Zambia Investor Briefing - October 2022

ZAMBIA INVESTOR BRIEFING

October 2022

OVERVIEW

Following the presentation of the 2023 budget by Minister of Finance Hon Dr Situmbeko Musokotwane, the New Dawn government continues its focus on stimulating private sector development by introducing new measures and incentives across sectors including mining, agriculture, manufacturing, tourism, telecommunications, insurance and gaming.
Government continued to pursue its debt management plans setting out its expectation that it hopes to agree debt relief terms with creditors by the end of 2022 or early 2023 during a presentation to Eurobond holders. Meanwhile, the World Bank approved a loan of US$270 million for economic relief.
The inaugural US Zambia business summit to boost trade and investment was convened in Lusaka.
President Hichilema travelled to Namibia to enhance trade ties between the two countries, following an agreement to develop a 2,000km oil and gas pipeline earlier in the month.
A trade mission to Lubumbashi in the Democratic Republic of Congo generated export deals for Zambian firms worth US$24.5 million, including for the supply of mealie meal, chicks, meat products and maize seeds.
VAT and excise duty on petrol and diesel was re-instated effective October 1st.

2023 Budget

On 30 September 2022 Minister of Finance Hon Dr Situmbeko Musokotwane presented the 2023 budget. Titled ‘Stimulating Economic Growth for Improved Livelihoods’ it is the second budget by the New Dawn government and contains additional measures and incentives to stimulate private sector development, as well as commitments to increase social spending. These will be financed in part by the K9 billion (approx US$560 million) in additional funds the government expects to have available in 2023 after announcing an end to fuel subsidies and the reintroduction of VAT and excise duty on fuel and other commodities. Measures to improve public financial management were also announced.

In the mining sector the royalty rate regime was restructured to tax only incremental value in price at various thresholds and property transfer tax for transfer of exploration rights was cut from 10% to 7.5%. Read more at ZambiaIsBack.com.

In the agriculture sector reform of the Fertiliser Input Subsidy Programme (FISP) was announced, with the new Comprehensive Agriculture Support Programme to include extension service support, irrigation development and access to finance. In addition, 256 extension officers and supporting equipment will target an extra 1.5 million smallholder farmers, while 16 new dams will support irrigation and new farming blocks are to be established.

In the manufacturing sector the government announced tax concessions geared at stimulating investments in corn starch production and a 50% suspension on excise duty on clear beer made with cassava or malt at certain levels of production.

For tourism there is a continued suspension of customs duty on selected capital equipment and waived visa fees from certain countries including EU member states, the United Kingdom, the United States, and China.

In telecommunications a single corporate income rate of 35% will replace the pre-existing two-tier system.

In the insurance sector government announced the removal of the 15% withholding tax on investment income on life insurance.

For betting and gaming the withholding tax on winnings reduced by 5% and presumptive tax on land-based betting companies reduced from 25% to 15%.

Other notable measures include a change in the basic rate PAYE threshold from K54,000 (approx US$3,343) to K57,600 (approx US$3,566), a reduction of the tax on income received by special purpose vehicles under Public Private Partnerships during a set period, and the announcement that timber exchanges are to be set up across the country to improve transparency in the sector.

Debt Management

During a presentation to three of Zambia’s Eurobond holders the government indicated that it hopes to agree debt relief terms with creditors by the end of 2022 or in Q1 2023. A net-present value reduction of US$6.3 billion is required in line with IMF targets, equivalent to 49% of the face value. The government is currently preparing for its third official creditors committee meeting, which it hopes will take place in the coming weeks

US Zambia Business Summit

The inaugural US-Zambia Business Summit was held in Lusaka on October 12th and 13th. US companies and investors from sectors ranging from mining to technology attended alongside representatives from the US International Development Finance Corporation, the US International Trade Administration, the US Trade and Development Agency and the Office of the US Trade Representative. During the event Ambassador Gonzales stated, “Working with the Zambian government to improve Zambia’s business enabling environment is my top objective”.

Zambia and Namibia Strengthen Trade Ties

President Hichilema travelled to Namibia as a guest of President of Namibia Hage Geingob at the Swakopmund International Trade Expo. Earlier in the month the two nations signed an agreement on the Cooperation in Facilitating Private-Sector Development and Implementation of an Oil Products and Natural Gas Pipeline project. The two governments have committed to working together with private partners to assess the cost and viability of the 2,000km pipeline which could supply 100,000 to 120,000 barrels per day and help reduce the cost of delivering petroleum products, with the ambition to also supply other countries in the SADC region.

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