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Sub-Saharan Africa

Zambia risk report

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The development of Zambia's business environment is hindered by corruption and a weak institutional framework. Companies encounter red tape and rampant bribery in all business operations, including company registration, obtaining a construction permit, setting up utilities, and paying taxes. As a result of the inefficient and corrupt judicial system, foreign investors' property rights are not accurately protected nor enforced. In addition, international trade is impeded by pervasive corruption and crime in Zambia's customs. Companies regularly pay kickbacks and bribes in the tendering process for government contracts. Zambia's Anti-Corruption Act prohibits corruption, extortion, bribery of a foreign public official, abuse of office and money laundering. Zambia's legislation does not address facilitation payments and the maximum allowable value of gifts or hospitality is not clearly regulated. Enforcement of Zambia's anti-corruption legislation is lacking.

Judicial system Very high risk

Corruption risks are high in Zambia's judiciary. Bribes and irregular payments in return for favorable judicial decisions are common (GCR 2015-2016). A third of Zambians believe that most or all judges are corrupt (GCB 2015). The judiciary lacks independence and companies have insufficient confidence in the efficiency of the legal framework to settle disputes and challenge government regulations (GCR 2017-2018). Many prosecutions and court decisions are perceived to be politically motivated (FitW 2017). Allegations of corruption involving members of the judiciary have called into questions the judgments in a variety of important commercial cases (BTI 2016). Many attempts at reforming the constitution and the judiciary have all ended in failure (BTI 2016).

The judiciary lacks the resources to prosecute cases in a timely manner, causing lengthy delays (BTI 2016). Courts are often inexperienced in the are of commercial litigation and the enforcement of contractual and property rights is weak (ICS 2017). It is slightly faster and cheaper to enforce a contract in Zambia compared to the regional average (DB 2017). Zambia is a state party to the United Nations Convention Against Corruption (UNCAC) and the African Union Convention on Preventing and Combatting Corruption.

Police Very high risk

Companies contend with a high risk of corruption, particularly petty corruption, when dealing with Zambia's police. The government has indicated that corruption in the police is very common (ICS 2017). In effect, half of Zambians consider the police to be corrupt, and a quarter of those who came into contact with police officers in the preceding twelve months paid a bribe (GCB 2015). Businesses have insufficient confidence in the reliability of police services to enforce law and order, yet do not report high business costs due to crime (GCR 2017-2018). Three out of five companies pay for private security (ES 2013). While civilian authorities maintain effective control over the security services, corruption in the police is fueled by a high degree of impunity (HRR 2016). The police frequently extort money and goods from drivers at roadblocks (FitW 2017; HRR 2016). There have been calls to disband the current traffic police due to the endemic levels of corruption (Lusaka Times, Jun. 2017).

Public services High risk

There is a moderate to high risk of corruption in Zambia's public services sector. Bribes and irregular payments are sometimes exchanged when applying for public utilities (GCR 2015-2016). One in ten companies report expecting to give gifts to public officials in order "to get things done", including obtaining an operating license, while nearly half of businesses expect to give gifts when obtaining a water connection (ES 2013). A third of Zambians perceives local government officials as corrupt (GCB 2015). Zambia's bureaucracy is inefficient and overstaffed, in part due to the replacement of a large majority of civil servants by politically connected individuals who often-times lack the required skills and experience to perform well in their positions (GI 2017; BTI 2016). The regulatory framework has many weaknesses; some red tape has been cut recently, but it remains a big problem (ICS 2017).

Starting a business in Zambia takes seven steps, which is in line with the regional average, but the time required is only a third of the average in the region (DB 2017). Obtaining a construction permit in Zambia takes fewer steps and requires slightly more time compared to the regional average (DB 2017).

Land administration Very high risk

There is a high risk of corruption in Zambia's land administration. Zambia's land administration is one of the most corrupted institutions in the country (ZBPI 2014). Property rights are generally adequately defined in urban areas, unlike in rural ones (BTI 2016), but the implementation of these rights faces many practical challenges (ICS 2017). Property rights enforcement in the courts is weak and court decisions can take a long time to be finalized (ICS 2017). Land titles are sometimes questioned and re-titled to another owner (ICS 2017). Expropriation, with compensation at a fair market rate, is allowed under Zambian law, however, the procedure to establish fair market value is ill-defined (ICS 2017). Leased land, for which 99 year leases are granted, may revert to the government if it is established that the land has remained undeveloped after a certain amount of time (generally five years) (ICS 2017). Allegations exist that persons with political connections use their clout in illegal land dealings (Zambia Daily Mail Limited, Jul. 2017).

The amount of steps required to register property in Zambia is in line with the regional average but the time required to register property in Zambia is less than the regional (DB 2017).

Tax administration Very high risk

There is a high risk of corruption when dealing with Zambia's tax authorities. Irregular payments and bribes in the tax administration are common (GCR 2015-2016). One in ten companies expect to offer gifts in meetings with Zambian tax officials (ES 2013). A third of Zambians consider most or all tax officials to be corrupt (GCB 2015). Tax rates are identified among the main obstacles for foreign companies in the Zambian market (GCR 2017-2018). On a more positive note, the Zambia Revenue Authority (ZRA) has increased its effectiveness, leading to higher government revenue (BTI 2016). State-owned enterprises (SOEs) and private companies are subject to the same tax regime (ICS 2017). Companies face significantly fewer tax payments and spend significantly less time each year on filing taxes compared to the regional average (DB 2017).

Allegations of large-scale corruption involving the ZRA have been logged by the President of the United Progressive People party. It is alleged that the ZRA inflated the cost of a contract from ZMK 84 million to ZMK 140 million in a corruption scheme presumably involving embezzlement and misappropriation of funds (Lusaka Times, Apr. 2017).

Customs administration Very high risk

Zambia's customs administration carries a high risk of corruption. Irregular payments and bribes are common (GETR 2016). The efficiency of the customs clearance process and the time predictability of import procedures are rated as poor by companies (GETR 2016). Burdensome import procedures, tarriffs, and corruption at the border are cited as the most problematic factors for trading across borders in Zambia (GETR 2016). Import and export bans on commodities are announced in an unpredictable manner (ICS 2017). The cost of border compliance for import procedures in Zambia is only around half of the regional average, but procedures take slightly more time than elsewhere in the region (DB 2017).

In 2014, several truck drivers were killed by customs authorities for refusing to pay bribes when crossing Zambian borders. Trucks are regularly attacked and ransacked when waiting in a queue to cross the border (Africa-News, Feb. 2014).

Public procurement Very high risk

Corruption is pervasive in Zambian government procurement presenting companies operating in the sector with high risks (ICS 2017). Businesses report that bribes and irregular payments are common when bidding for public contracts (GCR 2015-2016). Almost a third of companies indicate they expect to give gifts to secure government contracts (ES 2013). Both the diversion of public funds and favoritism in decisions of government officials are common (GCR 2017-2018). Fraud in the tendering process for government bids is widespread and often occurs during vendor selection, contracting and maintenance (GECS 2014). Transparency and accountability is particularly lacking in the last stages of the procurement process, which leaves significant room for manipulation (GI 2017). Private companies are able to compete with state-owned enterprises (SOEs) under equal terms when it comes to access to markets, credit, and other aspects of business operations such as licenses and supplies (ICS 2017). However, SOEs are not subject to the Government Procurement Agreement and are able to procure their own goods and services freely (ICS 2017). Payments for procured goods and services are processed without following procurement procedures due to failure to comply with regulations and the weak implementation of internal control systems (GECS 2014). Suppliers are known to inflate their prices far beyond market values, pointing at likely collusion between government officials and suppliers (Daily Mail Limited, Sept. 2017).

The risk of corruption in Zambia's defense procurement sector is very high (GDACI 2015). Zambia has created the Zambia Public Procurement Authority, to counteract corruption in the public procurement sector. Corruption in procurement remains rampant, but the introduction of an electronic procurement system, slated to be introduced in December 2017 is hoped to help curb corruption in the sector (B&FT Online, Jul. 2017). Another area with high risks of procurement fraud is road construction; a government minister was allegedly fired over his role in a corruption case involving road construction contracts worth USD 30 million (The Citizen, Nov. 2016). In another instance, suspicions were raised about a ballot paper printing contract granted to a company based in the United Arab Emirates, which printed the ballots for the August 2016 general elections. The company was not the lowest bidder and no other reason was given for picking a bidder whose price was higher than the firm which printed ballots for previous elections (GI 2017).

Natural resources Moderate risk

Corruption is a moderate risk for foreign companies doing business within the Zambian natural resources sector. Mining is an important sector of Zambian economy; it accounts for ten percent of GDP (ICS 2017) and about half of all export revenue (EITI 2017). Mining companies do provide audited financial statements upon request, but these will likely not include detailed financial records since they are considered confidential (GI 2017). The Zambian government does not publicly disclose mining contracts nor any mining assets held by public officials (NRGI 2017). The Zambian government conducts open bidding procedures and grants mining permits to qualified bidders (ICS 2017). Zambia is a member of the Extractive Industries Transparency Initiative (EITI) and publishes yearly reports on the revenue generated from the sector (EITI 2017). However, many of the reports available online are not up-to-date (GI 2017). The country is currently compliant with EITI's 2011 standards and is due to be assessed in 2017 on its compliance with the stricter 2016 standard (EITI 2017). A lack of legislation and jurisdiction has led to a low rate of beneficial-ownership disclosure in Zambia (EITI 2017).

In February 2015, Zambia's former mines minister was convicted of corruption and sentenced to one year in prison with hard labor. The official extorted bribes for awarding operating licenses to foreign companies (Reuters Africa, Feb. 2015). He was later acquitted upon appeal by Lusaka's High Court in 2017, because the judge believed it was impossible that the minister could have influenced everyone at the ministry to favor the companies concerned (Lusaka Times, Jun. 2017).

Legislation

Zambia's Anti-Corruption Act is the principal anti-corruption law; however, it lacks implementation (ICS 2017). It criminalizes attempted corruption, active and passive bribery, extortion, bribing a foreign official, abuse of office, and money laundering. Corruption is punishable by a fine, forfeiture of any benefit gained from the corruption offense, including money, and a prison term of up to fourteen years. Corporate bodies, unincorporated bodies, managers, and directors may be held liable for corruption offenses under the Anti-Corruption Act, nevertheless, sanctions are not specified (UNODC 2013). Bribery of foreign public officials is prohibited by law. Private sector bribery is criminalized by the Act as well. The Prohibition and Prevention of Money Laundering Act criminalize money laundering, increases penalties for financial crimes, and requires financial institutions to report suspicious transactions. It also allows the seizure of assets in cases related to money laundering. Zambian public officials are not subject to financial disclosure laws. The Parliamentary and Ministerial Code of Conduct Act prohibits ministers from soliciting or accepting transfers of economic benefit other than those of nominal value, including hospitality and gifts, and gifts from family members. There are, however, no requirements for registration of gifts, and the maximum value of allowed gifts or hospitality is not set. Zambia lacks adequate regulations on facilitation payments and freedom of information. The Public Interest Disclosure Act provides legal protection for civil servants or private sector employees reporting cases of corruption, but the law does not adequately protect whistleblowers (ICS 2017).

Zambia has ratified the United Nations Convention against Corruption and the African Union Convention on Preventing and Combating Corruption. Zambia is also party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Civil society

Despite Zambia's legislation guaranteeing freedom of speech and press, the government frequently harasses independent news outlets and uses defamation laws to restrain these freedoms (FotP 2016). The government has prosecuted critics on charges of incitement of public disorder and hate speech (HRR 2016). Self-censorship has increased (FitW 2017). The Zambian media is politically polarized; state-owned media are generally supportive of the government, while a number of private outlets have taken a critical stand (FotP 2016). The government targets and threatens unfavorable online publications (FotP 2016). The media environment is Zambia in classified as 'partly free'.

Zambia's Constitution guarantees freedoms of assembly and of association, but the government does not respect these rights in practice (HRR 2016). Demonstrations by opposition parties and civil society have been broken up using force (BTI 2016). Civil society organizations (CSOs) have little influence in the decision-making procedures of the government (BTI 2016). The ability of CSOs to mobilize society is limited, particularly outside the capital of Lusaka (BTI 2016). Zambia's NGO Act is said to have increased the government's influence over NGOs; registration fees and disclosure requirements have created obstacles for newcomers and have led to the dissolution of existing NGOs (GI 2017).

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