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Zambia: 2023 National Budget – Public-private partnerships re-emphasized

13 October 2022
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In 2021, the Government announced that it would aggressively pursue public private partnerships (PPPs) as a mechanism to fund and construct transport infrastructure. In announcing the Budget, the Minister reiterated the importance of PPP investments in furthering infrastructure development in Zambia.

In a further move to grow the economy, the Minister declared plans to accelerate new transport, agriculture, and energy infrastructure under the PPP approach as an alternative source of financing for key developmental projects without the Government overburdening the fiscus.

In the transport and logistics sub-sector, the Minister revealed that many of the roads, including the Lusaka-Ndola dual carriageway, Chingola-Solwezi, Ndola-Mufulira, Chingola-Kasumbalesa and the Lumwana-Kambimba roads, were already at the stage of final negotiations with potential partners.

To attract PPP infrastructure investment and ultimately improve the infrastructure deficit while simultaneously relieving pressure on the Treasury, the Minister proposed the following tax incentives:

  • a reduction by 20% on the tax chargeable on income received by a special purpose vehicle (SPV) under a PPP for the first five years that a project makes a profit;
  • an accelerated straight-line wear and tear allowance of not more than 100% in respect of any implement, plant, and machinery acquired and used under a PPP project;
  • value added tax (VAT) relief and a waiver of customs duty on imported equipment and machinery to be used for a PPP project;
  • an SPV will be permitted to claim input VAT, where applicable, before the commencement of commercial operations; and
  • an extension of the provisions of the VAT (General) Regulations relating to an intending trader to an SPV for PPP projects for a period of four years.

To facilitate the above proposals, the Minister indicated that the Government would repeal and replace the current Public Private Partnership Act of 2009. Further, the Income Tax Act, the Value Added Tax Act, and the Customs and Excise Duty Act will be amended to provide for specific incentives for PPPs.

The Minister announced that the new legislation will cut barriers and restrictions, making it quicker to plan and build new roads, speeding up the deployment of energy infrastructure like offshore wind farms and streamlining environmental assessments and regulations.