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ZAMBIA

 

  

IMPORTANCE OF PUBLIC PROCUREMENT ORDERS

 

The Zambian business environment is divided into three major sectors; parastatal companies (inclusive of Zambia Consolidated Copper Mines (ZCCM) the countrys chief foreign exchange earner), private companies (inclusive of foreign companies) and government (including local government) departments.

 

The government is implementing a privatisation programme which is progressing steadily and which will eventually place all parastatal companies in private hands.  The government does however, have stakes in most of the strategic sectors (such as telecommunications, electricity, broadcasting and railways).

 

Purchasing by tender is the chief means of procurement by both public, private and parastatal institutions, exclusive of ZCCM who have a long established procurement centre in the UK.

 

 

                                     REGULATORY FRAMEWORK

 

Principal legal provisions

 

Purchasing by public tender is administered by the Zambia National Tender Board (ZNTB) a government regulatory body established by an Act of Parliament.  ZNTB has guidelines (details of which can be obtained directly from address given in Annex I) that must be followed broadly by any institution wishing to purchase by public tender.

 

Procurement in the public sector is made by the following agencies:

 

1          Department Heads in Ministries/Provincial Government/Parastatals up to K200,000 through informal tenders.

           

2          Ministry Tender Committee/Provincial Tender Committee Parastatal Tender Committee - in respect of

 

2.1        Value between K200,000 and K5 million through informal tender and

 

2.2        Value between K5 million and K25 million through formal tenders

 

2.3        ZNTB - in respect of value above K25 million through formal tenders.

 

The above procurement limits may be amended from time to time.  For informal tenders, ie value not exceeding K5 million, purchases are expected to be made only from local suppliers and paid for in Zambian Kwacha.

 

 

Customs regime

 

Zambia is a member of two regional economic bodies, Common Market for Eastern and Southern Africa (COMESA) and Preferential Trade Area (PTA).  Trading amongst member countries is encouraged in order to promote economic development, and special tariff arrangements are in place for this purpose.  Details of these can be sought directly from PTA and COMESA Secretariat. (See Annex II).

Customs duties are levied on all imported goods and services according to the Harmonised Commodity Description and Coding system.  Duties range from 0%-30%.  Full information on the customs duty for any particular product is available from the Department of Customs and Excise.

 

            Department of Customs and Excise

            PO Box E635

            LUSAKA

            Tel:       +260 1 222130

            Fax:      +260 1 221923

 

Taxation

 

The Zambian tax system consists of three main areas, income tax, company tax and value added tax (VAT). There are also withholding taxes on interest, dividends, loyalties, rents and consultancy fees, now at 10%.

 

In order to overcome the bracket creep which pushes the lower income earners into higher brackets of taxation the government has revised tax bands.  Under the new bands wage earners and self employed individuals with annual incomes of K600,000 and below are exempt from tax.  Penalties apply for late submission of tax returns.  Income tax rates for individuals earning above K600,000 per annum range from 10% to 30%.  Company tax rate is 35%, reduced to 30% for companies listed on the Lusaka Stock Exchange.

 

As of July 1994, a system of VAT replaced the former sales tax at a rate of 20%.

 

Zambia has double taxation agreements with a number of countries including Denmark, Finland, France, Germany, India, Ireland, Italy, Japan, Netherlands, Norway, Sweden, Switzerland and the UK.

 

In order to ensure up-to-date information on tax laws, rates and/or amendments, advice should be sought from a firm of chartered accountants (see Price Waterhouse, Annex II).

 

 

PRINCIPAL CHARACTERISTICS OF PUBLIC PROCUREMENT ORDERS - ADVICE TO EXPORTERS

 

Entry in register of suppliers

 

Registration of approved suppliers is agreed by a large public sector purchase organisation involved continuously in procurement activity on a repetitive basis.  For this purpose interested suppliers should apply for registration to the purchasing agency (see Regulatory framework), by providing the required information and paying a nominal fee.  This formal registration provides listed suppliers with certain advantages over non-listed tenderers.  Registration of all foreign suppliers is done by ZNTB only.  Foreign suppliers must produce evidence of formal representation, and details of arrangements for full after-sales-service in Zambia.  Full details of regulations relating to foreign suppliers can be obtained from ZNTB.

 

 

Language of submission

 

English unless otherwise indicated.

 

Pre-qualification

 

ZNTB can provide details of these requirements, which may vary from case to case.

 

Standards and professional requirements

 

Specifications normally accompany tenders but Zambia as a general rule requires goods supplied to conform to British Standards Institutes (BSI) and/or the Zambia Bureau of Standards specifications.

 

Publication of invitation to tender

 

With the exception of informal tenders, tenders are invited from suppliers worldwide.  The tender notices are published both locally and/or in the international press where it is deemed necessary.  ZNTB can be approached directly for full details of any tenders that have been published.

 

Degree of openness of public procurement market to non-national suppliers

 

The public procurement market in Zambia is fairly open as the local industrial base is very limited.  It is however advisable that non-Zambian companies operate through a local agent, if only to ensure quick access to tender documents, notice of extension of tender closing dates and a presence at tender bid opening sessions.

 

Size of public procurement market

 

This is difficult to estimate precisely, as statistics of this nature are not readily available.  It can be said that this market, with the implementation of the privatisation programme, is shrinking as regards parastatal companies.  The donor driven economy means that government sector purchasing will fluctuate according to the availability of funding.

 

 

MARKET OPPORTUNITIES

 

The main public procurement opportunities are most likely to arise at present in aid-tied government programmes, and at a later stage in former parastatals whose new private owners will be seeking to rehabilitate aged and/or obsolete facilities.

 

 

 

ANNEX I

 

PRINCIPAL ORGANISATIONS AWARDING CONTRACTS

 

Zambia National Tender Board (ZNTB)

PO Box 31009

LUSAKA

Tel:       +260 1 228633

Fax:      +260 1 220577

 

 

Zambia Electricity Supply Corporation (ZESCO)

PO Box 33304

LUSAKA

Tel:       +260 1 223970/239343

Fax:      +260 1 223970

 

Zambia Railways Tender Board

PO Box 80935

KABWE

Tel:       +260 05 222201/222392

Fax:      +260 05 224411

 

 

Zambia Telecommunications Company (Zamtel)

PO Box 71630

NDOLA

Tel:       +260 2 611111

Fax:      +260 2 615855

 

  

  

ANNEX II

 

OTHER USEFUL ADDRESSES

 

 

EC Delegation

4899 Los Angeles Boulevard

PO Box 34373

LUSAKA

Tel:       +260 1 250711

Fax:      +260 1 241145

 

Zambia Investment Centre

PO Box 34580

LUSAKA

Tel:       +260 1 252130/255241

Fax:      +260 1 252150

 

Ministry of Commerce, Trade and Industry

PO Box 31968/34373

LUSAKA

Tel:       +260 1 228301/221184

Fax:      +260 1 226727

 

Preferential Trade Area for Eastern & Southern African States & COMESA

PO Box 30051

LUSAKA

Tel:       +260 1 229725/225107

Fax:      +260 1 227318

 

Price Waterhouse & Company (Taxation Division)

PO Box 30942

LUSAKA

Tel:       +260 1 228809

Fax:      +260 1 220778

 

SGS (Z) Ltd

PO Box 33673

LUSAKA

Tel:       +260 1 221308/222608

Fax:      +260 1 227176

 

 

Techpro (UK) - ZCCM Procurement Agents

International House

Dover Place

ASHFORD

Kent TN23 1EX

Tel:       1233 633355

Fax:      1233 612321

 

Zambia Bureau of Standards

PO Box 50259

LUSAKA

Tel:       +260 1 227171

Fax:      227171

 

 

Zambia Privatisation Agency (ZPA)

PO Box 30189

LUSAKA

Tel:       +260 1 223859

Fax:      +260 1 225270

 

 

Zambia Revenue Authority

PO Box 35710

LUSAKA

Tel:       +260 1 229214/19

Fax:      +260 1 222729

 

 

This chapter was written by The Commercial Section of the British High Commission, Lusaka, in February 1996 and, updated by Centre Français du Commerce Extérieur (CFCE), in September 1998 and unless otherwise indicated, is based on information available at the time.

 

SUMMARY OF THE ZAMBIAN TAX SYSTEM

 

 

DIRECT TAXES

 

PAY AS YOU EARN (PAYE)

 

Income up to K1.92 million is tax free, while income in excess of K1.92million is taxed at 30%. For persons with disabilities, there is an additional K60,000 tax credit per year. The exempt portion of termination benefits is K5 million.

 

COMPANY TAX

 

This is the rate levied on company income. The STANDARD RATE of Company tax is 35%. Certain sectors have specific rates of Company tax:

 

Farming

15%

Manufacturing of Chemical Fertilizers

15%

Nontraditional exports

15%

Rural Enterprises

30%

Companies listed on the Lusaka stock Exchange

33%

Banks income up to K250 million

35%

Banks income over K250 million

45%

 

WITHHOLDING TAX

 

This tax is withheld at source for interest, dividends, capital gains, rents and government bonds. Income from these sources is taxed at 15%.

 

Notes:

Former ZCCM companies pay a reduced rate of 10%. The first K300, 000 per year earned through interest is exempt from withholding tax.

 

PROPERTY TRANSFER TAX

 

Levied upon the selling price of transferred property and shares at 3.0%*.

 

MINERAL ROYALTY TAX

 

Royalty levied on the gross value of natural resources, such as base or precious metals, industrial minerals at 2% and gemstones is levied at 5%*, except for some successor companies of ZCCM, which are levied at a reduced rate of 0.6% of the gross value.

 

*Note: These measures are effective from 1st April and are subject to Parliamentary approval.

 

CUSTOMS TARIFF AND EXCISE DUTY

 

EXCISE TAXES

 

The major rates of excise tax are the following:

 

Soft drinks

10%

Opaque Beer

35%

Clear Beer

70%

Wine and Vermouth

125%

Spirits

125%

Cigarettes/Tobacco

125%

Gasoline

60%

Diesel Fuel

30%

Petroleum Gas

30%

Electricity

5%

Cosmetics

20%

Selected Motor Vehicles

10%

 

 

Customs Tariffs

 

Ad valorem customs tariffs are applied on the value of imports (including the cost of insurance and freight the c.i.f. value) at 0%, 5%, 15% or 25% on all goods imported into the country. The only exception are goods originating in the Common Market for Eastern and Southern Africa (COMESA) countries, which are duty free on a reciprocal basis.

 

VALUE ADDED TAX

 

Value Added Tax (VAT) was introduced in Zambia in 1995. It replaced Sales Tax that had various disadvantages (such as tax cascading and evasion) which were damaging to the economy. Almost all countries across the world now have VAT because it is recognised as a modern and efficient way to collect the revenue needed for the country.

The majority of items are charged VAT at a standard rate of 17.5%, whilst certain items are zero rated or exempt.

 

ZERO RATED ITEMS

 

Certain items do not have to pay VAT for specific reasons for example, there is no VAT on agricultural produce. These are zero rated. They do not have to pay VAT on their output and they can also reclaim VAT that has already been paid on their inputs.

 

MAJOR ZERO RATED ITEMS INCLUDE*:

 

  1. BASIC FOODS AND AGRICULTURAL PRODUCTS
  2. EXPORTS
  3. MEDICAL SUPPLIES AND DRUGS
  4. HOTEL ACCOMMODATION IN THE LIVINGSTONE DISTRICT

 

EXEMPT ITEMS

 

Other products are exempt from VAT, which means they do not need to be charged output tax, but cannot reclaim any VAT already paid on inputs.

 

MAJOR ITEMS EXEMPT FROM VAT INCLUDE*:

  1. WATER SUPPLY AND SEWERAGE SERVICES PROVIDED BY A LOCAL AUTHORITY
  2. HEALTH SUPPLY SERVICES
  3. EDUCATIONAL SERVICES FROM NURSERY SCHOOL TO UNIVERSITY
  4. BOOKS AND NEWSPAPERS
  5. PASSENGER TRANSPORT SERVICES BY AIR, ROAD, RAIL AND BOAT
  6. CERTAIN FINANCIAL SERVICES
  7. FUNERAL SERVICES
  8. DOMESTIC KEROSENE (PARAFFIN)
  9. TRADE UNION SUBSCRIPTIONS
  10. MOSQUITO NETS
  11. ROAD CONSTRUCTION AGREEMENTS ENTERED PRIOR TO 1ST JULY 1995

 

*It is essential to note that these lists give an indication of the zero-rated and exempt categories of goods. Not all categories have been listed, and some listed categories are partially standard rated.

 

For a complete list and explanation of which types of goods are zero-rated and exempt, consult The VAT Liability Guide and the text of the law. The link below provides further details.  

ZAMBIA REVENUE AUTHORITY

 

 

Exporting

Agents and Distributors: There are no special Zambian laws to govern the agent-principal relationship. Instead, the contractual provisions of the agency agreement govern. Zambian regulations require that the local agent be registered with the Ministry of Commerce, Industry and Foreign Trade. In addition, the agent must obtain the consent or confirmation of the Central Bank and a commercial bank on the terms and conditions of payments as well as remittance of profits from goods shipped to Zambia.

Commission agents in Zambia often distribute a wide range of consumer goods. Exporters should also consider the size of a potential local Zambian agency. A large, well-established marketing agent will likely have substantial financial resources, many contacts, and promotional expertise.

Import Restrictions: The vast majority of imports to Zambia require import licenses which may be obtained from the Ministry of Commerce. Licenses are usually valid for six months for goods shipped by air and nine months for goods shipped by sea.

Import Duties: The Harmonized System (HS) of product classifications is used in Zambia. Import duties are both specific and ad valorem and are assessed equally without regard to the product's origin. Other Commonwealth nations do not receive preferential duty status. The tariff structure is divided into four basic rates: various capital goods are charged a five percent ad valorem rate; various non-essential consumer goods (used primarily by lower-income groups) bear a 15 percent rate; other non-essential consumer goods are subject to a 30 percent duty; and luxury goods are subject to rates ranging from 50 to 100 percent. In addition, most imports are subject to a 15 percent sales tax on their taxable value, which is set at 125 percent of the customs value.

Certain priority imports are exempt from all import duties and sales taxes. These priority goods include: plant machinery, equipment, and spare parts or accessories used for manufacturing, agriculture, and cargo transportation.

Documentation: All goods shipped to Zambia must be accompanied by: an appropriate import license (and two copies of the pro forma invoice); certified invoices prepared in a prescribed manner; a bill of lading or air waybill; and a packing list. Import of animal or plant products must be accompanied by sanitary or health certificates.

Commercial Policies

Free-Trade Zones: As a part of the nation's 1991 plans to stimulate domestic and foreign investment, the government created customs-free zones at Lusaka, Livingston, and Ndola.

Exchange Controls: Foreign exchange is controlled by the Bank of Zambia, whose authority is delegated from the Ministry of Finance. Zambia permits foreign investors to repatriate 75 percent of after-tax profits accrued in Zambia.

Foreign Investment

The Zambian Investment Code of 1986 has been replaced by the Investment Act of 1991. The government encourages foreign investment that creates local jobs, produces export goods, utilizes local raw materials, and furnishes foreign exchange. Potential foreign investors must first obtain government approval from the Investment Board before being eligible under the Act. The new Investment Act of 1991 provides 75 percent after-tax profit repatriation and protection against government expropriation.

Incentives: Some investment projects, either domestic or foreign, may be accorded priority status if: they produce goods for export; are located in specific underdeveloped areas of the country; are in tourism or agriculture. Such priority investments may receive the following incentives: rebates on customs duties and exemption from sales tax on capital equipment, raw materials, and other intermediate goods; relief from import duties and taxes on capital equipment; relief from applicable income taxes; and favorable export tariff rates.

Intellectual Property Rights

Zambia is a member of the World Intellectual Property Organization (WIPO). The country has also signed the Paris Convention for the Protection of Industrial Property as well as the Universal Copyright Convention. U.S. citizens are entitled to national treatment in Zambia under its patent and trademark laws.

Patents: It takes a minimum of 18 months to patent an item or process which has not already been patented in another Paris Convention country. Patents are granted for 16-year periods and may be extended for five or 10 years.

Trademarks: Trademarks are granted for seven years from the application's filing date and are renewable for 14 years. Trademark registration is subject to cancellation if the trademark is not used for five or more years. Prior usage is not required before a trademark may be registered. The registration of geographical names is not permitted.

Copyrights: Zambia's copyright laws offer protection for the life of the author plus 25 years. Under the Universal Copyright Convention, literary, artistic, or musical works by American creators first copyrighted in the U.S. are entitled to protection in Zambia.

Taxation

Corporate Taxes: Corporate taxes are assessed at prescribed rates: income from farming activities is taxed at 15 percent; for the banking industry, profits up to ZK10 million are taxed at 40 percent while profits exceeding ZK10 million are assessed at 45 percent rate; the tax rate on profits derived from the manufacturing, service, or related sectors is 40 percent.

Tax rates for branch profits in Zambia are the same as those for other corporations and there is no withholding tax on profits remitted to the head office. A tax on capital gains is scheduled to replace the property transfer tax in 1993.

Personal Income Tax: For Zambian residents, personal income taxes range from 15 to 35 percent. Individuals are considered Zambian residents for tax purposes after six months of continual residence within the country. The capital gains tax scheduled to go into effect in 1993 also applies to Zambian residents.

Other Taxes: Most imported goods are subject to a sales tax of 15 percent. Taxpayers are also responsible for social security taxes and local income taxes.

Tax Treaties: Zambia does not have a double taxation agreement with the United States. However, double taxation may be avoided through the use of foreign tax credits.

Regulatory Agencies

  1. All foreign or domestic businesses in Zambia must be registered with the Ministry of Commerce, Industry, and Foreign Trade.
  2. The Ministry of Commerce holds overall authority over foreign trade and is responsible for issuing import licenses.
  3. The Investment Board issues investment licenses.
  4. The Controller of Customs and Excise, within the Customs and Excise Department, is charged with overseeing the entire import and customs clearance process.
  5. Patent, trademark, and copyright issues fall under the authority of the Registrar of Patents, Trademarks, and Designs, which part of the Ministry of Commerce, Industry and Foreign Trade.
  6. The Bank of Zambia administers foreign exchange controls and is responsible for maintaining the stability of the Zambian unit of currency, the Zambia Kwacha.
  7. The Zambian economy, long dominated by state-run agencies and parastatals, is currently going through a gradual privatization process that will significantly reduce government involvement in the private sector. The government plans to sell most of its holdings in state-owned companies, including those in the mining conglomerate Zambia Consolidated Copper Mines (ZCCM). Companies controlling the railway, telephone, and electric industries may be excluded from privatization.