
Furthermore, continuous and concerted efforts are being made to streamline licensing procedures by ensuring that only necessary licenses are issued at a reasonable cost and with minimum bureaucracy.
Procedures that are costly and time-wasting are being eliminated while legal requirements for doing business have been reduced.
What are your main competitive advantages at the moment for investing and starting a business in Zambia?
The following are the main competitive advantages at the moment for investing and starting a business in Zambia:
- Attractive Investment Incentives.
- Stable Political Climate.
- Favorable Economic Policies.
- Clear National Economic Strategy.
- Strategically located with access to regional markets (N8+1; SADC; COMESA).
- Stable Macro-economic Fundamentals.
- No Exchange Controls.
- Investment Guarantee Securities.
You have been appointed this year (2020) Director General of ZDA, the Agency responsible for investment and trade promotion in Zambia. What makes Zambia a competitive export platform in the region?
Zambia remains a competitive export platform in the region for the following reasons:
- Zambia is centrally located, surrounded by eight neighboring countries plus easy access to the great lakes region with low transportation costs and efficient trade facilitation.
- As a member of COMESA, SADC, the Tripartite FTA (COMESA-EAC-SADC and now the African Continental Free Trade Area (AFCFTA), with a market of 1.2 billion consumers and USD 3 trillion GDP, Zambia becomes a preferred destination for trade and investment.
- Attractive for investment in agriculture due to abundant land with prospects for increased and diversified agriculture production and regional value chains for exports into the region and international markets.
- Attractive for investments into the abundant mineral resources offering high tech regional and global value chains for exports into the regional and international niche markets.
- Exporters also enjoy incentives such as;
- VAT Rule No 18 (input VAT refunds on all export products).
- Duty Draw Back Scheme (a proportionate refund on all duties incurred inputs procured both locally and from outside Zambia used in the production of an export product)
- 10% Tax Rate for Non-Traditional Exports ( NTEs) in Agro-Processing and Farming
Which services are in place for investors?
The following services are offered by the Agency to enhance Investment Promotion and Facilitation:
- Project Identification and Packaging.
- Assistance in Plant Site selection.
- Provision of information on Markets and Industries.
- Assistance in seeking business partners for Joint Venture Partnerships.
- Arrangement of meetings with Government Ministries.
- Provision of administrative support.
- Provision of information on Investment incentives.
What is your message to potential investors looking at Zambia?
The country’s central location in the region, as well as a combination of the following key strengths, make Zambia an ideal investment destination. Investors will enjoy numerous benefits:
- Peaceful and stable political system.
- Positive and investor-friendly economic environment.
- Guarantees and securities to investors with legislated rights to full and market value compensation.
- Abundant natural resources presenting excellent investment and trade opportunities.
- Vibrant private sector.
- Attractive investment incentives.
- Unlimited repatriation of profits.
- Progressive banking, legal and insurance services of international standards and stock exchange market.
- Duty-free access to regional, wider Africa, EU and USA markets.
- Good place to work and live – sub-tropical climate, friendly people, mostly English speaking, open-air lifestyle with nature reserves, game parks, rivers, lakes and waterfalls.