Foreign investment in Zambia: Analysis of Development Agreements and Investment Promotion and Protection Agreements
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Date
2012-10-08
Authors
Kwibisa, Matapo Lydia
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Abstract
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 the law under the repealed Mines and Minerals Act, 1995 was adequate to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.
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Keywords
Investments,foreign--law and legialation--Zambia , Development rights transfer--law and legislation--Zambia