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Zambia Pushing Back On ‘Abusive’ Investors

Zambia’s Ministry of Finance has started revoking licenses of local and foreign investors
who abuse incentives ranging from ignoring safety standards, disregarding labor laws,
and lack of transparency to breaking promises to hire locals, according to a report in ChristianScienceMonitor.

The South-Central African nation does everything possible to attract investors, ChristianScienceMonitor reports. Like the economy of any frontier market, Zambia needs foreign direct investment. It offers incentives such as tax holidays and easy foreign transfers. Africa’s largest copper producer,  Zambia ranks seventh of nearly 50 countries on the World Bank’s list of best African countries in which to do business.

Yet in a region with a history of abuse and exploitation, and relatively recent discoveries of its mineral wealth, Zambia has also started “pushing back” on foreign investors that want to do business the old way, including companies from China and India, the report said.

In the past, foreign businesses took advantage, entering, signing incentive-laden contracts,
then ignoring all responsibility, the report said. Locals often saw no benefit from their
country’s wealth.

In 2013, Konkola Copper Mines, owned by an India-based and London Stock Exchange-listed company Vedanta Resources, defied a policy of creating employment for Zambians and announced that it would fire 1,500 workers.

Zambian President Michael Sata threatened to revoke KCM’s license if a single worker was fired. In a standoff, KCM chief Kishor Kumar called the threat “mere rhetoric” and fired 76 workers. Kumar’s work permit was subsequently revoked, and he was barred from entering Zambia.

Oliver Saasa, economics professor at the University of Zambia, says the policies of the
Sata government toward investors differ sharply from those of its predecessor. The previous government dealt carefully with foreign investors, he says, in spite of the rules, in order to establish a market and trade foundation.

“It’s like the MMD (Movement for Multiparty Democracy, which previously governed Zambia) provided the crude oil that the current PF (Patriotic Front) government is now trying to refine,” Saasa told the ChristianScienceMonitor. “Investors realize that government does not mean to harm them but (is just trying) to satisfy the needs of the people who own the resources.”

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