ZAMBIA: An Introduction to General Business Law

General Business Environment

The business environment in Zambia is well balanced between court-controlled business principles largely influenced by the English common law and interventions based in the Constitution and in principal and subordinate legislation. There are a few important pieces of legislation that affect business worth highlighting.

Companies Act of 2017 and Insolvency Act 2017

Among the most notable elements introduced under the Companies Act are the concept of surrender of shares as a way of relinquishing ownership under a company limited by shares. The Companies Act also permits a company to buy back its shares or hold shares as treasury shares as another mode of returning capital to investors. In addition, the Companies Act also introduces the concept of beneficial ownership disclosure. The disclosures aim at revealing who the ultimate beneficiaries of a company are. This is relevant for various reasons including transparency, combatting illicit activities, fair taxation and good governance.

The new Insolvency Act has now enhanced regulation of troubled companies by recognising the insolvency practitioner’s profession and by also extending or enhancing tools for managing companies in distress to include business rescue and more structured schemes of arrangement.

Competition and Consumer Protection Act

The Competition and Consumer Protection Act of 2010 regulates:

• all conduct that could trigger anti-competitive conduct;
• merger control; and
• restrictive business practices such as cartel conduct and abuse of dominance.

The Act also regulates consumer protection issues.

In terms of merger control, Zambia’s regime is suspensory, meaning that a merger must be approved before implementation. For the merger to be notifiable it must meet the prescribed threshold and the merger assessment period is 90 days with the possibility of an extension for up to 30 days. A merger that is implemented without approval is void and the parties can be fined up to 10% of their annual turnover.

In December 2023, Zambia incorporate the COMESA Competition Commission regulations into domestic law. The implication of this for merger control is that if a merger is notifiable at the COMESA Competition Commission (CCC) then there is no requirement to notify the merger at the Competition and Consumer Protection Commission (CCPC) in Zambia. Therefore, all mergers with a regional dimension are captured by the CCC merger regime. There is no dual merger approval filing at the CCPC and at CCC.

Regarding restrictive business practices, cartel conduct is per se prohibited and it attracts both administrative fines and prosecution. The same applies to resale price maintenance, which is also per se prohibited, and no rule of reason defence is available for per se violations of the Act.

In Zambia, an enterprise is deemed dominant if it has 30% or more market share in the relevant market. Abuse of dominance is prohibited, and an enterprise can be fined up to 10% of its annual turnover.

Mining Regulation

There are currently three potential changes to the regulation of the mining sector. Firstly, the 2015 Act is expected to be repealed by the Geological and Mineral Development Bill of 2023. The focus of the Geological and Mineral Development Bill is the regulation and development of artisanal and small-scale exploration and mining, which are mainly targeted at citizens or joint ventures with citizens. Most of the regulatory provisions in this respect have been extracted from the 2015 Act and this Bill is still undergoing legislative assembly debate.

Secondly, the proposed Minerals Regulation Commission Bill of 2023 is intended to essentially take over regulation of large-scale exploration and mining by largely adopting the relevant provisions of the 2015 Act. There are, however, some important proposed new introductions. One of these is a new autonomous regulator with its own corporate existence to be called the Minerals Regulation Commission. Apart from reigning in regulation, the commission is also proposed to regulate and monitor marketing of minerals as well as the trade and export of minerals produced in Zambia. This Bill is currently undergoing debate in the legislative assembly.

Thirdly, there is a proposal to introduce the Mines and Minerals Development (Local Content) Regulations. The initial draft of this law was circulated in 2020 with the major objective of preferring the procurement of local goods and services as well as the employment of local professionals by mining companies. The main instrument of regulation would be a mandatory local content plan required to be submitted by mining right holders whose implementation would be supervised by a Local Content Unit within the Ministry of Mines. This potential law is still under consideration but, unlike the two above-mentioned Bills, it does not need to be passed by the legislative assembly. As subordinate legislation, it is only required to be signed off by the Minister responsible for Mines and this is likely to happen once the two Bills are passed into law.

Energy Regulation

The sector is regulated by two principal statutes known as the Electricity Act and the Energy Regulation Act both of 2019. The legislative framework is largely facilitative and key development incudes the creation of a framework for power trading and access to the national grid. There is also imminent further introduction of net metering and access legislation.

The introduction of these further facilitative pieces of legislation is timely in view of the massive expansion of the mining sector which will require a commensurate increase in the energy generation capacity of the country. Some of the chief benefits of this new legislation in the electricity sub-sector of the energy sector in Zambia is the decentralisation of electricity supply to supplement grid scale supply but to also provide a ready market for excess power whether internationally or domestically available and a quick return on investment in generating equipment even at the micro level.

Telecommunications, Media and Technology Regulation

Zambia has enacted various pieces of legislation to create a secure and efficient environment for data protection, validity of electronic communications as well as cybersecurity. Key legislative acts include:

• the Electronic Communications and Transactions Act No 4 of 2021;
• the Data Protection Act No 3 of 2021;
• the Cyber Security and Cyber Crimes Act No 2 of 2021; and
• the Information and Communications Technologies Act No 15 of 2009.

The key challenges under these statutes are mainly the novelty of the concept of data protection and the requirement on businesses to localise the storage of data in country, which may in turn require the deployment of significant initial capital to achieve compliance.

Banking and Finance Regulation

The Banking and Financial Services Act No 7 of 2017

The Banking and Financial Services Act No 7 of 2017 is a comprehensive piece of legislation enacted to regulate and supervise banking and financial services in Zambia. International capital in debt form, however, is mainly regulated under general court made commercial law. International financial institutions are generally not required to obtain local licensing unless they perform intermediation functions or operate a payment system.

The Securities Act No 41 of 2016 as amended by Act No 21 of 2022

The Securities Act of 2016 in Zambia establishes a regulatory framework for the securities market, promoting transparency, fairness, and investor protection. Private placement of securities with sophisticated investors is generally not regulated under this statute unless the securities are offered to the public through a primary or secondary marketing platform in Zambia.

The Proposed Bank of Zambia Currency Regulations, 2024

These represent a second attempt by the central bank to tighten currency regulation against use of foreign currencies for domestic transactions and are currently still under discussion. There are proposed important exemptions allowing for cross-border transactions and certain transactions in the mining and energy sectors.

Naturally, however, most local companies with foreign currency obligations might face currency mismatches given that their revenues will primarily be in Zambian kwacha but strategies such as hedging should be able to help mitigate potential losses arising from fluctuations in exchange rates should these regulations be introduced.

Tourism Regulations

Apart from housing one of the seven natural wonders of the world, the Victoria Falls, Zambia is also a leading safari country with the tourism sector mainly regulated pursuant to standards under the Tourism and Hospitality Act, 2015.

The introduction and eventual operationalisation of the Business Regulatory Act is also likely to enhance investment in this sector following the consolidation of the licensing regime into a single licensing digital platform

Dispute Resolution Options

Investors generally have an option between the fast-track commercial court and arbitration. In terms of arbitration, arbitral proceedings in Zambia are regulated by the Arbitration Act of 2000. The United Nations Commission on International Trade Law (UNCITRAL) Model Law has been incorporated into the Arbitration Act and is thereby applicable to all arbitral proceedings in Zambia.

Similarly, Zambia is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This entails that any foreign/international awards made in a territory of a state which is also a party to the New York Convention is recognised and enforceable in Zambia in the same manner as a judgment of the Zambian courts.