Guidance

Overseas Business Risk: Zambia

Updated 10 March 2021

Information on key security and political risks which UK businesses may face when operating in Zambia.

General overview

Since 1991, Zambia has been undertaking major economic reforms that have spurred increased investment and trade. Today Zambia has a liberal and open economy with no price or foreign exchange controls. Copper and cobalt remain by far the major exports accounting for about 70% of foreign exchange earnings. The heavy dependence on base metal exports has made the country vulnerable to drops in global copper prices and policies are being made to diversify the economy into other sectors such as agricultures, energy and tourism.

In 2018 Zambia recorded $564.5million worth of foreign direct investment . The UK is among the top ten investors in Zambia and in 2018 the UK recorded inflows of $228.66 million, the second largest investment flow after Canada. The major sectors attracting investment in Zambia are mining, energy, manufacturing, construction and agriculture. The policy agenda by the current government is geared towards economic diversification, energy supply, improving the health systems, supporting local enterprises and tackling unemployment.

A sustained fiscal deficit continues to threaten economic growth and investor confidence. Zambia’s total stock of external debt as at June 2020 stood at $12billion and in November 2020, Zambia defaulted on its Eurobond obligations. In the current economic recovery programme 2020 -2023 Zambia has set itself an ambition to restore growth and safeguard livelihoods through achieving macroeconomic stability, economic diversification, debt sustainability, growth and inflation control. Discussions with the IMF on a potential medium-term programme are ongoing as at February 2021.

1. Political risk

Since independence in 1964, Zambia has enjoyed relative political stability, in particular when compared to regional neighbours. Multi-party elections were introduced in 1991 and transition of power between parties has occurred smoothly. Political parties are more fluid than in the UK, with less ideological differences.

Zambia is ranked 21sth out of 54 African countries on the 2019 Mo Ibrahim Index of African Governance.

Some sporadic political unrest can occur but not to the extent of major business disruption. Many companies find it useful to establish a relationship with a local lawyer or businessman who can advise on local political sensitivities. For more information on political risks including political demonstrations please visit FCDO travel Advice.

2. Economic risk

The strong economic growth rates that Zambia experienced for more than a decade from 2000 onwards have now declined significantly. Growth rates have been linked to global copper prices, but droughts, electricity rationing, the government’s debt position and, more recently, the COVID-19 pandemic, have slowed growth. The real GDP growth forecast for 2020 was negative 4.2. Zambia is classified as a lower middle income country by the World Bank. The GNI per capita stands at $1,430 (2019). Inflation has exceeded the country’s target of 6 to 8% for some time and as at December 2020 it was 19.2. The country is currently ranked 85/190 on the World Bank Ease of Doing Business index 2020.

World Economic Forum Global Competitiveness Index (2019) ranks Zambia 120 out of 141 economies. According to this measure, some of the challenges affecting Zambia’s competitiveness include access to finance, tax rates, corruption, and inflation, poor work ethic in labour force, foreign currency regulations and policy instability. There are extensive and complex regulations on labour, environmental and tax matters for which there are often substantial penalties for even minor infringements.

Access to capital in the domestic financial market is restricted and characterized by high interest rates when secured. The Central Bank reviews a monetary policy rate quarterly and this currently stands at 8.5%. The COVID-19 pandemic like in most other parts of the world, stifled growth in 2020 affecting supply chains and general business activity. The current focus for the country is mitigating the effects of the pandemic, restoring growth and microeconomic stability, attaining fiscal fitness and restoring debt sustainability. Electricity deficit due to rationing of the power affected business and industries in 2019 and 2020. The situation has improved since the Zambian government intensified efforts to connect new power generation projects to the national grid and as a result of strong rainfall in 2020/2021. Load shedding, though still experienced, has eased.

Businesses operating in Zambia sometimes have difficulties getting as many work permits as they would like for expatriate staff. Good Zambian professional staff are in high demand. Business must sometimes contend with policy inconsistencies and adjust business operations accordingly.

Piracy, IPR infringement and counterfeiting are a problem in Zambia, cutting across all forms of goods and services.

3. Human rights

The Zambian constitution is the authority on human rights in Zambia. The constitution states that no person shall be subjected to torture or to inhuman or degrading punishment. The constitution and law also prohibits arbitrary arrest and detention. However, rule of law problems remain, including around policing, allegations of torture (whilst detained) and illegal or prolonged detention.

The judiciary is generally perceived to be independent but is not entirely immune to political pressure and judicial decisions may take many months or even years to be made. The commercial courts are generally effective, but lack capacity. Detention facilities are over-crowded and poorly maintained, leading many to claim they provide degrading treatment below basic human rights.

4. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or as Scottish partnership to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

The Transparency International Corruption Perception Index (2020) ranks Zambia 18 out of 47 economies in Sub-Saharan Africa and 117 out of 180 in the world. The UK government, through DFID, actively supports the fight against corruption.

5. Terrorism and security

Read our FCDO Travel Advice on the terrorism threat in Zambia.

6. Protective security/organised crime

Read our FCDO Travel Advice on the terrorism threat in Zambia.

7. Intellectual property

IP rights are territorial, that is, they only give protection in the countries where they are granted or registered. A British company thinking about trading internationally should consider registering their IP rights in Zambia. There are a number of legal provisions pertaining to the administration and enforcement of copyright and intellectual property rights in Zambia. The Copyright Act 2008 makes provision for copyright of literary, musical and artistic works, cinematography pictures, gramophone records and broadcasts.

Piracy, IPR infringement and counterfeiting are a problem in Zambia, cutting across all forms of goods and services. Zambia’s counterfeit problem is aggravated by the lack of adequate enforcement of trademark laws, weak punitive measures and the high cost of goods and services. The institutions currently responsible for enforcing the Trademark Act are; Zambian Bureau of Standards, Zambian Police service, Zambia Revenue Authority, National Drug Authority.

Intellectual property laws in Zambia may cover such areas as domain names, traditional knowledge, transfer of technology, patents/copyrights, etc. Zambia is also party to several international intellectual property agreements.

Read the information provided on our Intellectual Property page.

8. Contact

Contact the Department for Business and Trade (DBT) team in Zambia for more information regarding doing business in the country.