REPORT OF THE SECOND NRG MEETING OF THE INVESTMENT FOR
DEVELOPMENT PROJECT (13TH FEBRUARY, 2003)
The Second NRG meeting of the Investment for Development Project was held at
Chrismar Hotel, Lusaka, Zambia from 08:30 hours to 16:30 hours on Thursday 13th
February 2003. Mention should also be made of the fact that the 2nd NRG meeting
coincided with the official launch of the study report on enforcing Competition Law
in Zambia. Thus the official launch of the study report on enforcing ‘Competition
Law in Zambia’ and the Second NRG meeting were divided into three sessions for
ease of presentation.
Session one : Launch of the Study Report on Enforcing Competition Law in Zambia
was chaired by Professor Oliver Saasa of the University of Zambia – Institute for
Economic and Social Research.
Session two : Discussion on Competition Policy and Law in Zambia was chaired by
Professor Manenga Ndulo also from the University of Zambia.
Session three : Presentation of draft study report on Foreign Direct Investment in
Zambia, policy and civil society perceptions was chaired by Muyunda IIilonga from
Zambia Consumers Association.
Professor Oliver Saasa welcomed the Honourable Eugene Appel, M.P., Deputy
Minister responsible for Commerce and Trade at the Ministry of Commerce, Trade
and Industry to the venue of the official launch of the study report and the Second
National Reference Group meeting. Thereafter Sajeev K.S. Nair, Programme Officer
at CUTS – ARC gave the welcome remarks and gave a brief overview and
background to the study report and the Investment for Development Project. The
Zambia Competition Commission then also provided their position with respect to the
study report on ‘Enforcing Competition Law in Zambia’. After Zambia Competition
Commissions reaction, the chairman then called on the Deputy Minister to officially
address the audience and in due course release the study report on Enforcing
Competition Law. In his opening remarks, the Deputy Minister expressed his sincere
gratitude to CUTS – ARC and in this regard , he informed the meeting of his decision
to officially recognise CUTS – ARC and the National Reference Group. The Deputy
Minister then proceeded to give a brief overview of :


The Zambian economy prior to the 1991 economic reforms
The Zambian competition policies in the process of economic reform –
experience and lessons
Role and performance of the Zambia Competition Commission
After the Deputy Ministers address and official launch of the study report, Mr.
Muyunda IIilonga from Zambia Consumers Association then gave his vote of thanks
and remarks.
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DISCUSSION ON COMPETITION POLICY AND LAW IN ZAMBIA
(PRESENTATION OF CASE STUDIES)
The presentation was undertaken by Ms. Helen Lungu Banda, Lawyer and Consultant
for CUTS – ARC. The consultant started by outlining the aims and objectives of the
Competition and Fair Trading Act, Chapter 417 of the laws of Zambia. Thereafter, the
consultant undertook to present 3 case studies to illustrate the Zambia Competition
Commission’s performance in implementing the Competition and Fair Trading Act.
The following were the case studies that were presented :


Takeover of Chilanga Cement by Lafarge
Takeover of Tamba Chicks Limited by Crest Breeders International
Takeover of Cadbury Schweppes by the Coca Cola Company
All the above cases touched on the subject of take-overs or mergers.
RESPONSE FROM THE PRIVATE SECTOR : COMPANY SECRETARY,
CHILANGA CEMENT
The Company Secretary from Chilanga Cement Plc acknowledged some observations
that were highlighted in the report. In this regard, he thanked the consultant for having
undertaken a detailed account of the issues raised in the report. However, Chilanga
Cement Plc was of the view that the Zambia Competition Commission was not doing
much to level the playing field in the relevant industry. The case of increased levels of
imports of cement from Zimbabwe whose landed cost was at one time half the price
Chilanga Cement Plc was offering for the same amount was highlighted. The meeting
was informed that had there not been a decision made concerning the influx of
increased volumes of cheap cement from Zimbabwe, the plant would have simply
closed and declared the workforce redundant. Zambia Competition Commission was
however of the view that it could not intervene in this particular case as it was purely
a case of trade policy and therefore could only be addressed by the Ministry of
Commerce, Trade and Industry.
RESPONSE BY THE ZAMBIA CONSUMER ASSOCIATION
It was the view of ZACA that the consumer did not benefit from the Chilanga Cement
Plc case because whereas the consumer had a choice to purchase the same amount and
quality of cement from Zimbabwe at a much lower price, this was not the case now
because of the ban that was effected by the Zambian government on a selected list of
products from Zimbabwe that were perceived to harm the local industry.
GENERAL RESPONSES
The Zambia Competition Commission also informed the meeting that it is not feasible
to sale Chilanga Cement as two separate units. The reason being that it would have
been practically impossible to find a buyer for the plant in Chilanga basically because
of its old age. The only plant that would have attracted investment is the Ndola works
by virtue of the fact that it is still new when compared to the Chilanga one.
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PRESENTATION OF DRAFT STUDY REPORT ON FOREIGN DIRECT
INVESTMENT IN ZAMBIA, POLICY PERFORMANCE AND CIVIL
SOCIETY PERCEPTIONS
The presentation was made by the CUTS – ARC Research Associate, Mr. Eric
Kalimukwa. To set the stage for the presentation, he initially gave a brief description
to the report and the main objective for the Investment for Development Project. He
further informed the meeting that the Investment for Development Report B basically
describes the Republic of Zambia’s national regulatory regime and policy
environment for Foreign Direct Investment. The meeting was further informed that
the report aims at raising awareness and stimulating discussion on investment related
issues in Zambia. To unravel the context in which the report was set, the researcher
attempted to draw a distinction between FDI and portfolio investment. In this regard,
the researcher then informed the meeting that the report outlined the national
investment policies of Zambia in three sectors namely:


Mining
Tourism
Agro-processing
The meeting was then informed that the three sectors were chosen by virtue of their
importance in attracting FDI and subsequently contributing to economic growth and
development.
IMPACT OF FOREIGN DIRECT INVESTMENT
MINING SECTOR
The researcher zeroed-in on evidence in terms of systematically observed data in all
the three sectors alluded to above. The meeting was informed that the sector
continued to be a major recipient of FDI inflows. However, a dark cloud was cast
over the sector when Anglo American Corporation announced its withdrawal from the
Konkola Copper Mines (KCM) and Konkola Deep Mining Project (KDMP). To
illustrate the significance of FDI inflows into the sector, the researcher availed to the
meeting figures on the mining sector’s contribution to inter alia :


Employment
State revenue
Gross Domestic Product
Other issues of significance that the researcher raised included among others :

Backward and forward linkages with downstream industries
Other spin-offs
TOURISM
The meeting was informed that other than the investment by Sun International Group
in the hospitality industry in Zambia, there has not been any significant investment in
the sector.
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AGRO-PROCESSING
This sector also suffered from inadequate and tangible investment.
CIVIL SOCIETY SURVEY RESULTS : PERCEPTIONS ON FDI

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Most of the respondents did not seem to be aware of what FDI was all about
A significant number were of the view that FDI had very little impact if any
on employment creation in Zambia
Some seemed to be of the view that FDI had actually contributed to capital
flight
From the responses received thus far the perception is that the mining sector
has received the highest level of FDI with the rest singling out agriculture and
tourism
An interesting outcome was that most respondents felt that FDI should be
banned in certain sectors such as :(a) trading activities
(b) small-scale mining on the Copperbelt in semi-precious stones which
should be reserved exclusively for Zambian
(c) transport sector
ASSESSMENT OF NATIONAL INVESTMENT POILICY AND CAPACITY
BUILDING NEEDS IN POLICY MAKING


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currently the investment act is being reviewed prior to its amendment
the Zambia Investment Centre suffers from an acute shortage of resource
flows from the central treasury
the centre has not been able to monitor pledges from investors to actual
investment on the ground
RECOMMENDATIONS
MINING SECTOR



re-introduction of the gemstone exchange scheme
introduction of the plant hire scheme
creation of a community development fund
TOURISM

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creation of an enabling environment for private sector participation through
the provision of adequate infrastructure and legislation to support growth in
the sector
government should undertake a proactive marketing strategy to attract
investment in the sector
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AGRO-PROCESSING


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build the sectors capacity to expand production, productivity and
competitiveness to meet the challenges of local and international demands
government should direct policy at encouraging synergies between large and
small scale producers through out grower schemes
government should look at exploiting the large scale/small scale mix synergies
in the sector
GENERAL RECOMMENDATIONS


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in attracting FDI to Zambia, there is need to also look at the economic, social,
political and cultural climate in the country. Fiscal incentives and regulation
alone are not sufficient to attract FDI and this is supported by studies on the
Zambian economy
the government should also seriously consider investing in education beyond
what is currently obtaining. It is through education that a lot of problems can
be tackled – poverty, HIV/AIDS, sustained availability of skilled human
resources
perception of high levels of corruption. This is another invariable factor that
discourages FDI in Zambia. To highlight this point : the Transparency
International 2001 report placed Zambia at 76 out of 90 countries on its scale
of ‘Corruption Perceptions Index’. Only 14 places from the bottom. Therefore,
it is recommended that government should address this fundamental issue with
results
COMMENTS ON THE RESEARCH REPORT : PROF. MANENGA NDULO
Professor Ndulo expressed his gratitude for a well researched report. The following
were his observations :

The report should delve more deeper to find out the linkages especially in the
tourism sector that can be recommended and exploited by Zambia to increase
the flow of FDI
Meat processing in the agro-processing sector is one area where the report
should access more data to unravel its potential in attracting FDI inflows
RESPONSE FROM THE CIVIL SOCIETY : Mr. ALICK LUNGU
The civil society representative noted the following observations :


In terms of small-scale mining (i.e. emeralds) most of which is labour
intensive, very little policy support goes to the sector
Marketing of gemstones still remains a problematic area
The current scenario in the mining sector shows that there is lack of social
responsibility to society e.g. social costs to society created by pollution and
environmental damage
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Investment legislation in Zambia does not compel investors to look at
corporate ethics i.e. the withdrawal of Anglo American Corporation from
Konkola Copper Mines being a case in point
Zambia’s investment climate and economy is highly vulnerable to external
shocks e.g. the withdrawal of Anglo American Corporation from Konkola
Copper Mines sent wrong investment signals
TOURISM
In the case of tourism the following was observed :

The importance of the investment by Sun International was highly
acknowledged
That public investment in infrastructure is a necessary prerequisite in
attracting FDI in the sector
AGRO-PROCESSING
The following interventions and observations were made with respect to this sector:

It was felt that since the majority of Zambians are poor and rely to a great
extent on agriculture, investment policies should take a direct approach at the
sector
A direct intervention approach that would target the small-scale farmers
should be adopted as opposed to a policy focus on out-grower schemes
(farming blocks)
CONCLUSIONS AND WAY FORWARD



Revise Report B on the basis of observations, suggestions and inputs from the
various stakeholders
Revised Report B to be circulated to all stakeholders at least two to three
weeks before the third NRG meeting
Include more respondents in the civil society survey since the report was
based on only a limited number of respondents
Prepared by EK, 18 February 2003
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