Overall ease of doing business:

For 2013 Zambia ranks 94th in the world for the relative ease of doing business as presented by the World Bank, however ahead of most countries in Southern Africa except for South Africa (39), Botswana (59) and Namibia (87). The criteria include: construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency[1].

Industry challenges:

1)      High price sensitivity: An example is Novonordisk, who in supplying insulin to the Zambian market, is selling its products at only 20 percent of its corresponding sales price in Europe. Similar pricing is applicable for prostate cancer drugs;

2)      Lack of transparency in general and in public tendering processes in particular

Market drivers:

1)      Growing private sector investment in the last five years

2)      High burden of infectious disease

3)      Entry lifestyle diseases

4)      Cancer treatment investments

Market restraints:

1)      Lack of transparency and limited accessibility to ministries and agencies

2)      Lack of funding

3)      No adequate social health insurance, limited private insurance

4)      Poor infrastructure

5)      Typically, a foreign investor would use local service providers to set up a local legal entity. The myriad of license requirements has made substantial reform within the Business Licensing Reform Program a necessity.

Market reform & incentives:

According to the Medium Term Expenditure Framework 2013-15, the Government has ambitious plans to recruit over 5,000 additional frontline medical personnel, construct, expand and upgrade health facilities. In addition, Government will scale up the provision of essential drugs and medical equipment and other supplies. Further, there are plans for 650 prefabricated health posts to be constructed around the country. The Government will also explore alternative ways of financing health provision, such as through the social health insurance scheme[2];

1)      Relatively steady political climate and social environment[3];

2)      Abolition of price controls;

3)      Liberalization of interest rates;

4)      Abolition of exchange rate controls;

5)      100% repatriation of profits: A foreign investor can own a company limited by shares. Zambia has no foreign exchange controls and foreign investors are free to repatriate 100% of profits and dividends, management fees, interest, profit, technical fees, etc., after settlement of all local obligations;

6)      Free entry investment in many sectors of the economy, including the health sector;

7)      Tolerant tax policy: Value-Added-Tax (VAT) process could be done in 3 days[4]; A 5-year tax holiday for existing and future manufacturers and waived import duties and taxes on all raw materials, printing and packaging material for the pharmaceutical manufacturing Industry. Government also has waived all Import duties and taxes on capital expenditure for the Pharmaceutical Manufacturing and Printing Industry;

8)      Trade reforms aimed at simplifying and harmonizing the tariff structure;

9)      Removal of quantitative restrictions on imports;

10)   The time for business name registration and company incorporation has been shortened from 21 days to 1-3 days;

11)   The ZDA Act provides for additional incentives for investments of USD 10 million in priority sectors involved in value addition, including the health sector;

12)   The Zambia Development Agency Act provides the following incentives for investments in health:

                     i.            Zero percent tax rate on dividends for a period of five years from the year of first declaration of dividends;

                   ii.            Zero percent tax rate on profits for the first five years for years six to eight, only 50 percent of the profits will be taxed and for years nine to ten, only 75 percent of the profits will be taxed;

                 iii.            Zero percent import duty rate on raw materials and capital goods for five years;

                 iv.            Deferment of value added tax (VAT) on machinery and equipment including trucks and specialized motor vehicles imported for purposes of the investment[5].

13)   The Investment Protection and Promotion Agreements (IPPAs) are aimed at promoting and facilitating large and impactful investments. Since 2008, the Government has signed IPPAs with 36 private companies. IPPAs are bound to existing national laws and do not provide further guarantees[6].

Various Aspects Break-down:

1)      Corruption: Zambia ranks 88 out of 176 countries on the annual Corruption Perceptions Index (CPI) 2012 published by Transparency International. It is ranked 11 in Africa with the score 37, and is ranking behind for example Botswana score 65, Rwanda score 53, Namibia score 48, Ghana score 45, South Africa score 43 and Liberia score 41. Positive signs are that the Government is planning to make the Anti-Corruption Commission (ACC) more independent, that the ACC will receive more funding and that new legislation in the form of an Access to Information Bill is planned to enter into force in 2013.

2)      Governmental Management & Political Climate:

The Medium Term Expenditure Framework 2013-15 stated that an overarching goal of the Government is to ensure that economic growth is inclusive and pro-poor, Government fiscal policy will focus on the strategic areas including health[7].

The government health budget was on average 10.4% of the national budget between 2000 and 2009. In his speech to the National Assembly opening the National Assembly on 21 September 2012, President Sata manifested the present Government’s increased focus on health, by pointing pointed out the fact that the budget for the health sector had increased by 40.7% to K3.6 billion (720 million USD) since last year’s budget. The allocation to the health sector for 2013 is K3.6 billion (ca 720 million USD) corresponding to 11.3% of the 2013 Budget. This represents an increase of K1.0 billion (ca 200 million USD) or 40.7% over the 2012 allocation.

The successful launch of the first USD 750 million Eurobond in 2012 was many times over-subscribed and became a sign of investor confidence in the Sata Administration.[8]

Of Zambia’s annual health budget, the donor share is estimated to be in the range of approximately 40%.

Political risks are present on a daily basis, and they are closely linked to the risks for corrupt practices. Government agency decision making is often hampered by officials who are not ready to make decisions that would normally seem to be straight forward.

3)      Cultural Differences: There seems to be a cultural rejection of risk in Zambia, the devise being “less risk to do nothing than to take action”.

4)      Banking Services: Bank services could be slow and many suppliers demand immediate cash payment[9].

[1] Gustaf Engstrand, Report on the Health Care Sector and Business Opportunities in Zambia, p.68.

[2] Ibid., p.26.

[3] Invest in Zambia, Embassy of the Republic of Zambia, October 2014, p.15.

[4] Invest in Zambia, p.15.

[5] Gustaf Engstrand, Report on the Health Care Sector and Business Opportunities in Zambia, p.65.

[6] Ibid., p.66.

[7] Ibid., p.10.

[8] Gustaf Engstrand, Report on the Health Care Sector and Business Opportunities in Zambia, p.9.

[9] Ibid., p.73.