ZAMBIA © Shutterstock.Com COTTON, TEXTILE and APPAREL SECTOR INVESTMENT PROFILE ZAMBIA

COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE potential made possible

ZAMBIA © shutterstock.com COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE ZAMBIA

2020 ABOUT THE PROJECT

This guide has been produced under the framework of the Partnership for Investment and Growth in Africa (PIGA) project with the purpose of facilitating foreign investors on complying with taxes in Zambia.

PIGA is part of Manufacturing Africa, a flagship programme of the United Kingdom of Great Britain and Northern Ireland’s Foreign, Commonwealth and Development Office (FCDO) facilitating foreign direct investment with high development impact into selected African countries.

Under Manufacturing Africa, PIGA aims to contribute to job creation and sustainable growth in Ethiopia, Kenya, Mozambique and Zambia by supporting these countries to attract foreign direct investment, specifically Chinese investment, in the agro-processing and light manufacturing sectors. PIGA is also designed to enhance the capacity of these countries for effective investment promotion.

PIGA is implemented by the International Trade Centre (ITC) in cooperation with the China Council for the Promotion of International Trade (CCPIT) and the China–Africa Development Fund (CADFund).

ACKNOWLEDGEMENTS

Designed and produced under the framework of the Partnership for Investment and Growth in Africa (PIGA) project funded by FCDO and implemented by ITC. PIGA is a South-South Trade and Investment project operational in Ethiopia, Kenya, Mozambique and Zambia.

Special contributions to writing this report have been provided by: Ministry of Commerce, Trade and Industry Ministry of Agriculture Ministry of Finance Ministry of Labour Ministry of National Planning and Development Cotton Board of Zambia Zambia Development Agency Kudu Consulting

Quality Assurance: International Trade Centre (ITC), Trade Facilitation and Policy for Business Section (TFPB), TCA Ranganathan, External consultant, Shupi Mweene, National Coordinator (PIGA), Ingrid Colonna, Project Adviser (PIGA) Author: Mr. Paul Muwowo and Mr. Coillard Hamusimbi, Kudu Consulting Design: Iva Stastny Brosig, Design plus d.o.o. Editor: Vanessa Finaughty

The views expressed in this report are those of the authors and do not represent the official position of the International Trade Centre, the Zambia Development Agency and the Government of the United Kingdom.

II Table of Contents

ABOUT THE PROJECT II ACKNOWLEDGEMENTS II ACRONYMS AND ABBREVIATIONS V FOREWORD VI

PART I: INTRODUCTION 1 INTRODUCTION 2 1. ZAMBIAN TEXTILE AND APPAREL 4 1.1. Manufacturing sector in general 4 1.2. Cotton production and ginning 5 1.3. Textiles 5 1.4. Apparel sector 7 1.5. Other developments 7

PART II: PROMISING COTTON, TEXTILE AND APPAREL INVESTMENTS 8 2. PROMISING COTTON, TEXTILE AND APPAREL INVESTMENTS 9 2.1. Cotton production and toll ginning 9 2.2. Modern spinning mills 10 2.3. Weaving and knitting 10 2.4. Apparel manufacturing 11 2.5. Textile and apparel sector challenges and risks 12

PART III: WHY INVEST IN ZAMBIA? 13 3. WHY INVEST IN ZAMBIA? 14 3.1. Peace and stability 14 3.2. Natural resources 14 3.3. Good climate 14 3.4. Strategic geolocation 16 3.5. Young and growing population 17 3.6. Labour availability 18 3.7. Sustained FDI inflows 19 3.8. Growing economy and macroeconomic stability 20 3.9. Conducive business environment 22 3.10. Established banking sector 24 3.11. Support infrastructure 24 3.12. Logistics and connectivity 26 3.13. Support services 29

4. WHEN INVESTING IN ZAMBIA 33 4.1. Legal requirements when investing in Zambia 33

5. HOW TO SET UP AND INVEST IN ZAMBIA 35

ANNEXES 38 Annex I: List of investment promotion and facilitating organizations 39 Annex II: List of leading banks 41 SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL III LIST OF FIGURES

FIGURE 1: OUTPUT SHARES WITHIN MANUFACTURING IN ZAMBIA (2014) 4 FIGURE 2: COTTONSEED AND LINT PRODUCTION (TONS) (1971–2017) 5 FIGURE 3: MAJOR SSA TEXTILE AND APPAREL IMPORT SOURCES (2017) 8 FIGURE 4: AGROECOLOGICAL ZONES 15 FIGURE 5: ZAMBIA’S NEIGHBOURING COUNTRIES AND POTENTIAL EXPORT MARKET 16 FIGURE 6: ZAMBIA’S POPULATION PROJECTIONS 17 FIGURE 7: FOREIGN DIRECT INVESTMENT INFLOWS INTO ZAMBIA (2008–18) (USD million) 19 FIGURE 8: INFLATION, INTEREST AND EXCHANGE RATE TRENDS (2009–18) 21 FIGURE 9: ZAMBIA AND SOUTH AFRICA EASE OF DOING BUSINESS COMPARISONS 22 FIGURE 10: ELECTRICITY TARIFFS (USDC/KWH) IN COMPARISON WITH NEIGHBOURING COUNTRIES 25 FIGURE 11: ELECTRICITY GENERATION AND CONSUMPTION (MWH millions) 25 FIGURE 12: MPULUNGU PORT THROUGHPUT CARGO (TONS) 28

LIST OF TABLES

TABLE 1: ZAMBIA’S TEXTILE AND CLOTHING IMPORTS, SOURCES, EXPORTS AND DESTINATIONS (USD ’000) 6 TABLE 2: TEXTILE AND APPAREL IMPORTS BY SUB-SAHARAN AFRICA REGION (2010–17) 7 TABLE 3: ZAMBIAN COTTON, TEXTILE AND APPAREL VALUE CHAIN SWOT ANALYSIS 12 TABLE 4: MEAN DAILY MINIMUM AND MAXIMUM TEMPERATURE DURING MAIN SEASONS 15 TABLE 5: POPULATION AND AGE CATEGORIZATION 17 TABLE 6: WORKING AGE AND LABOUR FORCE CATEGORIZATION 18 TABLE 7: AVERAGE MONTHLY EARNING (ZMW) BY AREA AND EMPLOYMENT TYPE 19 TABLE 8: LEADING NATIONALS ISSUED WITH PERMITS IN 2018 20 TABLE 9: ZAMBIA’S GDP (CURRENT PRICES), INFLATION AND EXCHANGE RATE 20 TABLE 10: MAIN ECONOMIC SECTORS AND CONTRIBUTION TO GDP 21 TABLE 11: CARGO VOLUMES BY TRANSPORTATION MODE 27 TABLE 12: ROAD TRANSPORT CARGO COST PER TON PER KILOMETRE 27 TABLE 13: CELL PHONE AND INTERNET USERS AND PENETRATION 28 TABLE 14: VISAS AND PERMITS: COSTS AND TIME 29 TABLE 15: CORPORATE TAX CATEGORIES AND RATES 30 TABLE 16: PAYE RATES BY INCOME BAND 31 TABLE 17: DOUBLE TAXATION TREATIES RATES 31 COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

IV Acronyms and abbreviations

Unless otherwise specified, all references to dollars ($) are to United States dollars, and all references to tons are to metric tons. The term ‘billion’ denotes 1 thousand million.

AGOA African Growth and Opportunity Act AfCFTA African Continental Free Trade Area CMFEZ Chambishi Multi-Facility Economic Zone COMESA Common Market for Eastern and Southern Africa FDI Foreign direct investment GDP Gross domestic product LS-MFEZ Lusaka South Multi-Facility Economic Zone MFEZ Multi-facility economic zone NIP National Industrial Policy PACRA Patents and Companies Registration Agency SADC Southern African Development Community SSA Sub-Saharan Africa TPIN Taxpayer personal identification number VAT Value-added tax ZCCZ Zambia–China Economic and Trade Cooperation Zone ZDA Zambia Development Agency ZEMA Zambia Environmental Management Agency ZRA Zambia Revenue Authority COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

V FOREWORD

Zambia’s population has grown significantly, to approximately 17.9 million in 2020, and is expected to reach 26.9 million by 2035. The young people and the working age population represent the largest share of this population. Further, the Zambian population has experienced increased incomes. These and other factors have generated a huge demand for cotton, textiles and apparel products. Zambia has made significant progress in creating a conducive business environment, making the country the 2nd most preferred investment destination in Southern Africa. Despite this progress, Zambia’s potential in the cotton, textiles and apparel sector remains underused. The huge production–consumption gap in this sector has made Zambia highly reliant on imports. This gap, therefore, presents an opportunity for investors to invest in Zambia’s cotton, textiles and apparel sector.

Increased cotton output and ginning capacity, collapsed textiles and weak apparel companies have created business opportunities in toll ginning, modern spinning, and fabric and apparel manufacturing. Zambia has easy access to land, especially in designated industrial zones with reliable and competitively priced electricity, water and other business support services. Zambia also has an abundance of skilled and experienced labour. The country has high-quality raw materials and is the 2nd largest producer of cottonseed in Southern Africa. The country’s geographical location and membership in different trading blocs will enable investors in the cotton, textiles and apparel sector to access a huge export market.

To support the cotton, textiles and apparel sector, Zambia has developed an investor-friendly business environment supportive of new investments. The Seventh National Development Plan (7NDP), National Industrial Policy, National Trade Policy, Local Content Strategy and other policies and pieces of legislation have been formulated to revitalize the textile and apparel industry and promote value addition to local cotton and other fibres.

To leverage the huge export market as well as increase the manufacturing sector’s growth and contribution to GDP, Zambia has prioritized the cotton, textiles and apparel sector. The Zambia Development Agency, in conjunction with the Partnership for Investment and Growth in Africa (PIGA) project, is thus promoting investments into Zambia’s cotton, textiles and apparel sector. Therefore, the PIGA project, funded by the UKAID and implemented by the International Trade Centre (ITC), has profiled the cotton, textiles and apparel sector. The profile is expected to aid potential investors in getting an in-depth appreciation of the challenges and investment opportunities that exist in Zambia’s cotton, textiles and apparel sector.

Investments in the cotton, textiles and apparel sector will contribute to Zambia’s transformation from a producer and exporter of primary products into a net exporter of value-added goods and products using local primary resources.

Mr. Mukula Makasa Acting Director General, ZAMBIA DEVELOPMENT AGENCY (ZDA) COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

VI © Shutterstock.com

PART I: Introduction © Shutterstock.com

PART I

INTRODUCTION

The Republic of Zambia offers viable investment oppor- the available labour is also skilled and experienced in tunities in cotton, textile and apparel (CTA). Increased textiles and apparel manufacturing, having worked for the cotton output, and ginning capacity, collapsed textiles and now-closed textiles and clothing companies. weak apparel companies have created business oppor- A growing population (3% p.a.) and rapid urbanization tunities in toll ginning, modern spinning, and fabric and (4%) is fuelling local textile and clothing demand, thus apparel manufacturing. Consequently, Zambia is looking the increasing and unmet local demand that is driving for foreign investments in its textile and apparel sector Zambia’s textile and apparel imports, which could easily to rejuvenate and boost sector competitiveness and be substituted with locally manufactured products. exports. Due to its high growth, wealth and job creation Zambia’s unique geolocation gives it the best proximity potential, Zambia has identified cotton, textile and apparel and connectivity to the Common Market for Eastern and as one of its priority economic sectors to improve its local Southern Africa (COMESA) (470 million people and $600 manufacturing value added, diversify its economy and billion market) and to the Southern African Development achieve industrialization. As a prioritized economic sector, Community (SADC) (337 million people and $706 billion government is supporting the textile and apparel sector market), both of which are characterized by huge textile with infrastructure, appropriate legislation and investment and clothing imports. Duty-free access to regional, conti- incentives. nental, European Union (EU), the United States of America Business environment: Zambia is politically stable, and other countries also gives Zambia preferential export making it the 3rd most peaceful country in Sub-Saharan trade opportunities that prospective investors in textile Africa (SSA). It enjoys sustained positive economic growth and apparel can also exploit. and relative macroeconomic stability, developments Textile and apparel trade: The absence of modern that have enabled it to continue attracting foreign direct spinning has also led to Zambia exporting almost all its lint investment (FDI). Recent policy reforms have also resulted (48,000 tons p.a.) and importing yarn expensively. Lack in a more investor-friendly business environment, making of weaving and knitting and weak local apparel manufac- Zambia 2nd in ease of doing business in Southern Africa turing has also led to Zambia becoming a net importer of (World Bank, 2019). Zambia’s fight against corruption is fabrics and most of its apparel products. In 2017, Zambia also yielding encouraging results, leading to the country imported $72 million worth of textile products against its ranking 105th least corrupt nation in 2018 (Transparency $3.4 million exports. It also imported $43.2 million worth International Zambia, 2019). of apparel against its $0.12 million exports. Unmet local Operational and cost advantages: Zambia offers a apparel demand has also led to increased second-hand number of operational and cost advantages to prospective clothing imports, resulting in a total $16.2 million worth of investors in textile and apparel. The first of such is easy formal second-hand clothing imports in 2017. Weak local access to land, especially in designated industrial zones production has further led to diminished cotton, textile with reliable and competitively priced electricity, 1 water, and apparel value chain contribution to gross domestic high-speed internet services and other amenities that are product (GDP). Textile and leather sector contribution to also competitively priced. Ample and best-quality raw local manufacturing industry has also remained low at materials availability is another advantage. On average, only 6% (Zambia Development Agency, 2014). Zambia produces 120,000 tons of seed cotton and Previous situation: Prior to the 1990s’ economic liberal- 45,000–50,000 tons of lint p.a., making it the 3rd largest ization, Zambia had a vibrant textile and clothing industry cotton producer in Southern Africa and one of the best with more than 140 companies employing 25,000 people. hubs for new investments in textile and apparel manufac- At peak, the local textile and apparel industry used 55% turing. Spare ginning capacity gives Zambia the ability of Zambia’s raw cotton. Macroeconomic instabilities, high to more than double its seed cotton output and to offer production costs, skyrocketed interest rates, depreciated toll ginning opportunities to new investors with own seed Kwacha, influx of second-hand clothing imports and stiff cotton. Competitively priced ($1.2 per hour on average) competition from Asian countries forced most Zambian and highly available labour also gives Zambia good textile and apparel companies to close. Zambia’s operational and cost advantages. A good proportion of COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL 1 Electricity tariffs in Zambia are lower (6.4c/kW/hr) than the Republic of South Africa’s (7.2c/kW/hr), the Kingdom of eSwatini (13.7c) and the Republic of 2 Mauritius (16.8c). © Shutterstock.com © Shutterstock.com

economic situation and business environment has, wear, uniforms and bedding, etc.), most of which are however, changed for the better, resulting in brightened currently imported. Clothing targeting the young and local textile and apparel investment prospects. low-income market is another growing market segment requiring new investments in fashion and designing and What has changed: Zambia has developed an inves- garments manufacturing. Demand for niche ethnic/African tor-friendly business environment supportive of new apparel (chitenge) products for both domestic and export investments. Specific policies and incentives to help markets is also on the rebound and needs exploiting. reboot its collapsed textile and apparel industry include Growing population, domestic market, good proximity the Seventh National Development Plan (7NDP), which and connectivity to regional markets are other factors seeks to revitalize the textile and apparel industry as a way justifying the need for local apparel manufacturing. of promoting industrialization and value addition of local cotton and other fibres for local and export markets. The Zambia is also open to new and modern spinning mills National Industrial Policy (NIP) of 2018 is another policy to enable it to add value to its lint and make its yarn put in place to help transform Zambia from a producer competitive on domestic and regional markets. Zambia and exporter of primary products into a net exporter of offers ample raw materials availability (average of 48,000 value-added goods and products. The NIP also seeks tons p.a. lint) and has capacity to more than double to improve growth of the manufacturing sector through its current lint if prospective investors make use of the textile, apparel and other subsectors from an average of spare ginning capacity. In this investment segment, 5% to 20% p.a. and improve local manufacturing sector Zambia offers prospective investors competitively priced contribution to GDP from 8% to 15% by 2027. Growing electricity, easy access to land and water for industrial domestic market has also widened Zambia’s textile and processing, and readily available and fairly priced labour. apparel investment opportunities. Increasing textile and A number of skilled and experienced textile workers are apparel buyer footprint in Sub-Saharan Africa (SSA) and out of employment following the collapse of old textile the launch of the African Continental Free Trade Area companies and are looking for new jobs. (AfCFTA) are other recent developments that have made Local fabric manufacturing (weaving and knitting) is Zambia the best destination for new investments in textile another unexploited investment opportunity. High potential and apparel manufacturing targeting the SSA market. for locally sourced lint and yarn, good access to compet- Current investments: Post-liberalization reforms itively priced electricity, easy access to land and water have attracted significant FDI in cottonseed outgrower for industrial processing, and readily available skilled, schemes and ginning. As a result, cottonseed output experienced and fairly priced labour makes it possible has increased from 50,000 tons to 120,000 tons p.a. on and profitable to establish modern and integrated textile average. Installed ginning capacity has also increased manufacturing businesses in Zambia. The ongoing Buy from 100,000 tons p.a. prior to liberalization to 152,000 Zambia Campaign is another factor that will help promote tons p.a. by 1999, and to its current 350,000–400,000 tons the uptake of locally produced fabrics. p.a. Ginning companies have also increased from two to 12. This has made Zambia the 3rd largest cotton producer in Southern Africa with 60% spare ginning capacity. FDI and improvements in cotton production and ginning need new FDI in modern textile and apparel manufacturing. Unexploited opportunities: Apparel manufacturing is one of the most promising investment segments for FDI. Local apparel manufacturing opportunities lie in producing industrial and institutional goods (protective COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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1. ZAMBIAN TEXTILE AND APPAREL 1.1. Manufacturing sector in general

Despite an improved business environment, supportive The Zambian manufacturing sector has been prioritized legislation and ample raw materials availability, the as an engine to drive Zambia’s envisioned industrial- Zambian textile and apparel sector is underperforming ization, economic diversification and growth, wealth and uncompetitive. Increased foreign direct investments generation and jobs creation, especially for youths and are needed to help revive the local textile and apparel women in both urban and rural areas. Currently, the sector. Increasing and unmet local and regional textile Zambian manufacturing sector only contributes 8%–10% and apparel demand provides investment opportunities in to national GDP. Through the NIP, government plans to locally manufactured apparel products. As the 3rd largest increase the manufacturing sector growth through textile cotton producer in Southern Africa, Zambia offers adequate and apparel subsectors from an average of 5% to 20% raw materials of premium quality capable of sustaining p.a. and its contribution to GDP from 8% to 15% by 2027. new investments in cotton spinning, weaving and knitting However, limited investments continue to affect textile (yarn and fabric manufacturing) for both domestic and and apparel sector output, competitiveness and growth. regional exports. Zambia has the best geolocation and In 2014, for instance, the textile and leather industry only proximity to SADC and COMESA markets, making it an contributed 6% to total manufacturing value added. Food, ideal hub for new textile and apparel targeting the East beverages and tobacco drive the local manufacturing and Sothern African region. Foreign direct investments in industry, contributing 63% to total value added in 2014. textile and apparel are also needed to improve local textile Figure 10 shows other key manufacturing subsectors in and apparel contribution to Zambia’s manufacturing Zambia. industry value added, non-traditional exports (NTEs) and national GDP. FIGURE 1 Output shares within manufacturing in Zambia (2014)

3% 1%

11% 63%

Food, beverages & tobacco Wood & wood products

Chemical, rubber & plastics Textile & leather

Paper & paper products Non-metallic mineral products Other

Source: CSO, 2014. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

4 FIGURE 2 Cottonseed and lint production (tons) (1971–2017)

300.000,00

250.000,00

200.000,00

150.000,00

100.000,00

50.000,00

0 1970/71 1971/72 1972/73 1973/74 1974/75 1975/76 1976/77 1977/78 1978/79 1979/80 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17

Seed Cotton (MT) Lint (MT)

Source: LINTCO Zambia Ltd, CSO, Cotton Board of Zambia and IAPRI.

1.2. Cotton production and ginning 1.3. Textiles

On average, Zambia produces approximately 120,000 The Zambian textile sector has gone through a difficult tons of cottonseed p.a., which is ginned into 40,000– patch following economic liberalization, leaving it 50,000 tons lint p.a. Almost all (99%) of the national fragmented, inoperative and uncompetitive. Fragmented cottonseed output is produced by smallholder farmers. textile companies also lack modern technologies and Despite a number of challenges affecting smallholder machinery to enable them to operate competitively cotton production, national cottonseed output has and continue exporting. New investments are needed remained significant enough to support a vibrant local to revive the sector and improve its competitiveness. textile and apparel industry. Foreign direct investments Prior to economic liberalization in the 1990s, Zambia in cotton ginning and outgrower schemes have led had a vibrant textile subsector. Macroeconomic instabil- to increased installed ginning capacity from less than ities, high production costs, skyrocketed interest rates 100,000 tons p.a. in 1994 to 152,000 tons by end of 1999 and depreciated kwacha forced most Zambian textiles and to 350,000–400,000 tons p.a. by 2015 (Chitah, 2016). companies to close, scale down operations and/or The number of ginning companies has also increased relocate. Most local textiles and clothing companies also from two prior to privatization in 1994, to 7–8 ginners by failed to compete with the sudden influx of second-hand the 2006 season and to 12 ginning companies currently. clothes imports. Stiff competition from Asian countries Most ginneries are, however, operating at less than 40% in local and export textile and apparel markets, and a of their installed capacity due to low cottonseed output sustained increase in global demand of synthetic fibre- volumes. This gives Zambia a 50%–60% unused/spare based products further weakened the textile and clothing ginning capacity capable of giving Zambia capacity to industry’s competitiveness. The current state of local more than double current cottonseed production without textiles has resulted in Zambia exporting most of its lint necessarily requiring additional investments in ginning. (raw materials). This has caused Zambia’s textile and apparel exports to severely shrink (by approximately 60%) from $136.54 million in 2012 to $41.98 million in 2017. The collapsed textile industry has also resulted in Zambia depending almost entirely on imports despite being the 3rd largest cottonseed producer in Southern Africa. Table 15 summarizes the total textile and apparel imports and exports. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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TABLE 1 Zambia’s textile and clothing imports, sources, exports and destinations (USD ’000)

Global total, source and/or destination 2012 ($'000) 2013 ($'000) 2014 ($'000) 2015 ($'000) 2017 ($'000)

Exports Imports Exports Imports Exports Imports Exports Imports Exports Imports

Global total 136 541.96 129 605.24 115 282.94 158 370.20 73 501.11 142 567.41 59 515.29 113 791.74 41 977.64 133 416.88

Sub-Saharan 73 468.87 52 464.20 74 626.09 61 408.07 32 756.08 79 442.54 34 986.39 56 412.18 36 595.81 56 382.51 Africa

Europe & 37 240.81 19 301.86 25 789.85 23 354.75 21 557.77 8 478.26 5 984.36 7 387.32 649,63 10 553.51 Central Asia

East Asia & 24 375.71 20 738.26 14 201.74 31 681.47 15 428.83 25 520.67 17 615.27 16 617.17 4 623.08 38 306.36 Pacific

South Asia 1 369.30 12 645.74 37,17 16 422.27 3 703.25 12 242.07 57,75 13 492.69 13,28 16 874.15

North America 57,51 8 907.38 11,69 6 856.68 43,22 4 111.01 26,41 1 951.99 77,44 3 069.91

Middle East & 25,04 12 571.34 613,37 14 968.74 9,04 10 686.92 842,56 7 097.24 17,32 7 161.11 North Africa

Latin America 4,49 43,22 2,44 32,49 0,46 113,72 2,56 9 985.66 1,08 30,88 & Caribbean

Source: World Bank, World Integrated Trade Solution (WITS) database, 2019.

An inoperative local textile industry has created huge 1.4. Apparel sector business opportunities for prospective investors willing to take advantage of Zambia’s ample cotton raw materials Zambia’s apparel sector is under penetrated and thus (Zambia is 3rd largest cotton producer in Southern Africa, requires new investments to enable it to exploit the averaging 120,000 tons p.a. cottonseed and 48,000 tons business opportunities that the Zambian apparel market p.a. lint). Zambia further has capacity to more than double offers. An increasing population and rapid urbani- its current raw cotton output due to 60% or so of spare zation has resulted in unmet apparel demand, which ginning capacity, and Zambia has a huge textiles import requires new investments targeting the young and trendy substitution opportunity, especially given exchange rate population, niche ethic clothing and industrial clothing. and local currency volatility. According to the UN Comtrade Existing apparel companies are fragmented and thus data, in 2017, Zambia formally imported $72 million worth unable to meet local demand or effectively compete with of textile products2 against $3.4 million exports. The international apparel manufacturers. An underdeveloped majority of textile imports into Zambia are from the People’s local apparel manufacturing base, and weak fashion and Republic of China and, as such, Chinese investors could designing has resulted in Zambia meeting its clothing easily maintain and increase their textile trade in Zambia demand (one of the top basic needs together with food, by establishing local investments in spinning and fabric housing and health) through imports. Currently, Zambia manufacturing. New investments in local textiles will not imports most of its institutional uniforms and industrial only enable Zambia to substitute some of its textile imports, clothing and all its high-end apparel. In 2017, Zambia but will also improve the textile sector’s competitiveness imported $43.2 million worth of apparel3 against $0.12 needed to rejuvenate Zambia’s textile exports. million exports. Zambia also imported $16.2 million

2 Furnishing articles, sacks and bags, and filament yarn, etc. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL 3 T-shirts, trousers and shirts, and infant wear, etc. 6 worth of second-hand clothes. Informal second-hand local apparel companies will also provide a sure market clothing imports mostly coming in as donations are also for locally produced yarn and fabric, which, in the long run, widespread. This presents prospective investors with a could become cheaper and help improve the competi- huge import substitution opportunity in Zambian apparel. tiveness of local textile and apparel manufacturing. A good proportion of skilled and experienced labour force who once worked in the clothing manufacturing 1.5. Other developments companies are also still available. Using this qualified and skilled labour force, prospective investors can easily Zambia’s proximity to most regional markets makes it offer hands-on skills training to the readily available and stand out as the best connection to East African, Southern competitively priced labour. Continued local currency African and other African markets. Insofar as textile and depreciation against major currencies is also driving costs apparel trade is concerned, Sub-Saharan Africa (SSA) of imported apparel products beyond the reach of most presents good intraregional trade opportunities. In 2017, Zambians. Investments in new apparel manufacturing for instance, SSA imported a total of $7.5 billion worth locally thus provide opportunities to use local materials of textiles and apparel products against its $4.2 billion and semi-processed imported inputs to produce locally exports, resulting in a trade deficit of $3.3 billion. Table 16 manufactured apparel products. This way, Zambia will summarizes SSA textile and apparel imports and exports be able to reduce costs of imported finished apparel from 2010–2017. products caused by the depreciating local currency. New

TABLE 2 Textile and apparel imports by Sub-Saharan Africa region (2010–17) in USD

2010 2011 2012 2013 2014 2015 2016 2017

Total SSA Imports from 8.995.736,37 9.115.507,37 8.598.405,75 9.352.598,74 9.228.711,38 8.009.447,58 7.333.897,30 7.476.336,02 World

Total SSA 5.111.380,59 6.036.267,67 6.281.324,88 5.679.940,87 6.053.158,97 4.538.001,35 4.155.021,73 4.202.043,21 Exports to World

SSA Trade -3.884.355,78 -3.079.239,70 -2.317.080,87 -3.672.657,87 -3.175.552,41 -3.471.446,23 -3.178.875,57 -3.274.292,81 Deficit

Imports from regions:

SSA 1.304.781,73 1.627.656,37 1.596.320,64 1.595.007,07 1.594.254,48 1.435.014,45 1.288.368,08 1.427.679,65

China 2.933.446,10 3.230.720,30 3.230.280,46 3.669.876,94 3.535.725,76 3.151.093,23 3.205.945,84 3.065.033,26

India 511.546,56 569.787,27 532.845,58 624.532,25 705.272,13 554.601,63 473.026,98 561.005,04

Pakistan 179.892,45 297.770,51 206.555,57 231.917,02 247.066,10 219.396,70 182.695,86 233.942,21

Source: World Bank, World Integrated Trade Solution (WITS) database, 2019.

Regions of origin of textile 7,5% 19% and apparel imports to 29% 19,1% the Sub Saharan Region in 2017

8% 41%

SSA China India Pakistan Others COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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FIGURE 3 Major SSA textile and apparel import sources SSA’s current textile and apparel trade deficit and the (2017) upcoming African Continental Free Trade Area (AfCFTA) have brightened textile and apparel investment prospects in Zambia. This is on account of improving regional trade and Zambia’s capacity to more than double its 3,1% raw materials production within a short period of time. Growing momentum of the Buy Zambian campaign is one other development prospective that investors in textile and apparel need to take advantage of by establishing 7,5% their textile and apparel businesses in Zambia. The Buy 19,1% Zambian campaign will drive uptake of locally manufactured textile and apparel products, thus increasing market demand in line with Zambia’s growing population and economy. Chinese investments in Zambian textile and apparel could also easily help increase intra-SSA textile and apparel trade. Lower import duties on fabrics and many other incentives on textile and apparel give 41% Zambia better operative and cost advantages that will enable prospective investors to produce more competitive finished apparel products for both local and regional exports. SSA Pakistan India Pakistan Prospective investors in Zambian textiles and apparel can also take advantage of the underexploited opportunities Source: World Bank, World Integrated Trade Solution provided by preferential initiatives such as the African (WITS) database, 2019. Growth and Opportunity Act (AGOA), and help Zambia rejuvenate and improve its textile and apparel trade in The majority of SSA textile and apparel imports are from SSA. Rising textile and apparel manufacturing costs in Asia and China in particular. China and other Asian countries is another key reason why prospective Chinese investors should also take China’s textile and apparel exports into SSA increased in advantage of the lack of jobs among former textiles and proportion by 8% from approximately 33% in 2010 to 41% garments manufacturing workers, and help curb the rising in 2017. Intra-SSA textile and apparel trade increased by unemployment among educated youths and women. 4% from 15% in 2010 to 19% in 2017. The proportion of textile and apparel imports from the Republic of India and the Islamic Republic of Pakistan into SSA increased by 2% and 1% respectively during the same period. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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PART II: Promising cotton, textile and apparel investments © Shutterstock.com

PART II

2. PROMISING COTTON, TEXTILE AND new ginning facilities. This spare ginning capacity oppor- APPAREL INVESTMENTS tunity also gives investors intending to establish new integrated textile and apparel manufacturing facilities an Zambia offers investment opportunities in cotton, spinning, assured availability of raw materials over and above the weaving, knitting and apparel. Supportive infrastructure currently available lint, most of which is exported. A good and services, appropriate legislation and policies, and proportion of the spare ginning is also owned by investors investment incentives have created a conducive business from China, a situation that gives Chinese investors better environment that has made Zambia attractive to invest- partnership prospects. ments in modern spinning mills, weaving and fabric manufacturing, and apparel making. 2.2. Modern spinning mills Precisely, Zambia offers: Lack of modern and competitive spinning mills is Spare ginning capacity, giving Zambia the ability preventing Zambia from processing and adding value to more than double its current cottonseed output to its cotton lint. This has affected Zambia’s capacity to (120,000 tons p.a. on average) and opportunities in produce and market yarn, a key textile input. This has also toll ginning services; turned Zambia into a net yarn and fabric importer, importing Ample raw materials (average of 48,000 tons p.a. mainly from China and South Africa. Prior to the closure lint), which is currently all exported at the expense of its biggest integrated spinning and textile company in of increasing an unmet domestic and regional yarn 2008, Zambia enjoyed a growing yarn exporting business. demand; By 2005, Zambia’s yarn exports had increased to $34.9 Skilled and experienced textiles and apparel million from $25.5 million in 2003 (World Bank, 2008). By workers who are out of employment following 2017, textile (yarn and fabric) exports had reduced to $3.4 industry collapse during the 1990s; million p.a. This situation has opened up this value chain segment to new investments in modern and compet- High unemployment rate, giving rise to readily itive spinning mills needed to supply local and regional available and competitively priced additional labour markets that depend on imported yarn. force; Growing population (3% p.a.) and rapid Ample raw materials availability (average of 48,000 urbanization (4%) fuelling domestic apparel tons p.a. lint) makes investments in spinning feasible. demand; and Capacity to more than double its current lint output and availability due to spare ginning capacity makes invest- Strategic geolocation and best proximity to East ments in spinning even more viable. Zambia also assures and Southern Africa textiles and apparel export prospective investors of easy access to land, and compet- markets. itively priced electricity and water for industrial processing. The above operative and cost advantages make Zambia Readily available and fairly priced labour is another factor the most attractive investment destination for cotton, that will make new investments in local spinning in Zambia textile and apparel. competitive. A reasonable number of skilled and experienced textile workers are out of employment following the collapse of old textiles and this will also help prospective 2.1. Cotton production and toll ginning investors easily employ and establish a productive labour force within a short period of time. Zambia’s preferential Spare ginning capacity offers business opportunities in textile trade agreements with the USA (AGOA), European toll ginning of independently produced and/or procured Union (EU) and East and Southern Africa markets also cottonseed. Up to 240,000 tons p.a. spare ginning capacity makes Zambia a better hub for cotton spinning invest- could be used by prospective investors intending to ments to serve the Common Market for Eastern and produce self-financed cottonseed and have it processed Southern Africa (COMESA) member states that highly into lint and other cotton by-products without investing in depend on imported yarn. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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2.3. Weaving and knitting another growing market segment, while niche ethnic/ African apparel (chitenge) products for both domestic Zambia’s fabric manufacturing is also at its weakest and export markets is on the rebound. Zambia imports following the closure of major weaving and knitting most of its institutional uniforms and other garments and companies. This has led to high fabric imports, which make the growing manufacturing industry base is also fuelling local apparel manufacturing less competitive. Demand for demand for industrial protective wear, which is also being woven and knitted fabrics in Eastern and Southern African imported. In 2017, close to $60 million of apparel was markets has also remained high and is being serviced imported, out of which $43.2 million was new apparel, mainly by imports from China and other Asian countries. against its $0.12 million exports, while approximately The state of Zambia’s weaving and knitting and current $16.2 million was on second-hand clothes. These imports market dynamics have opened up this textile segment could be substituted with locally manufactured industrial to new investments, with Zambia looking for up to 500 and institutional apparel in line with the ongoing Buy looms and 250 knitting machines capable of producing Clothing being among the top basic requirements (together 50 million metres of woven fabrics and 25,000 tons knitted with food, health, shelter and education), Zambia’s clothing fabric in the short- to medium-term. A high potential for demand is also expected to continue increasing in tune locally sourced lint and yarn, good access to competi- with its growing population (3% p.a.) and rapid urbanization tively priced electricity, easy access to land and water for (4%) (Central Stastical Office, 2018). The almost doubled industrial processing, and readily available skilled, experi- Zambian population by 2035 is expected to fuel domestic enced and fairly priced labour are some of the operative apparel demand. The ongoing Buy Zambian campaign, if and cost advantages to exploit when establishing new taken advantage of, will also help increase uptake of locally fabric manufacturing businesses in Zambia. The ongoing produced clothing. Underexploited preferential trade initi- Buy Zambian campaign will also help promote the uptake atives with COMESA, SADC, the European Union (EU) of locally produced fabrics. and AGOA is another operative advantage prospective investors in Zambian apparel could take full advantage of 2.4. Apparel manufacturing in promoting their regional and internal exports of apparel made in Zambia. Demand for the Zambian chitenge and Apparel manufacturing is one of the most promising other niche ethnic/African apparel products is increasing investment segments for FDI. Investment opportunities for and could be exploited using Zambia’s existing preferential Zambia’s apparel manufacturing lie in producing indus- trade initiatives. Investors in Zambian apparel can also trial and institutional goods (protective wear, uniforms take advantage of a good base of skilled and experienced and bedding, etc.), most of which are currently imported. labour force in apparel manufacturing, most of who are still Clothing targeting the young and low-income market is of the working age, but are out of employment. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

11 2.5. Textile and apparel sector of farmers out of cotton and into competing crops like challenges and risks soybeans with better producer margins. The cottonseed is also not readily available in the open market to encourage Continued and increasing penetration of second-hand emergent and commercial farmers to participate in the clothing is the major challenge affecting Zambian textile production. New investments in textiles and increased and apparel. Formal second-hand clothes imports local demand for cotton lint will, however, help to improve accounted for 27.3% of Zambia’s $59.4 million in 2017, cottonseed prices, quality premiums and margins to while informal imports are hard to estimate. Import duties farmers. restructuring on second-hand clothes and other apparel While Zambia produces good volumes of cotton lint, imports will be needed to help resolve the negative effects a large proportion of this key raw material is exported second-hand clothes have on the local textile and apparel abroad due to fragmented local textile players. High manufacturing renaissance. New investments by major dependence on imported yarn and fabric increases the global textile and apparel players in Zambia can also help local cost of production and lowers overall competi- improve the competitiveness of locally produced apparel, tiveness within this subsector. To address this challenge, especially for industrial, institutional and ethnic clothing prospective investors in textile will need to explore market segments. medium- to long-term raw materials sourcing agreements Declining cottonseed yields and output is another risk with existing ginning companies. Implementation of factor that may affect new investments in Zambia’s textile improved local content regulations to promote local value and apparel value chain. Poor cottonseed quality and addition in cotton by government will also be needed. agronomic skills and practices are affecting cottonseed Table 17 summarizes Zambia’s strengths, weaknesses, yields to below average yield potential. Low cottonseed opportunities and threats (SWOT) in the cotton, textile and prices and price volatility are also pushing a number apparel industry.

TABLE 3 Zambia’s textile and clothing imports, sources, exports and destinations (USD ’000)

Strengths: Weaknesses:

Good raw materials (cotton lint) availability; Limited value addition to cotton lint – obsolete and no local High labour availability; spinning, weaving and knitting facilities; Unmet and increasing local demand for textile and Fragmented and uncompetitive garments manufacturing apparel products; companies; Unique geolocation, proximity and connectivity to regional Declining cottonseed yields; markets; Non-availability of cottonseed in open market for High receptiveness to foreign direct investments; independent cotton growers; Government support and conducive business Power outages during drought-hit years; environment; Increasing fuel costs. Easy access to land, water and electricity for new investments.

Opportunities: Threats:

Unused/spare ginning capacity is 60%; High and increasing penetration of second-hand clothing in Large cotton production base and capacity to more than Zambia and regional export markets; double cottonseed outputs; Stiff competition from Asian countries in local and export Increasing government focus on the textile and apparel markets; sector; Increase in global demand of synthetic fibre-based Tripartite Free Trade Area agreement between COMESA, products; SADC and the East African Community (EAC); Climate change effects on cotton production, power and Rise of textile and apparel manufacturing costs in Asian environment in general. countries; Africa Continental Free Trade Area (AfCFTA) and increasing buyer footprint in Sub-Saharan Africa; Extension of AGOA until 2025. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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PART III: Why invest in Zambia? © Shutterstock.com

PART III

3. WHY INVEST IN ZAMBIA? 3.2. Natural resources

Zambia is renowned for its peace and stability. Its Zambia is endowed with abundant land and water strategic geolocation makes it a getaway to SADC and resources. More than 43 million hectares (58%) of its 75 COMESA markets. In addition, Zambia has abundant and million hectares of total land mass are of high to medium underused land and water resources. Ample raw material agricultural production potential. However, only 14% of availability for its manufacturing sector and its stable and total arable agricultural land is being used. The rest (31.5 growing economy are other fundamentals making Zambia million hectares) are also suitable for livestock production among the best homes for FDI in textiles and apparel. and most other industrial uses. Up to 2.75 million hectares A conducive investment and business environment, a is irrigable land, with 523,000 hectares of highest irrigation reservoir of investor-friendly legal and regulatory frame- potential. All this gives Zambia five times more land avail- works, attractive investment incentives and good labour ability for increased cotton and other crops production in availability further make Zambia among Southern Africa’s addition to twofold more yields increase possibilities from most preferred investment destinations. Improving ease of vertical yield-enhancing technologies and other solutions. doing business and a reasonable Corruption Perceptions Zambia also holds close to 40% of the fresh waters in the Index (CPI) score are other factors making Zambia among Southern African region. It has five main rivers, namely the best investment destinations. As Africa heralds its the Zambezi, Kafue, Luangwa, Luapula and Chambeshi continental free trade area, Zambia naturally stands out Rivers. The country is also home to major lakes such as as the best trade nexus for Eastern and Southern Africa. Tanganyika, Mweru, Mweru Wa Ntipa, Bangweulu and the Zambia also enjoys a young and fast-growing population man-made lakes Kariba and Itezhi Tezhi. Despite all this driving the domestic market. irrigable land and fresh waters, only 30% of total land of highest irrigation potential is being irrigated currently. 3.1. Peace and stability 3.3. Good climate According to the 2014 Global Peace Index (GPI), Zambia is the 3rd most peaceful country in Sub-Saharan Africa Zambia has a tropical to subtropical climate with two main (SSA). Mauritius is the most peaceful country in SSA, seasons. The rainy season (November to April) corre- followed by the Republic of Botswana. For more than sponds to summer. The dry season (May to October) 50 years, Zambia has maintained and enjoyed political corresponds to winter. The dry season is further subdi- stability with sound governance based on the rule of law vided into the cool dry (May to August) and the hot dry and respect for private property rights. Since 1991, Zambia (September to October/November) mini seasons. has upheld a presidential democracy and holds multi- party elections every five years. During this same period, Zambia has, three times, peacefully and seamlessly changed political parties and presidents. Home to more than 73 ethnic groupings, Zambia has exceptionally exhibited unity in diversity. Zambia is also home of choice for many refugees and many other foreign nationals who

have easily integrated into society and contribute to the © Shutterstock.com country’s industrialization and thriving private sector. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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TABLE 4 Mean daily minimum and maximum temperature during main seasons

MEAN DAILY MAX. MEAN DAILY MIN. MONTHS SEASON TEMPERATURE °C (°F) TEMPERATURE °C (°F)

May–August Cool and dry 21–26 (70–79) 6–12 (43–54)

Sept.–Oct. Hot and dry 28–35 (82–95) 17–22 (63–72)

Nov.–April Rainy 25–30 (77–86) 14–19 (57–66)

Source: Zambia Meteorological Department.

Rainfall varies between 400 mm and 1,500 mm per year which are considered semi-arid. No part of the country is across three major agro-climatological zones. Apart considered arid or a desert. Flooding is an annual event from the valley areas, most areas fall into the 800 mm to on floodplains, to which people and wildlife are adapted. 1,200 mm rainfall per year, resulting in an average rainfall Flash floods after unusually heavy rains occasionally of 1,020 mm per year during normal rainy seasons. The cause some crop damage, especially in places that do highest rainfall is in the north (Region III in Figure 1), not experience annual floods. Erosion and the washing especially the north-west and the north-east of Zambia, out of roads and bridges are also a common feature, decreasing towards the south. The driest areas are the especially in high rainfall areas of the northern half of far south-west, the Luangwa River and the middle of Zambia. Overall, Zambia is ideal for cotton and most other the Zambezi River Valley (Region I in Figure 1), parts of rain-fed crops production.

FIGURE 4 Agroecological zones

Region IIb Region II Rainfall range 800 - 1,000 mm/annum More than 1,000 mm of rainfall/annum Loamy to sandy soils Very deep soils, sandy clay loam Cassava, sorghum, millet, seseme Cassavam millet, sorhum, beans, cashew nuts, livestock, fisheries groundnuts, rice, coffee, tea, pineapples, fish, farming, livestock

Region I Region IIa Rainfall Less than Rainfall range - 800 to 1,000 mm/annum 800 mm/annum Inherent fertile plateau soils Loamy to clay soils Maize, cotton, tobacco, sunflowe, Cotton, sorhum millet, seseme, soybeans, irrigated wheat, groundnuts, cashew nuts, livestock, fisheries flowers, paprika, vegetables, cassava, millet, horticulture, livestock

Source: Zambia Meteorological Department. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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3.4. Strategic geolocation

Located between 8° and 18° south latitudes, and 22° Namibia to the south-west, and the Republic of Angola and 34° east longitudes, Zambia is surrounded by eight to the west. This unique geolocation makes Zambia a neighbouring countries: the Democratic Republic of the strategic nexus and gateway to COMESA, and to SADC Congo to the north, the United Republic of Tanzania to markets. Increasing textile and apparel buyer footprint in the north-east, the Republic of Malawi to the east, the SSA and the launch of the African Continental Free Trade Republic of Mozambique to the south-east, the Republic Area (AfCFTA) solidifies Zambia’s strategic geolocation of Zimbabwe and Botswana to the south, the Republic of as one of Africa’s emerging textile and apparel hubs.

FIGURE 5 Zambia’s neighbouring countries and potential export market

Democratic Republic of the Congo

United Republic of Tanzania

Angola

Malawi Zambia

Mozambique

Zimbabwe Botswana

Namibia

Swaziland South Africa

Source: Indaba Agricultural Policy Research Institute (IAPRI), 2018. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

16 3.5. Young and growing population

Zambia has a youthful and fast-growing population National population will almost double by 2035, from 13.7 increasing at 3% p.a. (Central Stastical Office, 2018). million in 2011 to 17.9 million by 2020 and to 26.9 million The majority (66%) of the Zambian population are young by 2035. people younger than 25 years, while the working age (15–54 years) accounts for 49% of the population.

TABLE 5 Population and age categorization

TOTAL POPULATION 16 445 079 (JULY 2018 EST.)

Age group % of total Males (#) Females (#) Total

0–14 years 45.95% 3 796 548 3 759 624 7 556 172

15–24 years 20% 1 643 364 1 645 713 3 289 077

25–54 years 28.79% 2 384 765 2 349 877 4 734 642

55–64 years 2.95% 225 586 260 252 485 838

65 years and older 2.31% 166 224 213 126 379 350

Total 100% 8 216 487 8 228 592 16 445 079

Source: CIA, 2019.

Zambia’s fast-growing population is also fuelling rapid growth rate of 2.4% per annum, rural population growth urbanization, which is currently estimated at 4% annually is also expected to push up market demand and avail- (Central Stastical Office, 2018). Rapid urbanization is ability of labour in most rural areas of Zambia. The rural expected to fuel Zambia’s domestic demand for food, population is expected to grow from 8.2 million in 2011 to other agricultural commodities, and textile and clothing 10.1 in 2020 and 14.5 million by 2035. This will also create products. Zambia’s urban population is expected to grow investment opportunities in the Zambian agricultural and from 5.6 million in 2011 to 7.8 million in 2020 and 12.4 manufacturing sectors. million by 2035. Though at a relatively stable average

FIGURE 6 Zambia’s population projections 26,933,658 23,576,214 20,574,138 17,885,422 15,473,905 14,517,242 6,468,092 13,718,722 5,569,801 12,849,037 12,416,416 11,398,072 10,727,177 10,141,034 9,176,066 9,005,813 8,148,921 7,744,388

2011 2015 2020 2025 2030 2035

Rural Population Urban Population National Population

Source: Central Statistical Office, 2018. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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3.6. Labour availability

According to 2017 CSO estimates, only 3,398,294 among youths (17% nationally, 19% in urban and 16% in persons (37.5% of total working age of 9,056,840) made rural areas). Youth unemployment is also higher among up the total labour force, leaving 62.5% (5,658,546 females (18.5%) against 16.5% among their male counter- persons) out of the current labour force. Most (approxi- parts. This makes most youths, especially females, mately 40%) of the working age population are in Lusaka available for textile and apparel manufacturing. National and Copperbelt Province, a situation denoting high unemployment was estimated at 13% with Copperbelt, labour availability in cities and towns, which also happen Muchinga, Northern, North-Western, Western and Luapula to be the main demand centres and host major indus- Provinces having unemployment rates of 14%–24%. trial zones. Unemployment remains high and is highest

TABLE 6 Working age and labour force categorization

DESCRIPTION NUMBER OR PERCENT

Total population (2018 estimate) 16 405 229

Total working age 9 056 840

Total working age out of labour force 5 658 546

Total labour force 3 398 294

% Women labour force employed 39.5

% Men labour force employed 60.5

% Urban labour force employed 59.9

% Rural labour force employed 40.1

% Employed in informal sector 63.1

% Employed in formal sector 36.9

% Employed in agriculture 25.9

% Employed in non-agriculture 74.1

Youth labour force 1 558 389

% Youth employed rural 40.5

% Youth employed urban 59.5

Source: Central Statistical Office, 2018.

Zambia also enjoys competitively priced labour. Average earning (ZMW) per month by gender in rural and urban areas and type of employment are tabulated in Table 4. Most of the formerly employed in rural areas are, however, government employees who also receive rural hardship allowances, thus the skewed average earnings for rural areas. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

18 TABLE 7 Average monthly earning (ZMW) by area and employment type

TOTAL RURAL URBAN

Type of Both Both Both employment genders Male Female genders Male Female genders Male Female

Total 3 330 3 301 3 401 3 425 3 299 3 772 3 297 3 301 3 286

Formal 4 261 4 098 4 706 4 758 4 450 5 635 4 102 3 984 4 419 employment

Informal 2 254 2 313 2 126 2 087 2 126 1 979 2 319 2 392 2 173 employment

Source: Central Statistical Office, 2018.

3.7. Sustained FDI inflows

Improving ease of doing business, growing and stable the 2014/15 global commodity price crash led to most economy, strategic geolocation, proximity to regional FDI going into manufacturing. In 2015, manufacturing markets, growing population, appropriate legislation received $604.1 million (66.8%) of total FDI. The manufac- and investment incentives make Zambia one of the most turing (mainly cement, fertilizers and metal related) attractive investment destinations in Africa. Zambia was industry also accounted for 52.2% of the total FDI inflows ranked the 2nd most attractive investment destination in 2016. Manufacturing (mainly cement, vegetable/oil fats, (with attractiveness score of 77%) in Southern Africa in and metal related) also received most (31.3%) of total FDI 2015 (KPMG Africa, 2016). This has led to continued FDI inflows in 2017 (Bank of Zambia, 2018). Other sectors inflows into Zambia. During 2013, Zambia experienced that have continued attracting FDI include the financial the highest increase in FDI inflows ($2 billion) in Southern and insurance, real estate, trade (wholesale and retail), Africa from $1.7 billion in 2012. The mining sector construction, transportation and storage, and agriculture. attracted most of the FDI inflows from 2007–15. However, Figure 4 shows annual FDI inflows.

FIGURE 7 Foreign direct investment inflows into Zambia (2008–18) (USD million) 2,099 1,731 1,729 1,582 1,507 1,108 938 865 694 662 568

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: World Bank, 2019. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

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By 2016, industry estimates show that there were 182 also employed a total of 83,601 people with Chinese- majority owned foreign affiliates (MOFAs) in Zambia (Bank affiliated companies accounting for 10,382 (12.4%). The of Zambia, 2017) with a total sales/turnover of $11,147.1 number of Chinese investors in Zambia is increasing – million. Chinese-affiliated companies accounted for see Table 5 for the number of Chinese nationals who were $1,471.2 million (13.2%) of total sales/turnover. MOFAs issued investors and employment permits in 2018.

TABLE 7 Leading nationals issued with permits in 2018

NATIONALITY RESIDENCE INVESTOR EMPLOYMENT STUDY TOTAL

Chinese 80 124 5 428 10 5 642

Indian 424 104 1 816 29 2 373

South African 74 60 622 42 798

Zimbabwean 87 10 192 62 351

American 38 18 225 6 287

Total 703 316 8 283 149 9 451

Source: Zambia Department of Immigration, 2018.

3.8. Growing economy and macroeconomic stability

Zambia has continued posting positive economic growth growing, though at a decreasing rate since 2014. In 2017, since 1990. From 2005–14, Zambia was among the Zambia’s GDP was $25.8 billion representing 0.04% of world’s fastest-growing economies, with real GDP growth global GDP, 3.7% of combined SADC GDP and 3.4% of averaging 7% p.a. The economy has also continued the combined COMESA GDP.

TABLE 8 Zambia’s GDP (current prices), inflation and exchange rate

PERIOD 1990–94 1995–99 2000–04 2005–09 2010–14 2015–18

GDP (USD billions) 3.36 3.73 4.60 13.68 24.89 23.67

GDP growth rate (% change) -0.82 3.44 5.54 8.10 6.64 3.47

Inflation rate 121.66 30.73 21.81 12.77 7.26 10.51

Exchange rate (ZMW per USD) 0.28 1.53 4.13 4.17 5.27 9.73

Source: World Bank. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

20 3.8.1. Key economic sectors Primary economic sectors include mining and agriculture education are the key tertiary sectors (contributing more (accounts for 20%), while construction and manufacturing than 50% to GDP). Table 7 shows value added to Zambia’s are the secondary economic sectors (contributing more GDP by each of the major sectors from 2014–16. than 20% to GDP) and trading, financial services and

TABLE 10 Main economic sectors and contribution to GDP

2014 2015 2016

Agriculture, forestry and fishing 6,8 5 6,2

Mining and quarrying 14,6 12,7 13,2

Manufacturing 6,8 7,5 7,7

Construction 8,9 10,2 10,3

Financial and insurance activities 3,1 3,9 4,5

Wholesale and retail trade; repair of motor vehicles and 21.8 22.3 20.9 motorcycles

Education 7,8 7,8 7,3

Real Estate Activities 4,1 4,8 4,5

Source: Central Statistical Office, 2018.

3.8.2. Macroeconomic stability Zambia has had relative macroeconomic stability despite that raises the likelihood of debt distress, along with effects inflationary pressures and foreign exchange rate volatil- of drought conditions during the 2018/19 farming season. ities induced by falling copper prices, reduced power Despite relative macroeconomic stability, commercial generation, and depreciation of the kwacha, which inten- bank lending rates have remained approximately 26%. sified in 2015 and again in 2019. Risks to the economic High interest rates are affecting private sector borrowing outlook continue to stem from a substantial external debt from local banks.

FIGURE 8 Inflation, interest and exchange rate trends (2009–18)

0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Inflation, Consumer Price (Annual) Official exchange rate (LCU per US$ period average)

Commercial Bank lending Rates (annual average %)

Source: BOZ and CSO. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

21 © Shutterstock.com

3.9. Conducive business environment Insolvency Act No. 09 of 2017. Zambia has also strengthened minority investor protection by increasing Zambia aspires to become a prosperous middle-income shareholders’ rights and role in major corporate decisions nation by 2030. To this effect, Zambia has created a as well as clarifying ownership and control structures. conducive investment and business environment critical Automation of a construction permit system launched at in attracting domestic and foreign direct investments the beginning of 2019 will also help to reduce the cost needed to attain a competitive, self-sustaining and and time involved in dealing with construction permits dynamic economy resilient to shocks. Private sector and changing of ownership of property. Zambia has also investments are being promoted as part of national made reforms aimed at easing processes and require- economic diversification the through industrialization, and ments for starting a business and employing workers promotion of strong and cohesive industrial linkages in once a business is established. Improvements in getting the primary and secondary sectors. credit, paying taxes and trading across borders have also continued on an improvement trajectory (World Bank, 3.9.1. Ease of doing business 2018). Due to the above developments, Zambia now ranks Zambia has made resolving insolvency easier by 85th in Ease of Doing Business – an improvement from introducing a reorganization procedure and granting 87th position in 2018 (World Bank, 2019). Improvements debtors the possibility of obtaining post-commencement in its ease of doing business makes Zambia the 2nd most governance. This was done through the Corporate preferred investment destination in Southern Africa.

FIGURE 9 Zambia and South Africa Ease of Doing Business comparisons

Starting a Business 200

Resolving Insolvency Dealing with Construction Permits 150

100

Enforcing Contracts 50 Getting Electricity

Trading Across Borders Registering Property

Paying Taxes Getting Credit

Protecting Minority Investors

South Africa Zambia

Source: World Bank Ease of Doing Business 2019. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

22 The government’s fight against corruption is also yielding 3.9.4. Investment incentives results, with Zambia scoring 35 points out 100 in its latest Zambia offers a range of incentives to ignite, attract, th Corruption Perceptions Index (CPI), making it the 105 promote and sustain investments in textile, apparel and least corrupt nation out of 175 countries (Transparency all other key economic sectors. These include investment International Zambia, 2019). promotion incentives and export promotion incentives.

3.9.2. Supportive policies INVESTMENT PROMOTION INCENTIVES Zambia has put in place a number of national policies Investors who invest $500,000 or more in a multi-facility meant to promote investments in manufacturing. The economic zone (MFEZ), an industrial park, in a priority Seventh National Development Plan (7NDP) 2017–21 is sector or in a rural enterprise under the ZDA Act are designed to create a diversified and resilient Zambian entitled to the following: economy through increased value addition and processing and industrialization of the agriculture and 1. Fiscal incentives: tourism sectors, amongst others, with high growth, Customs duty exemption on machinery and poverty reduction and job creation potential. The 7NDP equipment imported within five years from first year is also facilitating key reforms in land administration and of operation; management, financial sector, business regulation, labour Accelerated depreciation on machinery and market, public service, ICT and trade facilitation. equipment within two years for priority sectors The National Industrial Policy (NIP) of 2018 seeks to under the ZDA Act and for manufacturing projects transform Zambia “from a producer and exporter of primary in a rural area, MFEZ and industrial park. products into a net exporter of value-added goods and products utilizing local primary resources with increased 2. Non-fiscal incentives: citizens’ participation”. NIP is thus expected to stimulate These include provision of investment guarantees and encourage textile and apparel manufacturing as a and protection against nationalization and free way of making use of locally produced cotton and cotton facilitation for the application of immigration by-products and increase national export earnings, permits, secondary licences, land acquisition and creating employment opportunities and ultimately trans- utilities. forming the Zambian economy into a diversified and competitive industrialized economy well integrated into Investors who invest $250,000 or more in any sector or the international trading system. Specifically, NIP aims product that is not provided for as a priority sector or to increase growth of the manufacturing sector through, product under the Act are entitled to non-fiscal incentives among other subsectors, textile and apparel from an such as: investment guarantees and protection against average of 5% to 20% and its contribution to GDP from state nationalization, and free facilitation for application of 8% to 15% by 2027. immigration permits, secondary licences, land acquisition and utilities. Prospective investors can also enter into 3.9.3. Investor-friendly laws investment promotion and protection agreements (IPPAs) as provided for by the ZDA Act. Zambia has adequate laws and legal frameworks to facilitate, nurture and protect local and foreign investments in EXPORT PROMOTION INCENTIVES all economic sectors. The Zambia Development Agency (ZDA) Act provides for a one-stop facility promoting The Zambian Government, through the Tax Remission for and facilitating private and public sector investments in Export Office (TREO), encourages local manufacturers Zambia. The ZDA also facilitates industrial infrastructure to export their products via duty drawback systems. development, promotes and facilitates greenfield invest- This is achieved through remitting duty and value-added ments through joint ventures and partnerships between tax (VAT) (duty drawback) on raw materials and inter- local and foreign investors, and facilitates applications for mediate goods used in the manufacturing of goods for work permits, water permits, electricity and other licences, export. Under this scheme, the manufacturer includes permits and certificates of registration for investors. any process by which a commodity is finally produced, Zambia is also a signatory to the Multilateral Investment e.g. assembling, repacking, bottling, mixing, blending, Guarantee Agency (MIGA) of the World Bank and other grinding, cutting, bending, twisting, joining or any other international agreements. This guarantees foreign similar activity. The remission of duty is done once the investment protection in cases of war, strife, disasters exporter provides evidence of exportation of the goods, and other disturbances or in cases of expropriation. which includes the customs entry and certificate of export. Zambia has also signed bilateral reciprocal promotional and protection of investment protocols with a number of countries. The ZDA also offers foreign investors further security against nationalization through the signing of the investment promotion and protection agreements (IPPAs). COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

23 © Shutterstock.com

3.10. Established banking sector 3.11. Support infrastructure

Zambia has a well-developed banking sector with good Zambia has developed robust support infrastructure branch network in all major cities and towns. Zambia such as MFEZs, transport and communications network has 18 licensed commercial banks, of which eight are servicing local industries and the region. Support infra- locally owned, eight are subsidiaries of foreign-owned structure and services critical to textile and apparel banks, and two are jointly owned by the government and industry investments and development include: foreign banks. The Bank of China is among the foreign- owned banks. All banks and other financial institutions 3.11.1. Multi-facility economic zones are subjected to regulatory requirements that include To enhance competitiveness of its manufacturing their prudential position, consumer protection and market sector, Zambia has established multi-facility economic conduct in order to safeguard the overall soundness and zones (MFEZs). MFEZs are meant to create and foster stability of the financial system. A good branch network an attractive business environment, promote exports enables Zambian banks to facilitate large payments and enhance domestic trade. So far, three main MFEZs through the Zambia Interbank Payment and Settlement have been established: the Zambia–China Economic System (ZIPSS). Banks also offer retail payment services and Trade Cooperation Zone (ZCCZ), also called the through a number of payment mechanisms, which include Lusaka East (LE-MFEZ), the Lusaka South Multi-Facility electronic funds transfer (EFTs), cheques, automated Economic Zone (LS-MFEZ), and the Chambishi Multi- teller machines (ATMs), point of sale (PoS), remittance Facility Economic Zone (CMFEZ). The ZCCZ is the first systems (both for domestic and international) and mobile Chinese overseas economic and trade cooperation zone payment systems. established in Africa as a multi-use facility open for both foreign and Zambian investments. It has a planned area Short-, medium- and long-term credit is available of 5.7km2 and is located 25 km north-east of Lusaka to corporates in both local and major international City, next to Kenneth Kaunda International Airport. Land convertible currencies. Most existing banks prefer lending under a MFEZ is available for a 40-year lease renewable to corporates and international firms of good reputation. for locally registered companies at $0.27–$0.30 per m2. Lending rates on major foreign currencies (Euro, USD Phase I is approximately 1.6 km2. Intended sectors in the and British pound) range from 7%–12% p.a. depending ZCCZ include agriculture, agroprocessing, textiles and on the perceived risk profile. Banks are, however, unable apparel, brewery, pharmaceuticals, building materials, to lend more than 25% of their primary capital and this logistics (storage) and international commerce. limits amounts that a single bank can lend to a big project without syndicating the loan with other banks. The CMFEZ is a sub-zone of the ZCCZ with the same developer China Nonferrous Mining Co. (CNMC), which was opened in 2007. It is located in the city of Chambishi in the Copperbelt Province approximately 308 km north of Lusaka. The CMFEZ is 5.26 km2. The CMFEZ is also a multifunctional zone and open for both foreign and domestic investors. The priority sectors include mining, © Shutterstock.com engineering equipment assembly, construction materials, fertilizers, agriculture, and service sectors such as banking and hospitals. The LS-MFEZ is approximately 10 km from the Lusaka city centre and 21 km from the Kenneth Kaunda International Airport. It has a total area of 2,100 hectares and has been planned to be developed in five phases beginning with Phase I in the north-eastern side of the zone. The zone is a mixed-use development comprising COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

24 industrial, commercial and residential developments. The years, Zambia generates approximately 14.3 million Mwh intended sectors for the zone include agribusiness, textile against national electricity consumption of approximately and apparel manufacturing, packaging and printing, palm 12 million Mwh. Mining is the biggest electricity consumer, oil processing, pulp and packaging boards, pharmaceu- accounting for 53.1% of total consumed electricity ticals, electrical and electronic appliances, information nationally, followed by the services sector at 32.4%. and communications technology (ICT), education and Household access to electricity is currently at 31%, with skills training, research and development (R&D), and 67% of the urban and 4% of the rural population having professional, medical, scientific and measuring services. access to power. Manufacturing consumes only 4% and agriculture consumes 2% of power. 3.11.2. Electricity

There is assured and easy access to electricity in all FIGURE 11 Electricity generation and consumption established multi-facility economic zones. The LS-MFEZ (Mwh millions) has developed a power substation of 330/132/33 kV and a 330 kV powerline to provide 150 MW power for the zone. Similarly, the CMFEZ has developed a 330 kV substation, 66 kV and 10 kV transmission lines servicing the zone. Access to electricity outside the MFEZ is also reasonably easier and assured. Cost of electricity has also remained relatively lower than most Southern African neighbours.

Government is, however, reviewing electricity tariffs and 14 seeks to adjust tariffs towards more cost-reflective levels. 12 12 12

This move is meant to attract more private investments 11 11 into power generation, distribution and supply. Increasing electricity demand and reduced hydropower output during drought-affected years has led to power shortages and load shedding in 2019. Up to 85% of Zambia’s installed electricity generation capacity is hydro- based. This exposes the country to electricity shortages in years affected by drought. MFEZs are also affected by 2015 2016 2017 power shortages during drought-hit years, thus ongoing investments in renewable energy to avert power shortages Generation Consumption during and after droughts in MFEZs. In good rainfall Source: Ministry of Finance, 2018.

FIGURE 10 Electricity tariffs (USDc/kWh) in comparison with neighbouring countries

15 17,5 16,81 13,72 10 9 10,79 9,86 8,7 9,21 8,3

5 7,15 6,39 2,22

Angola Malawi Zambia Lesotho Mauritius Namibia Tanzania Botswana Swaziland Zimbabwe Mozambique South Africa

Source: ZESCO. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

25 © Shutterstock.com © Shutterstock.com

3.11.3. Water for enhanced trade into the Great Lakes Region and Zambia has abundant underground water. All established Eastern Democratic Republic of the Congo, but also need MFEZs have developed their underground water sources urgent upgrade and commercialization. and reservoirs, water distribution network and sewer networks. Once water sources are developed, supply 3.12.1. Road network costs remain insignificant in comparison to other utility Most parts of Zambia are serviced by its relatively costs. Outside these industrial hubs, underground water developed 37,000 km road network made up of 6,476 can also easily be developed for industrial use. Investors km surfaced roads to Class 1 bituminous standard, 8,478 planning to explore and develop boreholes for indus- km and 21,967 km of earth and gravel roads respectively. trial and domestic water use are required to apply and Zambia has also a 30,000 km capillary of ungazetted get permission from the Water Resources Management community roads, especially in most agricultural areas Authority (WARMA) (http://www.warma.org.zm). used to transport food processing raw materials to main marketing points. The country’s road network is also 3.11.4 Fuel heavily used by neighbouring countries, a situation that Zambia imports all its petroleum products making it puts enormous pressure on these roads. All established among its top five imports. In 2017, Zambia imported industrial zones where foreign direct investments in 519,438 tons of petroleum products, up from 483,887 cotton, textile and apparel (CTA) and other industries have tons in 2016. This was in addition to 306,193 m3 and been earmarked have well-developed road networks. In 408,100 m3 of unleaded petrol and low sulphur gasoil addition to the more than 20 km road network within the respectively. National fuel consumption has continued zone, a new Chifwema access road has been constructed increasing. Diesel consumption reached 987,283,288 and connects the LS-MFEZ to the rest of the main road litres and that of petrol hit 461,427,680 litres in 2017. network. Both the ZCCZ and the CMFEZ have developed Heavy fuel oils consumption reached 162,144,107 kg, good internal road networks and are connected to the main while that of liquid petroleum gas (LPG) hit 9,253,578 kg. road network by Class 1 bituminous standard highways. Zambia is, however, faced with high petroleum prices. The ZCCZ is located 25 km north-east of Lusaka City, On average, Zambian consumers pay approximately next to Kenneth Kaunda International Airport, while the 15% more than the global diesel price average. High fuel LS-MFEZ is 10 km from Lusaka City centre. The CMFEZ is prices are attributed to the depreciating local currency, in Chambishi of the Copperbelt Province, approximately levies and taxes, and procurement inefficiencies among 308 km north of Lusaka. other factors. To help facilitate regional connectivity, Zambia has upgraded its border entry points to one-stop border facilities. Kazungula Bridge and one stop-border with Botswana 3.12. Logistics and connectivity is the latest of such facilities being developed. Once As a land-linked country, Zambia depends heavily on completed, the Kazungula Bridge project will transform the its transport and communication networks for domestic dynamics of transportation in surrounding communities, and regional trade. This is why Zambia has continued cities and countries (Botswana, Namibia and Zimbabwe), investing in road, air transport and telecommunication boosting road travel and the ease of doing business within infrastructure. As a result, Zambia now has relatively the Southern African Development Community, the East developed road and air transport sectors. Railway African Community and the Common Market for Eastern transport infrastructure is, however, ageing and under- and Southern Africa. Poor state of most earth and gravel performing, with plans and efforts at revamping it already roads is the biggest challenge to most agricultural projects, underway. Inland marine waterways offer great potential as most of these roads are not all-weather roads. A number COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

26 of roads rehabilitation, expansion and development a situation that pushes prices higher. Cost of cargo per projects are underway, and the country is continuously ton per kilometre on railways is approximately $0.06 and working at improving its entire road network. Table 8 shows delivery times vary from 12–15 days to Dar es Salaam, for cargo volumes by road and other transport. instance.

Cost of cargo transportation per ton per kilometre on 3.12.3. Water transport Zambian roads is approximately $0.06 and delivery time Zambia’s water transport remains underdeveloped and from major ports like the Lusaka–Durban route is 8–9 days. underused, especially in Lake Tanganyika. This notwith- 3.12.2. Rail network standing, Mpulungu port still facilitates huge volumes of exports into the Great Lakes Region and beyond. Zambia’s more than 2,922 km railway network (900 km of Throughput cargo volume has been increasing since main lines under Zambia Railways and 1,860 km mainline 2013. By the end of 2017, throughput cargo volume under the Tanzania-Zambia Railway Authority (TAZARA)) reached 173,210 tons. Mpulungu port, however, lacks has aged and is currently underperforming. This is due requisite infrastructure and commercial cargo vessels to lack of locomotives, poor track conditions and wagon needed to facilitate increasing local trade and exports. ability, and low operating capital. The poor condition of the Limited cargo vessels are constraining trade and delaying rail network on both the main and branch lines is another Zambia’s exports into Eastern Democratic Republic of the challenge. This has forced trains to run at average speeds Congo and the Great Lakes Region. Inadequate storage of 20 km and 25 km per hour and with a lot of derailments. capacity and cargo handling equipment are also affecting Slow speed and poor state of the railways are the major throughput cargo. reasons most of Zambia’s imports and exports use road,

TABLE 11 Cargo volumes by transportation model

VOLUME OF CARGO TRANSPORTED (TONS) 2015 2016 2017

Road 16 554 107 18 498 196 24 206 222

Rail 996 895 761 025 874 008

Air 16 935 19 086 19 087

Maritime 54 298 108 692 172 760

Total 17 622 235 19 386 999 25 272 077

Source: Zambia Meteorological Department.

TABLE 12 Road transport cargo per ton per kilometre

CONTAINER INLAND HAULAGE HAULAGE BY TRUCKS WITH BY ROAD FLAT TRAILERS

Import rates Export rates in $ Import rates in $ Export rates in $ Distance to in $ per tonne per tonne (CIF) per tonne (CIF) per tonne (CIF) Port Lusaka (km) (CIF) per km per km per km per km

Durban 2154 0,14 0,17 0,11 0,07

Dar es slaam 1955 0,15 0,19 0,12 0,08

Beira 1044 0,28 0,11 0,17 0,14

Wavis Bay 2072

Source: http://www.zda.org.zm/cost/en/Cost%20of%20Doing%20Business. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

27 FIGURE 12 Mpulungu port throughput cargo (tons)

2017 173,210

2016 108,692

2015 54,298

2014 48,592

2013 46,169

2012 123,352

2011 131,879

Mpulungu Port Throughput Cargo Per Year (MT)

Source: Ministry of Finance, 2018.

3.12.4. Air transport 3.12.5. Telecommunications Air transport is another critical trade- and investment-en- Zambia has a well-established telecommunications infra- abling infrastructure. Currently, there are four international structure with capacity to easily facilitate commerce and airports, all of which have received major facelifts and/ trade within Zambia and with external markets. Cell phone or are being upgraded. This has given all major indus- coverage is almost reaching saturation while internet trial zones good air transport connectivity. Once commis- penetration is growing at more than 20% p.a. Table 10 sioned, the upgraded Kenneth Kaunda International shows the cell phone and internet subscriber base and Airport will facilitate trade logistics for the ZCCZ, which penetration. is within the airport vicinity, and the LS-MFEZ, which Though not as high as cell phone and internet use and is approximately 25 km away. The upcoming Ndola penetration, digital financial services, especially mobile International Airport is being earmarked for air cargo payments, are gaining momentum. This has kept trans- transport and will easily connect the CMFEZ. Zambia actional costs high. has also adopted an open skies policy, a development that has seen the birth of an air cargo hub to connect the Southern African region. Currently, approximately 19,087 tons of cargo is transported by air annually.

TABLE 13 Cell phone and internet users and penetration

PERIOD (YEAR) % CHANGE ITEM 2016 2017 2018 2017–18

Cell phone subscriber base (#) 12 017 034 13 438 539 15 470 270 15.1%

Cell phone penetration 74.9% 81.9% 91.6% 9.7%

Internet users (#) * 7 800 000 9 800 000 25.6%

Internet penetration * 47.3% 58.4% 11.1%

Source: Zambia Information Communication Technologies Agency, 2019. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

28 © Shutterstock.com

3.13. Support services Any foreign investor who invests a minimum of $250,000 or its equivalent and employs a minimum of 200 employees Improved phone and internet connectivity have also (of certain technical or managerial levels) is entitled to enabled the digitization of key business services such as a self-employment permit or resident permit. The ZDA e-tax returns and payments, e-immigration services and assists qualifying investors to obtain work permits for up digitized public procurement of goods and services as to five expatriate employees. An entry permit holder can detailed below. apply to be granted a dependant’s pass for each of his or her dependants. Table 11 details the type, cost and 3.13.1. Immigration visas and permits processing time for the various visas and permits. To ease visa applications government has introduced online application and processing of visas and permits.

TABLE 14 Visas and permits: costs and time

APPLICATION RENEWAL PROCESSING TYPE COST COST TIME

Single-entry visa $50 $50 5 days

Multiple-entry visa $80 $80 5 days

Transit visa $50 $50 5 days

Day tripper visa $20 $20 5 days

Temporary employment permit ZK4 500 ZK5 250 21 days

Employment permit ZK6 000 ZK7 000 21 days

Temporary permit ZK6 000 ZK5 250 21 days

Investors permit ZK4 000 ZK5 000 21 days

Residence permit ZK5 000 0 21 days

Spousal permit ZK750 ZK1 500 21 days

Source: Zambia Immigration Department, 2019. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

3.13.2. Taxation CORPORATE INCOME TAX Pursuant to the provisions of the Income Tax Act, Cap. Corporate income tax is paid on trading profits and other 323, businesses in Zambia are required to pay a number taxable income such as interest, royalties and rental of taxes. Main taxes payable include corporate income income. Corporate income tax rates are currently 35%, tax, personal income tax, withholding tax, value-added but companies such as agricultural and agroprocessing tax and property transfer tax. The Ministry of Finance and companies are taxed at 10%. A one-year 2% discount is National Planning is responsible for the formulation of tax granted to newly listed companies on the Lusaka Stock policy and the tax-implementing agency is the Zambia Exchange (LuSE). A 5% discount is also granted to a Revenue Authority (ZRA) ([email protected]). LuSE-listed company for as long as one-third of shares are owned by indigenous Zambians. Table 12 details the corporate tax rates for each prioritized sector.

TABLE 15 Corporate tax categories and rates

CORPORATE INCOME TAX RATE SECTOR CATEGORY 2020 2019 2018

1. Manufacturing and others 35% 35% 35%

2. Manufacturing – value added to copper cathodes 15% 15% 15%

3.Manufacturing organic and chemical fertilizers 15% 15% 15%

4. Farming 10% 10% 10%

5. Agroprocessing 10% 10% 10%

6. Companies listed on LuSE in 1st year of listing (less 2%) 33% 33% 33%

7. Companies with one-third of shares owned by indigenous 30% 30% 30% Zambians (less 5%)

8. Non-traditional exports 15% 15% 15%

9. Export of non-traditional exports from farming or 10% 10% 10% agroprocessing

Capital allowance deductions 2020 2019 2018

10. Investment/initial allowance on new industrial building 10% 10% 10%

11. Industrial building allowance 5% 5% 5%

12. Plant and machinery used in manufacturing and tourism 50% 50% 50%

13. Implements and machinery used in the generation of 50% 50% 50% electricity

14. Plant, equipment and machinery used in farming and 100% 100% 100% agroprocessing

15. Commercial building 2% 2% 2%

16. Commercial motor vehicle and other plant machinery 25% 25% 25%

17. Farm works/improvements and improvement allowance 100% 100% 100% under MFEZ only

Capital allowance is provided on an annual basis irrespective of how accounts are drawn or prepared. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL Source: Zambia Revenue Authority, 2019. 30 30 PERSONAL INCOME TAX Personal income tax is paid by people resident or deemed to be resident in Zambia. Personal income tax is also charged directly on profits made by corporate bodies such as limited liability companies and trusts. Current personal income tax is 35%. Employers are also required to register and operate a Pay As You Earn (PAYE) scheme under which they are required to deduct the appropriate tax from the emoluments of liable employees and remit the tax to the Zambia Revenue Authority. Table 13 shows the applicable personal income tax rates for salaried employees in Zambia.

TABLE 16 PAYE rates by income band

INCOME BAND PER ANNUM INCOME BANDS PER MONTH TAX RATE CHARGEABLE

First K39 600 First K3 300 0%

Next K9 600 Next K800 25%

Next K25 200 Next K2 100 30%

Balance more than K74 400 Balance more than K6 200 37.5%

WITHHOLDING TAX Individuals and businesses receiving consultancy services are expected by law, under Section 82 A of the Income Tax Act, to withhold tax (WHT) at 15% on dividends, interest, royalties and management fees. WHT is not a final tax, and the amount paid is considered as a tax prepayment. Final tax is arrived at after assessment of the end-of-year tax return submitted by the individual or business. Zambia has double taxation relief agreements with partner countries as indicated in Table 14.

TABLE 17 Double taxation treaties rates

CORPORATE INCOME TAX RATE CONSULTANCY SECTOR CATEGORY DIVIDENDS INTEREST ROYALTIES FEES

Canada 15% 15% 15% 0%

China 5% 10% 5% 0%

Germany 5% or 15% 10% 10% 0%

India 5% or 15% 10% 10% 10%

Ireland 7,50% 10% 10% 0%

Italy 5% or 15% 10% 10% 0%

Japan 0% 10% 10% 0%

Mauritius 5% or 15% 10% 5% 0%

Netherlands 5% or 15% 10% 10% 0%

Seychelles 5% or 10% 5% 10% 0%

South Africa 15% 15% 20% 20%

Sweden 5% or 15% 10% 10% 0%

United Kingdom 5% or 15% 10% 5% 0%

This is a selection of countries most commonly transacted with and is not a comprehensive list. Rates available are not automatic and have to be applied for

Source: BDO, 2019 COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

VALUE-ADDED TAX duty free on a reciprocal basis. Excise duty, on the other hand, is levied on selected goods of a luxurious nature. Value-added tax (VAT) is levied at 16%. VAT applies to both These include alcoholic beverages, tobacco, selected goods and services of domestic production and those motor vehicles and cosmetics, etc. Zambia also charges that are imported. VAT is levied on the cost, insurance and export duty on a few selected items. These include scrap freight (CIF) value plus customs tariff. Registration for VAT metal at a rate of 25%, copper concentrates at 15% and purposes is mandatory for every dealer in or supplier of cottonseed at 15%. standard-rated and zero-rated goods and services whose taxable turnover exceeds K200 million per annum, as defined in the VAT Act No. 4 of 1995 (which replaced sales ZDA ONE-STOP SHOPS tax). Voluntary registration is acceptable for dealers whose turnover falls below the stipulated minimum turnover. It As part of its business facilitation and investments has also been made mandatory to capture and electron- promotion, the ZDA has established one-stop shops in ically transmit to ZRA the taxpayer personal identification Lusaka and selected provincial headquarters. Through number (TPIN) and the name of both the buyer and seller these one-stop shops, the ZDA provides local and foreign of goods and services in all business transactions. investors with fast and efficient business registration services, licences and all key investment and business permits, thus reducing the cost of doing business. This PROPERTY TRANSFER TAX has been achieved through bringing together government agencies involved in offering registration services Pursuant to the Property Transfer Tax Act, Cap. 340, a 10% and issuance of licences and permits in one location. property transfer tax of the realized value of the property Institutions hosted by a one-stop shop include the Patents is charged. and Companies Registration Agency (PACRA), the Zambia Revenue Authority (ZRA), the National Pension Scheme OTHER TAXES Authority (NAPSA), the Citizens Economic Empowerment Commission (CEEC), the Department of Immigration, and Customs duty, excise duty and export duty are some of the Zambia Public Procurement Authority (ZPPA). Other the other main taxes payable in Zambia. Customs duty is stakeholders are licensing and regulatory bodies that a tax levied on all goods entering the country. Customs provide optional registrations for businesses or that issue duty rates range from 0%–5% for raw materials and capital operational permits and licences. These include district goods, 5%–15% for intermediate goods, and 15%–25% councils, the Zambia Environmental Management Agency for finished products. Textile products are treated as inter- (ZEMA), the Zambia Wildlife Authority (ZAWA) and the mediate goods, while apparel is considered as finished Water Resources Management Authority (WARMA). products. Goods imports from COMESA partners are COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

4. WHEN INVESTING IN ZAMBIA

Below are legal requirements and obligations that prospective investors need to comply with when investing in Zambia.

4.1. Legal requirements when investing in Zambia

Below are legal requirements and obligations that prospecting investors need to comply with when investing in Zambia.

Company A foreign investor intending to establish a business in Zambia is required to set up a branch or incorporate incorporation a company. Unlike a branch, an independent company or a subsidiary will be a separate legal entity from its holding company. There are various types of companies that can be formed in Zambia, including a private company limited by shares, a company limited by guarantee and an unlimited company. Unlimited companies are, however, rarely formed. In addition to a private company, one can also form a public company (a company satisfying Section 14 of the Companies Act).

Company The Companies Act, Cap. 388 of the Laws of Zambia regulates all companies in Zambia. A company regulation incorporated outside Zambia intending to establish a business in Zambia must be registered as a foreign company pursuant to the Companies Act, Cap 388. The Companies Act provides for company incorporation, share capital provisions, shareholders rights, management and administration, accounts, directors’ duties, winding up and regulation of foreign companies based in Zambia.

Business The Business Regulatory Act, No. 3 of 2014 provides for the business licensing system and licensing regulation principles that all regulatory regimes must adhere to, and for regulatory service centres at which all regulators are to have a presence at or an affiliation with, for all applications for licences, permits, certificates and authorizations to be processed.

Tax registration Limited companies are required to register with the Zambia Revenue Authority (ZRA) for income tax purposes and obtain a taxpayer personal identification number (TPIN). Limited companies are also required to apply for VAT registration if they deal in taxable goods and services and their taxable turnover exceeds the registration threshold of ZK00,000 (approximately $60,000+) per annum. This application can only be done following the TPIN registration.

Trading and A company undertaking any trade or manufacturing is required to obtain a licence under the Trades manufacturing Licensing Act. Section 18 A of the Trades Licensing Act requires licence holders under the Act to submit to the licensing authorities details such as the physical address of the place where the license holder conducts his or her business or trade. The information obtained by the licensing authorities is forwarded to the Zambia Revenue Authority at the time when the licence expires or is renewed.

Environmental Any person intending to implement any project is required, under the Environmental Protect Act, to prepare impact and submit a project brief to the Zambia Environment Management Agency (ZEMA) for approval. ZEMA may, assessments on receipt of a project brief, direct that an environmental impact statement be prepared by the developer if ZEMA determines that the project is likely to have an adverse impact on the environment. Such a statement would be required even if the developer is undertaking any project as part of a previously approved project. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

33 Taxes payable Income tax: Pursuant to the provisions of the Income Tax Act, Cap. 323, businesses are subject to corporate income tax on trading profits and other taxable income such as interest, royalties and rental income. Corporate income tax rates are currently 35%. A one-year 2% discount is granted to newly listed companies on the Lusaka Stock Exchange (LuSE), and corporate tax on agricultural companies is at 10%. Personal income tax is paid by people resident or deemed to be resident in Zambia. Income tax is also charged directly on profits made by corporate bodies such as limited liability companies and trusts.

Withholding tax: A 15% withholding tax is payable on dividends, interest, royalties and management fees.

Value-added tax (VAT): This is levied at 16%. Some specified goods and services are zero-rated or exempt. VAT applies to both goods and services of domestic production and those that are imported. VAT is levied on the CIF value plus customs tariff.

Property transfer tax: Pursuant to the Property Transfer Tax Act, Cap. 340, a 10% property transfer tax is charged of the realized value of the property.

Double taxation Zambia has double taxation relief agreements with Canada, the Kingdom of Denmark, the Republic of agreements Finland, the French Republic (France), the Federal Republic of Germany, the Kingdom of the Netherlands, Ireland, the Republic of Italy, Japan, the Republic of Kenya, Mauritius, Romania, South Africa, the Kingdom of Sweden, Tanzania, the Republic of Uganda, the United Kingdom of Great Britain and Northern Ireland, the Kingdom of Norway, Zimbabwe and India.

Immigration Any foreign investor who invests a minimum of $250,000 or its equivalent and employs a minimum of 200 employees (of certain technical or managerial levels) is entitled to a self-employment permit or resident permit. The ZDA further assists the qualifying investor to obtain work permits for up to five expatriate employers. An entry permit holder can apply to be granted a dependant’s pass for each of his or her dependants.

Land ownership Non-Zambians can acquire land if they are a permanent resident in Zambia, are investors within the meaning of the ZDA Act or any other law permitting investment in Zambia, and, in exceptional cases, by presidential consent in writing, if a person registers a company under the Companies Act, and if the person is granted concession or right – under the National Parks and Wildlife Act.

Land There are only two types of land tenure in Zambia: leasehold (99 years; renewable for a further 99 years) and acquisition/ customary tenure. Customary land can be converted into leasehold. Under the 1995 Act, land now has value purchase and can be sold even without improvement on the land. Before land can be bought or sold, state consent must be obtained from the commissioner. If consent is not granted within 45 days of filing the application, the application is deemed granted. If consent is refused, the reasons for refusal must be furnished to the applicant within 30 days. Acquisition of land in an area designated as state land will require consent of the relevant district council. Land that does not fall within the jurisdiction of any council can be alienated upon direct application to the Commissioner of Lands. He will then make a formal offer to the applicant, which will contain similar conditions to those contained in the offer made for an application of land situated in the customary area.

Conversion and There is no exchange control in Zambia for anyone doing business as either a resident or non-resident. transfer policies Investors are free to repatriate capital investments as well as dividends, management fees, interest, profit, technical fees and royalties. Foreign nationals can also transfer and remit wages earned in Zambia without difficulty. Additionally, there are no restrictions on non-cash transactions. Over-the-counter cash conversion of the local currency into foreign currency is restricted to a $5,000 maximum per transaction per day for account holders and $1,000 for non-account holders.

Construction Prior to constructing any infrastructure, the developer needs to engage an architect to come up with architectural designs/drawings, which are submitted to the local council when applying for architectural/structural plans approval and construction permit application. Once council approvals are obtained, the developer is also required to register the construction with the National Council for Construction. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

5. HOW TO SET UP AND INVEST IN ZAMBIA

Below is a summary of key steps, formalities, requirements and procedures an investor needs to complete to invest in Zambia.

STEP 1: As a first step, an investor needs to contact the ZDA investments promotions division as first point of call to familiarize self. Consultations with ZDA Refresh themselves with business and tax registration, information on all other formalities and licensing requirements, and investment registration. Get contact details of key industry stakeholders and make appointments for consultation meetings. Get more information on identified potential areas for intended investment. Assess and re-establish all critical aspects such as land, water, power, labour availability, access and adequacy in specific potential areas.

STEP 2: Business registration starts with the business name clearance done by submitting an application consisting of three proposed names of the company to be incorporated, copy of passport or any other Business form of identity for one of the directors or shareholders of the proposed company, physical (local or registration international) address of directors and shareholders, and the proposed nature or sector of business to PACRA. The process costs ZK83 and takes a few minutes, and can also be done using the PACRA online portal at https://www.pacra.org.zm. Business registration is done at PACRA. To register a business, one needs to complete and submit the acceptance letter for name clearance, application for incorporation (Form 2), declaration of consent to act as a director or secretary (Form 5), declaration of compliance (Form 11), and articles of association. Legal assistance on business registration can be obtained from corporate law firms. If not sure, the investors’ embassy in Zambia, the ZDA or the Law Association of Zambia can assist with lists of registered corporate law firms operating in Zambia. Business registration process takes 1–2 working days if all above-stated requirements are met. Registration fee for a local company is ZK705 (USD equivalent) and ZK4,166 (USD equivalent) for a foreign company.

STEP 3: Once the investor has registered his or her business, he or she also needs to register the company with the Zambia Revenue Authority for tax. Tax registration To register for tax, one needs to submit the certificate of incorporation, certificate of share capital, articles of association of the company, a map (sketch) of business location, tenancy agreement for the business premises, business bank account statement, and business plan or projected cash flow for one year. Tax registration can be done online at https://www.zra.org.zm. The same corporate lawyers used for business registration can assist the investor to register and get a taxpayer’s identification number (TPIN) and VAT certificate. TPIN registration precedes all other mandatory tax registration. A TPIN certificate is vital to enable the company to apply for other taxes and registrations.

STEP 4: There a number of local and international banks in Zambia (see Annex II) that an investor can choose to open business bank accounts with. Bank accounts An application to open a business account must include a TPIN certificate, a certificate of incorporation, a certificate of share capital, articles of association, and recommendations from other companies with accounts at the same bank. The ZDA provides support services to help a potential investors open business accounts with banks in Zambia. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

35 35 STEP 5: Identification and acquisition of land/premises for the intended investment is another critical activity the investor needs to undertake. Investment premises Depending on the exact type of investment, land can be acquired through: acquisition Purchasing private land on title; Application for leased land in industrial zones, a farming block or municipal authorities, etc.; Acquisition and conversion of traditional land; Purchasing an institutional land. Advice on how to legally acquire the needed land for the intended investment can be obtained from ZDA.

STEP 6: Every investor planning to set up a business in Zambia needs to register for an investment certificate with the ZDA in order to qualify for available incentives. Investment registration To apply for the investment certificate of registration, one must submit the completed formal application form from the ZDA, certified copy of certificate of incorporation or registration, certified copy of certificate of share capital, certified copy of a certificate of minimum share capital, certified copy of an official list of shareholders or directors, business plan or feasibility study, verifiable evidence of project finance: i.e. local or foreign bank statements in the name of shareholders or a financier, invoices for purchase of machinery and equipment for the proposed investment or a letter from the company indicating the proposed financing source, and brief resumes for shareholders or directors. Once the investor completes the application forms, they are submitted for review and possible approval and issuance of a certificate of registration, which enables the investor to apply for available investment incentives.

STEP 7: Once an investor acquires his or her investment certificate of registration with the ZDA:

Application The investor can apply for all available and applicable incentives, which may include: for investment Customs duty exemptions; incentives Corporate tax incentives; and Other investment incentives. The investment should have a minimum of $250,000 in order to qualify for basic non- tax incentives, and a minimum of $500,000 in order to qualify for special tax incentives for priority sectors located in a multi- facility economic zone (MFEZ), industrial park or rural area.

STEP 8: Every investor wishing to live and do business in Zambia is required to comply with the Immigration Act and apply for work permits and visas. Application for immigration Government has introduced the online application and processing of visas and permits. When applying permits for visas and permits, one is required to submit a passport-sized photo, copy of applicant’s passport, cover letter on company letterhead with full address and contact numbers addressed to the Director General of Immigration, invitation from host company and certified copy of certificate of incorporation for host company. An investor or shareholder in a company is expected to apply for an investor’s permit, which allows an investor to move freely in and out of the country and to import personal items from one’s country of origin, duty free. An investor who wishes to apply for an investor’s permit must show evidence of having transferred not less than $250,000.00 to either a Zambian bank account or in the form of equipment and machinery by attaching customs Form CE20 from the ZRA or bank transfer documents. Other requirements include: cover letter addressed to the Director General of Immigration, duly completed and signed application for an investor’s permit (Form 27), certificate of incorporation, certificate of share capital, certificate of minimum capital, investment licence from the ZDA, list of directors, proof of personal investment (bank statement, money transfer, ZRA Form CE20 and bill of lading from the ZRA), certified copy of valid passport (bio data and last endorsement stamp for the Republic of Zambia); and two recent passport- sized photographs. An investor is also required to apply for employment permits for all expatriate staff. Applicants for employment permits are required to secure and apply for their permits while outside the country (for more information, visit www.zambiaimmigration.gov.zm). COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

STEP 9: Environmental impact assessment: All investment projects require either a project brief or a full environmental impact assessment (EIA) that Application for is done by the Zambia Environmental Management Agency (ZEMA). other licences Manufacturing licences: An investor in the manufacturing sector is required to apply for and obtain a manufacturer’s licence from the local municipality in which the investor will be operating. Construction permit: All infrastructure development requires the developer to apply for architectural and structural drawings approval and for a construction permit with the local council prior to commencing the construction. To do this, the developer or investor needs to: Contract an architect to draw the architectural drawings; The architect registers with the council planning department and uploads the architectural drawings, a disclaimer form in case there is excess coverage, a land survey plan and land rates clearance receipt into the City Planning Registry; Collect a construction payment invoice from the council and pay the construction permit application fees. The fee is not standard and depends on the size and type of building being erected. The banker’s cheque or cash for the total fee should be addressed and paid to the council accounts office; It takes approximately 30 days for the drawings to be signed, after which the architect can collect the authenticated drawings and approval; Using the approved architectural drawings, the structural engineer will then work together with the architect in order to upload the structural plans into the Lusaka City Council registry; Once approved, the architect or structural engineer will obtain the authenticated structural plans and approved certificate of structural designs; Once the construction permit is obtained, the developer needs to register the project with the National Council for Construction. COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

ANNEXES

ANNEX I: List of investment promotion and facilitating organizations

SCOPE/AREA ORGANIZATION CONTACT AND ADDRESS

Investment promotion Zambia Development The Director General Agency (ZDA) ZDA, Privatisation House, Nasser Road, P.O. Box 30819, Lusaka, Zambia

Phone: +260 211 220177/223859

E-mail: [email protected]

Business registration Patents and Companies Chief Registrar Registration Agency PACRA head office (PACRA) Plot No. 8471, PACRA House, Haile Selassie Avenue, Longacres P.O. Box 32020, Lusaka, Zambia

Phone: (+260) 211 255151/255127

Website: https://www.pacra.org.zm

Taxation Zambia Revenue The Commissioner General Authority (ZRA) Kalambo Road, P.O. Box 35710, Lusaka–Zambia Switchboard: +260 211 380000

Call centre: +260 211 381111/5972 (all networks), +260 971281111, +260 962251111

E-mail: [email protected]

Immigration – visas and Immigration Department The Director General permits Department of Immigration, Headquarters Kent Building, Haile Selassie Road P.O. Box 50300, Lusaka, Zambia

Phone: +260 211 255282 (Public Relations Office) +260 211 252622 (Customer Service Centre)

E-mail: [email protected], [email protected]

Environmental impact Zambia Environmental The Director General assessments – permits Management Agency ZEMA head office (ZEMA) P.O. Box 35131Corner Suez & Church Roads Plot # 6975, Ridgeway, Lusaka, Zambia

Phone: 260-1-254130/1

Fax: 260-1-254164/254023

E-mail: [email protected] COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

38 SCOPE/AREA ORGANIZATION CONTACT AND ADDRESS

Water development and Water Resources Director General use Management Authority Plot No. 4186, Addis Ababa Drive (WARMA) P.O. Box 51059, Lusaka, ZAMBIA

Phone: +260 211 251 934/0974 606 743

State-owned enterprises Industrial Development Chief Executive Officer and public investments Corporation (Zambia) 61 Independence Avenue, Prospect Hill Limited (IDC) P.O. Box 37232, Lusaka, Zambia

E-mail: [email protected]

Phone: +260 211 427000, +260 967 773007

Standards Zambia Bureau of Executive Director Standards (ZABS) Lechwe House Freedom Way South End P.O. Box 50259, Lusaka Zambia

E-mail: [email protected]

Energy regulation Energy Regulation Executive Director Board (ERB) Consumer and Public Relations Energy Regulation Board Plot No. 9330, Off Alick Nkhata Road P.O. Box 37631 Lusaka, Zambia

Phone: 260-211-258844-49

Fax: 260-211-258852

E-mail: Public Affairs ([email protected] COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL

ANNEX II: List of leading banks

NAME OF BANK AND CONTACT DETAILS

Zambia National Commercial Bank PLC Barclays Bank Zambia PLC Head Office Stand numbers 4643 and 4644 Elunda Office Park P.O. Box 33611 Addis Ababa Round About, Lusaka , Zambia Cairo Road Call: Lusaka, Zambia Toll free: 5950 E-mail: [email protected] Phone: +260 (211) 366100, +260 (211) 366225

E-mail: [email protected]

Stanbic Bank Zambia Limited Standard Chartered Bank Stanbic House, Plot 2375, Addis Ababa Drive, Long Acres Cairo Road, Lusaka Zambia P.O. Box 31955, Lusaka Phone: +260 978 751500 / +260 966 751500 Phone: +260971288200 E-mail: [email protected]

Citi Bank (Z) Limited Bank of China (Zambia) Elunda 3 Stand No 4646 Addis Ababa Drive, Street/postal address: Limitedamandra House, Lusaka, Zambia Ben Bella Road, Lusaka Zambia

Phone: 021 122 9025, 021 144 4400 Phone: (260211) 235349/222549, +260 21 123 8696 / +260 21 123 8686 / +260 21 122 3084

Fax: (260211) 235350

INDO ZAMBIA United Bank for Africa Zambia Ltd Plot 6907, Cairo Road Acacia Park Stand 22768, corner Great East/Thabo P.O. Box 35411 Mbeki Road Lusaka, Zambia P O Box 36789, Lusaka–Zambia. 10101

Phone: +260 211 224 653 Phone: +260 211 389501, +260 211 389502, +260 211 389503

Bank of China (Zambia) First National Bank – FNB Zambia Head Office Street/postal address: Corner Great East Road and Thabo Limitedamandra House Lusaka, Zambia Ben Bella Road, Lusaka Corporate and Investment Banking

Phone: (260211) 235349/222549, +260 21 123 8696 / Phone: +260 211 366 800, +260 21 123 8686 / +260 21 122 3084 +260 211 366 362 menu option 1, then 4

Fax: (260211) 235350 E-mail: [email protected] COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE: ZAMBIA COTTON, TEXTILE AND APPAREL