Zambia - Foreign investment



In the past, the heaviest concentrations of foreign private capital in Zambia were in the mining enterprises of the Copperbelt. Anglo-American holds only a 27% interest in the national mining company ZCCM, but privatization of the company was talked of in 1998. Most investment is from the United Kingdom or South Africa. Although tax holidays have been offered as incentives, Zambia's highly socialized economy has not been conducive to private foreign investment, and exchange controls have made the repatriation of profits and dividends difficult.

Laws concerning retention of foreign exchange have been consistent, achieving full liberalization only recently. In 1983, exporters of nontraditional items could keep 50% of earned foreign exchange to finance imported inputs. This resulted in a fivefold increase in nonmetal exports. This provision was revoked in 1987. The Investment Act of 1991 provided for a 70% foreign exchange retention during the first three years of a license, 60% in the next two years, and 50% for the rest of the license's term. This act was subsequently revised to allow for full retention of foreign exchange earnings.

Annual foreign direct investment (FDI) flow into Zambia reached $207 million in 1997, after which it steadily declined, from $198 million in 1998 to $72 million in 2001. Zambia's success in attracting FDI declined from 1990 to 2000. For the period 1988 to 1999, Zambia's share of world FDI inflows was more than four times its share in world GDP. For the period 1998 to 2000, its share of world inward FDI was less than twice its share of world GDP.

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