Foreign Investment Policy in
Zambia: Lessons from Chinese
investment
Prof. Kenneth K. Mwenda, PhD, LLD, DSc(Econ)
Adjunct Professor of Law
Washington College of Law (WCL)
American University
Washington DC
USA
November 4, 2014
“The views expressed herein should be attributed solely to the author”
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Introduction
 Given the time constraints (that is, I am allowed only
ten (10) minutes to speak), I will proceed straight into
the main issues, without much ado on the theoretical
constructs of foreign direct investment (FDI).
 As part of its foreign investment policy, the Zambian
Government has embraced Chinese FDI after winning
the elections, notwithstanding its earlier cynicism of
Chinese investment while campaigning as an
opposition party.
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 Unlike in the pre-election campaigns of the PF party,
Taiwan is no longer heard of. What happened?
 Indeed, what happened to the notion of the then bad guy,
China? Has he now become a good guy?
 Or has something transformational taken place to convert
the critics into affirmed disciples?
 For the purposes of this conference, what are the main
issues facing Chinese FDI in a country such as Zambia?
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The main issues with Chinese FDI
 In a paper titled, “The Myth and Reality of Chinese
Investors: A Case Study of Chinese Investment in Zambia’s
Copper Industry,” published by the South African Institute
of International Affairs in May 2010 (Occasional Paper No.
62, China in Africa Project), Pengtao Li posits that:
 “In any attempt to analyse the implications of Chinese
foreign direct investment (FDI) for African countries,
Zambia is the example par excellence, its historical
relationship with China and its ever-increasing economic
ties with the emerging power being the main reasons for
this.”
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 “The activities of Chinese mining companies operating in
the Zambian Copperbelt have roused much contention,
particularly in the Western media, yet there is little
understanding of the Chinese perspective on this issue.”
(Pengtao Li)
 “…Chinese FDI has the potential to bring about both
positive and negative results, depending on the structure
and quality of the host economy, as well as the strategies
and policies employed by the host government to manage
the investment.” (Pengtao Li)
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 “While Chinese companies often apply poor labour and
environmental standards, this is also true of other foreign
companies operating in the Copperbelt.” (Pengtao Li)
 Furthermore, evidence suggests that Chinese investors are
learning from and adapting to the Zambian context, and
are gradually embracing the corporate social responsibility
agenda. As a result of this progressive transformation,
Chinese companies active in Zambia are beginning to play a
more positive role in the country’s overall development.”
(Pengtao Li )
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Why are Chinese investors interested
in African countries like Zambia?
 Access to natural resources such as copper to maintain
China’s economic growth.
 China is now the world’s largest consumer of copper.
 Investments Zambia’s mining sector now constitute over
88% of total Chinese investments in the country.
 Out of all the Chinese mining companies operating in
Zambia, Chambishi Copper Mine, owned by the NonFerrous Company–Africa (NFCA), is the largest.
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 In total, Chinese investments in Africa rose from US$681
million in 2000 to US$9.3 billion in 2010.
 Out of the US$9.3 billion invested in Africa by China in the
year 2010, 42.3 percent went to the services sector.
 Then, 29.2 percent was committed to the mining sector of
various African countries, with 22.0 percent committed to
the manufacturing sector and 3.1 percent to the agricultural
sector.
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 By 2009, China had surpassed the United States as Africa’s
largest trading partner.
 In Zambia’s case, Chinese investment in 2013 stood at
US$2.6 billion, reportedly creating about 50,000 jobs in the
country.
 By October 2014, Chinese investment in Zambia was said to
be at US$3 billion.
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Why Zambia?
 Zambia is reported to have the highest inflow of FDI
among the 16 Landlocked Developing Countries in Africa,
according to the UN Conference on Trade and
Development (UNCTAD).
 FDI flows to LLDCs fell by 11 per cent in 2013, and the Asian
group of LLDCs experienced the largest fall in FDI flows of
nearly 50 per cent.
 Notwithstanding the mixed picture for African LLDCs,
eight of the 16 LLDCs economies increased their FDI
inflows, with Zambia attracting the most at $1.8 billion
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So, where is the problem?
 Zambia boasts of being the highest copper producing
country in Africa.
 Zambia is also the beneficiary of the continent’s third-
highest level of Chinese investment.
 But, the high levels of unemployment and poverty have left
many Zambians asking what has happened to the fruits of
their government’s lucrative deals with the Chinese?
 Admittedly, some Chinese investors have even taken over
such small businesses of the locals as selling chicken.
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Governance!
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Deplorable Labor standards!
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The Legal Framework
 Zambia is a common law jurisdiction.
 English common law and legislation, in addition to treaties
and customary international law, apply.
 Mining legislation:
The Mines and Mineral Development Act 2008, revising the law
relating to the prospecting for, mining and processing of
minerals, as well as repealing and replacing the Mines and
Minerals Act, 1995.
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 Labor laws:
CHAPTER 256: The National Pension Scheme Act
CHAPTER 441: The Factories Act
CHAPTER 276: The Minimum Wages and Conditions of
Employment Act
CHAPTER 270: The Employment (Special Provisions) Act
CHAPTER 269: The Industrial and Labour Relations Act
CHAPTER 268: The Employment Act
 Plus applicable international treaties on labor law
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 Arbitration laws:
(a) The Arbitration Act, 2000
(b) Applicable international treaties
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But is the enactment of laws enough
to improve the situation?
 What about the issue of law enforcement? How effective
and efficient is law enforcement in Zambia?
 What about the culture of compliance with domestic laws
and regulations by the Chinese investors?
 What happened to the ‘once bad guy, China”? Is he now a
‘good guy’ for the Zambian Government?
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“Zambian miners shot by Chinese managers” - Telegraphwww.telegraph.co.uk
A backlash against China's powerful presence in the Zambian economy has
been triggered by an incident in which 11 miners were shot by Chinese
managers.
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