Foreign investment in Zambia: Analysis of Development Agreements and Investment Promotion and Protection Agreements

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Kwibisa, Matapo Lydia
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This study discusses the competing interests between foreign investment protection and the citizen’s right to the enjoyment of the country’s natural wealth with regard to exploitation of mineral resources. Following the cancellation of Development Agreements (DAs) under section 160 (1) of the Mines and Minerals Development Act 2008, the relationship between the Zambian government and foreign investors is strained and some affected mining companies have threatened legal action. The continued use of a similar Agreement, the Investment Promotion and Protection Agreement (IPPA), has been questioned by many. The situation has necessitated an investigation into the contents of these Agreements and benefits, if any. The question investigated by the study is how the Zambian government has fulfilled its obligation to ensure respect for the citizen’s right to the enjoyment of the country’s natural wealth in the face of competing interests from the foreign investors on their right to protection by the host State. Relying on a desk review of secondary sources, with a study population of 11 DAs, the study evaluates the contents of 4 randomly selected DAs out of the 9 accessed and the contents of the IPPA standard Agreement. It makes a quantitative analysis of all clauses in the selected DAs and the IPPA to determine their significance and import. Each of the Articles is analysed for its significance to show the share proportion of benefits to government and to the companies/foreign investors. The main findings of the study, among others, are that: 1. all the four DAs analysed contain adverse legal provisions and have more benefits to foreign investors than government; 2. under the IPPA template, government has more benefits than investors; 3. the Guiding Principles provide useful guidance to the negotiation process to benefit Zambians but require some amendments and regular review; 4. the law under the repealed Mines and Minerals Act, 1995 was adequate to benefit Zambian citizens but was flouted in the name of foreign investment protection. 5. the law under the current ZDA Act, 2006 is adequate. Foreign investors do not therefore require ‘additional protection.’ Based on these findings, the study has concluded that the guarantee provisions adequately protect foreign investors. The investors do not therefore require ‘additional protection’ by negotiating conditions outside what the law provides. It has further concluded that government’s obligation to satisfy the competing interests between foreign investors and benefits to citizens cannot be effectively fulfilled at the same level because successful fulfillment of either will be at the expense of the other. Against this background, it is recommended that government should prioritise national development and ensure respect for the citizen’s right to enjoyment of natural wealth by inter alia, creating a natural resources fund for the proceeds from the mining sector, laying of natural wealth-related Agreements before Parliament for ratification and strengthening of the government negotiating team in terms of representation and capacity to effectively protect the interests of the state.
Investments,foreign--law and legialation--Zambia , Development rights transfer--law and legislation--Zambia