Project Finance 2026 Comparisons

Sponsors

Sponsors of projects in Zambia include international and domestic project developers, strategic or industry investors, state-owned enterprises and other government-owned entities. Sponsors may participate individually or as part of a consortium, and typically undertake projects through special-purpose vehicles (SPVs). For example, Enel Green Power and the Industrial Development Corporation sponsored the Ngonye Solar Project through Ngonye Power Company Limited, a Zambian-incorporated SPV.

In practice, the Zambian market distinguishes between an originating or “core” sponsor and a strategic sponsor. A core sponsor may be any entity that has secured a concession, land or another project right, sometimes without substantial project finance or operating experience. For a large project to reach financial close, lenders will commonly expect an experienced sector participant to join as a strategic co-sponsor or equity partner. The depth of this strategic sponsor pool varies by sector: in energy, it includes established producers such as Copperbelt Energy Corporation and Lunsemfwa Hydro Power Company, as well as state-owned entities, while Chinese contractors have been prominent in road infrastructure.

Lenders

Lenders and other providers of project finance include domestic and foreign commercial banks, development finance institutions and institutional investors. Foreign banks frequently lend into Zambian projects without a local presence (“non-presence banks”); the absence of general exchange controls makes such cross-border lending comparatively straightforward, subject to the applicable tax and regulatory rules (see 4.1 Restrictions on Foreign Lenders Granting Loans).

Development finance institutions (DFIs) participate both with and without a local office, and are particularly active in the Zambian project finance market. For example, the International Finance Corporation and European Investment Bank participated in the financing of the Ngonye Solar Project.

Project financing may also be raised through the capital markets. CEC Renewables, for example, has financed the Itimpi II Solar Project through its green bond programme.

Institutional investors, particularly pension funds, play a comparatively limited direct role. The National Pension Scheme Authority has occasionally taken up large single investments, but most pension funds prefer to provide liquidity to banks, sometimes earmarked for a sector rather than a specific project, and allow the banks to lend it on. This reflects the limited in-house project appraisal and structuring capacity, as well as the statutory investment guidelines, including those of the Pensions and Insurance Authority, which restrict concentration of exposure to any single investment.

The market is not yet sufficiently developed for high net worth individuals or family offices to lend directly into projects, and local venture capital activity remains small relative to the infrastructure market. Commercial banks are not a substitute for this type of capital: depositor funds are not suited to venture-type risk, which in more developed markets is taken by ring-fenced vehicles with dedicated capital.

The African Development Bank has also increasingly financed Zambian energy projects on a project finance basis, including through its Sustainable Energy Fund for Africa (SEFA). Examples include the Garneton North Solar Project, a 20 MW facility with ZESCO as offtaker under a 25-year power purchase agreement, and the Ilute Solar PV Project, a 25 MW facility in Sesheke District selling power into the Southern African Power Pool. The African Development Bank has also provided larger-scale infrastructure financing, including for the Lobito Corridor rail and road links between the Copperbelt and the Angolan port of Lobito.

Public-private partnerships (PPPs) have been used in Zambia for a number of years and have become an increasingly important means of delivering infrastructure, particularly for large road and transport projects. Recent transactions include the Lusaka–Ndola Dual Carriageway PPP, although the PPP framework extends more broadly to infrastructure and public service projects. However, some road projects have been developed on a contractor-led model in which a sponsor with a strong balance sheet funds construction largely from its own resources and refinances in the market after completion, rather than as a conventional limited recourse project financing.

Projects may be initiated either by the government through a solicited process or by private parties through unsolicited proposals. A PPP project will ordinarily undergo feasibility and value-for-money assessment before procurement and negotiation of the PPP agreement, with the successful bidder establishing a Zambian-incorporated SPV through which the project is undertaken.

Relevant Legislation

The principal legislation is the Public-Private Partnership Act No 18 of 2023, which came into operation in February 2024 and replaced the previous 2009 regime. The Act provides the framework for the identification, appraisal, procurement, approval and implementation of PPP projects, and establishes the PPP Office, PPP Council and Technical Committee. It is supplemented by the Public-Private Partnership (General) Regulations, 2024 and PPP Guidelines. The Act was also amended by the Public-Private Partnership (Amendment) Act No 20 of 2026, principally to revise the composition of the PPP Council.

Legal Restrictions

PPP projects are subject to the procurement and approval requirements under the PPP Act, as well as any applicable sector-specific, land and environmental approvals.

From a project finance perspective, the PPP Act permits project assets and rights to be used as security for financing and provides for lender protections, including substitution of the concessionaire. However, restrictions apply to the creation of security over certain public assets, assignment of the PPP agreement and changes in control of the project company (Sections 67–69). The preferred bidder must also establish an SPV incorporated in Zambia before execution of the PPP agreement (Section 52).

Other Obstacles

The principal practical obstacles relate to the length and complexity of project preparation and approval, obtaining the necessary regulatory approvals, allocation of project and government risk, and ensuring that projects are sufficiently bankable to attract private financing. Revenue-generating projects may also face challenges where tariffs or user charges are insufficient to support the required investment and debt service.

Bankability is the most persistent of these obstacles. Concessions are frequently negotiated and signed before financiers are consulted, so that terms lenders cannot accept are effectively fixed by the time financing is sought. Bringing lender input into the concession negotiation, rather than after signature, is the most effective mitigant.

Feasibility funding is a further constraint. Feasibility studies are ideally funded by sponsor equity, but many sponsors lack sufficient equity, and few Zambian institutions finance feasibility work. DFIs can do so, although securing DFI funding at this early stage is often slow. Even where a study exists, inadequate legal structuring, insufficient sponsor equity or limited sponsor experience may still undermine bankability.

Sponsor inexperience can be mitigated by bringing an experienced engineering, procurement and construction (EPC) contractor or operation and maintenance (O&M) operator into the project as an equity partner. Lenders place more weight on a party with equity at risk than on a contractor engaged solely under contract, which may ultimately walk away despite its contractual obligations.

Sponsors are also often reluctant to fund independent financial, technical, legal and environmental advisers, meaning that projects are presented to lenders without adequate preparation. Lenders generally prefer to test an independently prepared feasibility study and financial model rather than to advise on, and then lend against, their own work.

Environmental and social requirements have also become more demanding. Compliance with the Equator Principles is no longer, in itself, sufficient for many lenders, which apply additional environmental and social due diligence. Early screening should address resettlement (including evidence of consultation with all affected household members), heritage sites, agricultural land and water use.

Key considerations when structuring a project finance transaction include:

• the project’s anticipated cash flows and bankability;
• the allocation of construction and operational risks;
• the appropriate debt-to-equity structure;
• the security available to lenders;
• regulatory approvals;
• foreign exchange exposure; and
• tax treatment.

Projects are typically undertaken through an SPV established to hold the project assets and contracts, ring-fence project risk and facilitate the taking of security.

Financial Model and Debt-to-Equity Ratio

Because a lender to infrastructure cannot realistically take possession of and sell a road or transmission line, project finance is lent against cash flow. Therefore, the financial model determines how much debt the project can carry, rather than a fixed regulatory or market ratio. Tenor is central: a project whose cash flows support debt of 50% of cost over five years may support 80% over 15 years. Even where the model supports very high leverage, lenders will require meaningful sponsor equity because, in a non-recourse structure, a sponsor with operational control but no equity at risk could walk away from a failing project without loss.

Risk Allocation and Sponsor Experience

Construction, operating, offtake, concession and government risks should be allocated through the project documents to the parties best able to manage them, including the concessionaire, the contracting authority, the EPC contractor and the O&M operator. As infrastructure and energy projects often operate for 15 years or more, lenders will also assess whether the sponsor has the experience to run or oversee the asset over that period. Environmental and social screening should be completed early (see 1.2 Public-Private Partnership Transactions).

Currency and Macroeconomic Risk

A project earning kwacha revenues but carrying US dollar debt (for example, a toll road used predominantly by domestic traffic) bears a currency mismatch that must be priced and mitigated. Under the Bank of Zambia Currency Directives, 2025, domestic transactions must generally be settled in kwacha even where they are denominated in foreign currency, although electricity transactions and financial services products are exempt, including foreign currency lending by banks.

Separately, an economically sound project may face transfer and convertibility risk: during periods of foreign currency shortage, the project company may hold sufficient kwacha but be unable to convert and remit it to an offshore lender, resulting in a payment default. Zambia’s sovereign debt position is relevant to project finance principally through this macroeconomic channel rather than through the project structure itself, and does not displace the lender’s own responsibility to conduct due diligence and to set appropriate conditions precedent and covenants.

Special-Purpose Vehicle, Security and Tax

Where a project is procured as a PPP, the Public-Private Partnership Act, 2023 requires the preferred bidder to establish a Zambian-incorporated SPV before execution of the PPP agreement, and regulates its minimum capital and certain changes to its corporate structure (Section 52). The Act also permits security over project assets, rights, receivables and revenues and the pledging of shares, subject to restrictions relating to public property (Section 67).

Tax considerations may also affect the financing structure. The Income Tax Act generally limits the deduction of gross interest expense to 30% of tax EBITDA (Section 29(1B)). This applies to related-party and third-party debt and may be particularly relevant during a project’s ramp-up phase when EBITDA is low. Related-party financing is also subject to applicable transfer pricing rules.

Funding Techniques

Typical funding techniques include:

• senior debt from domestic and international commercial banks and development finance institutions, such as the International Finance Corporation, the African Development Bank and the European Investment Bank;
• blended or concessional finance combining DFI and climate funding;
• green bonds, as used by CEC Renewables to finance its solar portfolio;
• shareholder loans and equity;
• export credit agency-supported financing for projects with significant imported equipment; and
• political risk insurance or credit enhancement from providers such as MIGA and the African Trade Insurance Agency.

Local currency financing is also available, including through kwacha-denominated bonds issued by the IFC to fund local currency lending in Zambia, providing an alternative to US dollar-denominated debt for projects with kwacha-denominated revenues.

Sponsor funding may be contributed as ordinary equity, shareholder loans or subordinated debt, and may be supplemented by mezzanine finance or convertible instruments. The appropriate mix is driven by the financial model, and credit-risk mitigants such as guarantees and insurance may be used to improve the risk profile of the senior debt.

The energy, mining, transport infrastructure and fast-moving consumer goods (FMCG)/manufacturing sectors are expected to be particularly active in the coming year.

Energy

In the energy sector, continued investment is expected in new generation capacity, particularly renewable energy, as Zambia seeks to address electricity shortages, diversify its energy mix and meet increasing demand from the mining and industrial sectors.

Mining

Mining activity is also expected to remain strong, supported by the government’s target of increasing copper production to 3 million tonnes annually by 2031, together with continued investment in exploration and the expansion and development of existing and new mines.

Transport Infrastructure

Transport infrastructure is similarly expected to remain active, as the government has increasingly utilised PPPs for major road projects and has a substantial pipeline of further road developments. Rail and regional corridor infrastructure is also receiving significant investment, including the rehabilitation and operation of TAZARA and development of the Lobito Corridor, for which the African Development Bank approved financing in 2026 covering rail and road infrastructure connecting Zambia’s Copperbelt towards the Angolan port of Lobito.

FMCG and Manufacturing

FMCG and domestic manufacturing are expected to grow in importance. Supply disruptions during the COVID-19 period, when border closures interrupted the flow of imported goods, prompted a shift towards local production, and continued economic and middle-class growth is expected to support further investment in onshore manufacturing.

Project Finance Context

In large project financings, physical security is not the primary source of lender comfort. Lenders are principally cash flow lenders, and assets such as roads or transmission lines are difficult or impractical to realise. Therefore, security supports control over the project’s cash flows and is commonly supplemented by insurance, guarantees and other credit enhancements. Sponsor cash-shortfall undertakings are more typical of corporate financing and are generally avoided in pure project finance structures in order to preserve their non-recourse character, although hybrid structures are encountered.

Assets Available as Collateral and Form of Security

Generally, any and all assets with sufficient value may be used as collateral. Lenders may take security over substantially all of the project company’s assets. Security typically includes:

• mortgages over immovable property;
• debentures;
• share charges over shares in the project company;
• assignments of receivables and contractual rights;
• subordination agreements;
• agricultural charges; and
• fixed and/or floating security over other movable assets.

Future and fungible assets may also be secured by way of a floating charge.

Where public assets are involved, additional restrictions apply. Under the Public Finance Management Act, 2018, a controlling officer may not pledge or otherwise encumber a public asset without the Minister’s authorisation, and a public body authorised to borrow may not pledge a government asset as collateral without the written authority of the Secretary to the Treasury (Sections 41(7) and 26(3)). Additional restrictions may also arise under the Public Debt Management Act, 2022.

Formalities and Perfection Requirements

The applicable formalities and perfection requirements depend on the nature of the collateral:

• a security interest over movable property is generally perfected under the Movable Property (Security Interest) Act, 2016 (the “MPSI Act”) by registration of a financing statement in the Collateral Registry, although certain types of collateral may instead be perfected by possession or control;
• mortgages over immovable property must be registered at the Lands and Deeds Registry under the Lands and Deeds Registry Act; and
• assignments of receivables and contractual rights are generally made in writing and the related security interest is ordinarily perfected by registration in the Collateral Registry.

Notice to the relevant counterparty may also be required or advisable to ensure that payments are redirected to the assignee and to comply with any applicable contractual restrictions.

Agricultural Credits and Warehouse Receipts

The Agricultural Credits and Warehouse Receipts Act No 7 of 2026, which has been enacted but has not yet commenced, will replace the Agricultural Credits Act (Cap. 224) and establish a framework for warehouse receipt financing and agricultural charges. It permits lenders to advance credit against warehouse receipts issued in respect of stored agricultural commodities, and provides for fixed and floating agricultural charges over farming stock and other agricultural assets. Once the relevant security is registered in the Collateral Registry, the framework strengthens the lender’s security and priority position. The Act also establishes an Electronic Warehouse Receipt System linked to the Collateral Registry and provides mechanisms for realisation of the secured commodity following default.

Security Agent

Security agent structures are recognised and commonly used in Zambian syndicated and project financing transactions. The MPSI Act permits registration by a secured creditor or its agent, and recognises perfection by control exercised by a secured creditor or agent in the case of relevant collateral. The security documents should expressly identify the security agent’s capacity, the secured obligations and the beneficiaries for whom the security is held or administered, so that the agent may exercise the agreed enforcement and administrative rights on behalf of the finance parties. The Lands and Deeds Registry Act does not preclude the creation of a mortgage or other security over immovable property through a security agent. Such an arrangement should, however, be expressly provided for in the deed itself or in ancillary documentation.

Zambian law permits the creation of a security interest over all or substantially all of a company’s present and after-acquired movable property. Under the Movable Property (Security Interest) Act No 3 of 2016, the Act permits a security agreement to describe collateral “by item, kind, type or category”, and to extend to after-acquired property, achieving a commercial effect comparable to a floating charge. In practice, this enables lenders to obtain security comparable in commercial effect to a floating charge over a changing pool of business assets, subject to the Act’s creation, perfection and priority rules.

The costs of registering collateral security interests depend on the type of security, the registry involved and the fees in force when the filing is made. Registration of a financing statement in the Collateral Registry attracts the prescribed statutory fee, currently ZMW133.33. A mortgage over land is subject to the fees prescribed for registration at the Lands and Deeds Registry. For mortgages, debentures, charges and similar security documents relating to immovable property registered at the Lands and Deeds Registry, the registration fee is currently 1% of the amount secured or guaranteed, subject to a maximum of ZMW4,000.

Where a separate company charge filing is required, the applicable Patents and Companies Registration Agency (PACRA) fee is currently ZMW133.33.

A general description by item, kind, type or category is ordinarily sufficient for movable collateral, but greater specificity is required in certain cases. For example, a description merely referring to “consumer goods” is insufficient, and prescribed serial-numbered goods, including motor vehicles, trailers and locomotives, must be identified by serial number for registration purposes. This is governed by Sections 35(2)-(3) (general descriptions) and 13(2) of the Movable Property (Security Interest) (General) Regulations, 2016, S.I. No 77 of 2016 (defined to include motor vehicles, trailers and locomotives), read with Regulation 2 and Form I (Part D) (serial-numbered goods).

For immovable property, the particular land subject to the security must be specifically identifiable. A document relating to land lodged for registration must describe the land by reference to the relevant diagram, plan or description, including the applicable year and Surveyor-General’s number (Section 12 of the Lands and Deeds Registry Act).

General Restrictions

The granting of security or guarantees is generally permitted where the transaction falls within the company’s capacity, is supported by proper corporate authorisation and is entered into consistently with the directors’ statutory duties. Additional scrutiny may be required where a company grants security or a guarantee for the obligations of a shareholder, director, related party or another group company, including consideration of corporate benefit, conflicts of interest and any applicable rules on financial assistance. Consent or approval may also be required where the security concerns regulated assets, licences, concessions, project agreements or shares in a regulated entity. Additional restrictions apply to financial institutions, as these are required to comply with the Banking and Financial Services Act and Bank of Zambia directives prior to approving a security or guarantee.

Restrictions on Security Over Public Assets

As noted in 2.1 Assets Available as Collateral to Lenders, the creation of security over State or public assets is separately restricted under the Public Finance Management Act, 2018 and the Public Debt Management Act, 2022, and generally requires ministerial or Secretary to the Treasury authorisation.

Lenders typically conduct searches at the relevant registries to identify existing registered security interests affecting the proposed collateral. Security interests over movable property are centrally recorded and searchable through the electronic Collateral Registry maintained by PACRA. For immovable property, searches may be conducted at the Lands and Deeds Registry to identify registered mortgages, charges and other encumbrances.

Registry searches do not necessarily disclose every competing claim, including unregistered interests, possessory rights or matters arising from occupation. Due diligence therefore commonly includes:

• searches and enquiries with the relevant local authority;
• inspection of the property;
• verification of boundaries and survey details;
• review of title and contractual documents; and
• enquiries regarding occupation or other interests affecting the property.

The Lands and Deeds Registry Act provide for official searches, which are certified by a Registrar.

Security is generally released once the secured obligations have been discharged or the secured creditor has agreed to the release. For a security interest registered in the Collateral Registry, the secured creditor effects the release by lodging the prescribed amendment or discharge relating to the registered financing statement. A mortgage over immovable property is released by executing the prescribed discharge of mortgage and registering it at the Lands and Deeds Registry.

Any additional filing made in respect of a company charge, or any notice given to an account bank, contractual counterparty or other third party, should also be withdrawn or discharged where applicable. This is effected by lodging a Notice of Amendment or Discharge of a Financing Statement (Form IV, First Schedule to the Movable Property (Security Interest) (General) Regulations, 2016) with the Collateral Registry.

Practical Approach in Project Finance

In a large project financing, formal enforcement is a last resort; where the project remains capable of generating value, lenders will generally restructure or reschedule rather than enforce. This is partly commercial and partly regulatory: when a loan becomes non-performing, the lender must provide for the impaired exposure through its income statement, so that a single large default can materially erode a lender’s capital. Lenders therefore rely principally on upfront due diligence, structuring and covenant monitoring rather than on enforcement. Where enforcement does become necessary, the statutory regime described below applies.

Enforcement of Security

A secured lender may generally enforce its security following a default by the borrower in accordance with the terms of the relevant finance and security documents.

In relation to movable property, prior to enforcement, a secured creditor is required to register an enforcement notice with the Collateral Registry identifying the debtor, the secured creditor and the collateral against which enforcement is sought (Section 71 of the MPSI Act). The secured creditor may thereafter take possession or control of the collateral where the debtor is in default or the collateral is at risk, and may proceed through judicial process, or without judicial process where the debtor has consented in the security agreement (Section 72). The Act also permits a secured creditor to seek the appointment of a receiver, receiver and manager, or official receiver (Section 70(2)).

The secured creditor may dispose of the collateral by sale, lease, licence, auction, public tender or any other method provided for in the security agreement (Section 78). Generally, at least 14 days’ notice of the proposed disposal must be given to the debtor and other specified persons, subject to certain exceptions (Section 79). The net proceeds are applied towards satisfaction of the secured obligation, with any surplus applied to subordinate secured creditors or competing claimants in accordance with their priority and thereafter returned to the debtor (Section 82). The secured creditor is required to exercise its rights in good faith and in accordance with reasonable commercial standards (Section 87). The debtor or another secured creditor may redeem the collateral before its disposal or retention by satisfying the secured obligations and paying the reasonable expenses incurred by the secured creditor (Section 85).

In relation to mortgages over immovable property, a mortgagee has a power of sale and the right to take proceedings to obtain possession of the mortgaged property (Section 65 of the Lands and Deeds Registry Act). Where the mortgage is made by deed, the mortgagee may exercise the statutory power of sale once the mortgage money has become due and the applicable conditions for exercise of that power have been satisfied (Section 66). A mortgagee may also apply to court for relief, including sale, foreclosure or possession, under Order XXX Rule 14 of the High Court Rules.

Guarantees are generally enforced in accordance with their contractual terms, typically by making a demand upon the guarantor following the occurrence of the relevant default and, where payment is not made, commencing proceedings for recovery.

In syndicated or project financing, security agent structures may be used to hold and administer security on behalf of the secured lenders, subject to the terms of the relevant finance and security documents.

Zambian courts generally recognise the parties’ choice of foreign law. However, the governing law of a contract is distinct from the question of jurisdiction, and a choice of foreign law or foreign jurisdiction clause does not, by itself, oust the jurisdiction of the Zambian courts. Whether a Zambian court should nevertheless decline to exercise its jurisdiction will depend on the circumstances of the case, including considerations of forum conveniens (Axiz (Pty) Ltd v CloudTech Zambia Ltd & Another [2021] ZMCA 150).

There is limited reported Zambian case law directly addressing the effect of foreign governing law or jurisdiction clauses. In the absence of Zambia-specific authority on this point, the applicable principles are generally taken to be the common law rules received into Zambian law under the English Law (Extent of Application) Act (Cap. 11), including the established common law approach to the proper law of a contract and the forum non conveniens doctrine.

A foreign court judgment may be registered and enforced in Zambia, without a retrial of the merits, where the country in which it was given is one to which the Foreign Judgments (Reciprocal Enforcement) Act, 1937 has been extended (see 3.4 A Foreign Lender’s Ability to Enforce for further detail). Where that regime does not apply, a foreign judgment may still generally form the basis of fresh proceedings in Zambia without relitigating the underlying merits, provided the foreign court had proper jurisdiction.

Arbitral Awards

Zambia is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which it acceded in 2002, given effect under Part III of the Arbitration Act, 2000. A New York Convention award is recognised as binding and is enforced by the High Court on written application, without any review of the merits of the underlying dispute.

Recognition or enforcement may be refused only on limited, exhaustive grounds broadly mirroring the New York Convention, including:

• the incapacity or invalidity of the arbitration agreement;
• lack of proper notice to a party;
• an award exceeding the scope of the submission to arbitration;
• an irregularly constituted tribunal;
• an award that is not yet binding or has been set aside;
• the non-arbitrability of the subject matter;
• public policy; or
• fraud or corruption.

There are no material restrictions specific to a foreign lender’s ability to enforce its rights under a loan or security agreement in Zambia. A foreign lender is generally entitled to enforce its contractual and security rights on the same basis as a domestic lender, subject to the applicable Zambian laws governing the relevant loan or security.

Foreign lenders are not generally restricted from granting loans to Zambian borrowers. However, a foreign lender that carries on financial business or provides financial services in Zambia is required to obtain the appropriate licence from the Bank of Zambia (Section 6 of the Banking and Financial Services Act, 2017). The mere provision of a cross-border loan to a Zambian borrower does not, in itself, necessarily amount to carrying on financial business in Zambia.

The principal practical consideration is cost. Interest paid to a foreign lender may attract withholding tax, whereas interest paid to a locally licensed bank is exempt (see 8.1 Withholding Tax), and foreign lenders typically require the borrower to gross up interest payments to cover the tax. Foreign currency debt from offshore lenders may nevertheless remain competitive where the offshore margin is materially lower than onshore pricing, so the comparison should be made on an after-tax basis.

The granting of security or guarantees to foreign lenders is not generally restricted in Zambia. However, restrictions or consent requirements may apply where the security relates to regulated assets, licences or concessions, or shares in entities subject to sector-specific ownership or regulatory requirements.

Foreign investment in Zambia is principally governed by the Investment, Trade and Business Development Act, 2022 and administered by the Zambia Development Agency. Zambia generally permits foreign investment across most sectors of the economy, and foreign investors may generally own 100% of a Zambian enterprise, although sector-specific ownership, licensing or regulatory requirements may apply. The Act provides a framework for investment promotion and protection, and provides for fiscal and non-fiscal incentives for qualifying investments. Foreign investors may generally repatriate profits, dividends, capital and other investment proceeds, subject to applicable tax and other legal requirements. Restrictions may also apply to the acquisition of land by non-Zambians under the Lands Act.

There are generally no exchange control restrictions on the repatriation of capital or payments abroad by foreign investors. An investor may transfer funds out of Zambia in foreign currency, after payment of applicable taxes and liabilities, including dividends, principal and interest on foreign loans, management fees, royalties and other charges, and the proceeds from the sale or liquidation of a business (Section 10 of the Investment, Trade and Business Development Act, 2022). Such transfers remain subject to any other applicable laws relating to the externalisation of funds.

In practice, funds are remitted bank-to-bank, so payments abroad pass through a local bank account and the remitting bank will require documentation evidencing the nature and purpose of the payment. This is an administrative and reporting requirement rather than a restriction. There is no prescribed minimum period for which funds must remain in a local account before remittance, although ordinary processing requirements apply.

A project company may generally maintain offshore foreign currency accounts. There are no exchange control restrictions in Zambia that generally prohibit a Zambian company from opening or maintaining foreign currency accounts outside Zambia.

Financing and project agreements do not generally require registration with a government authority merely to be valid or enforceable. However, security documents may be subject to registration and other perfection requirements. Security interests over movable property are generally perfected by registration of a financing statement in the Collateral Registry (Sections 12–15 of the MPSI Act), while mortgages over immovable property must be registered at the Lands and Deeds Registry. Certain charges created by a company may also be subject to registration under the Companies Act, 2017. Sector-specific project agreements, licences or concessions may additionally be subject to approval or registration requirements under the legislation governing the relevant project.

Ownership of land does not generally require a licence and is ordinarily evidenced by a Certificate of Title. However, the acquisition of land by non-Zambians is restricted under the Lands Act and is permitted only in specified circumstances, including where the non-Zambian qualifies as an investor under the applicable investment legislation (Section 3(3) of the Lands Act).

The ownership and exploitation of natural resources is generally subject to sector-specific licensing. For example, mineral rights are vested in the President on behalf of the Republic, and mining activities require the appropriate mining right or licence. Mining rights may be held by companies with foreign ownership, although certain categories of mining rights are subject to Zambian ownership requirements.

The concepts of agency and trusts are recognised in Zambia. English common law and the doctrines of equity apply in Zambia under the English Law (Extent of Application) Act (Section 2), subject to the Constitution and other written law.

In financing transactions, security agent structures are used as an alternative to holding security through a trust structure, particularly in syndicated lending.

Priority

For movable property, priority is principally governed by the MPSI Act. A perfected security interest generally has priority over an unperfected security interest. Between perfected security interests, priority is determined by whichever occurs first: registration, possession or control. Between unperfected security interests, priority is determined by the order in which they were created (Section 52 of the MPSI Act). There are exceptions to these general rules for certain types of security interests, including purchase-money security interests and security over bank accounts.

For immovable property, mortgages and other interests in land are registered at the Lands and Deeds Registry, and competing registered interests generally rank according to the order in which they are lodged for registration (Sections 4 and 7 of the Lands and Deeds Registry Act).

Subordination

Priority may be contractually varied by agreement between creditors. This may be done through a subordination or intercreditor agreement under which a creditor agrees that its security will rank behind the security of another creditor. This applies to both movable and immovable security. For movable property, the MPSI Act expressly permits a secured creditor to subordinate its priority in favour of another competing claimant, with the subordination becoming effective upon registration of an amendment to the financing statement (Section 55). The Companies Act, 2017 also recognises that a person otherwise entitled to priority may consent to a different ranking (Section 240).

Insolvency

Contractual subordination provisions should continue to regulate the rights and priorities of the creditors as between themselves upon the insolvency of the borrower. However, they cannot override mandatory priorities imposed by insolvency legislation. In particular, the Corporate Insolvency Act, 2017 prescribes the ranking of preferential debts, and provides that certain statutory priority rules apply notwithstanding any agreement to the contrary (Section 127).

There is no general requirement for a project company to be incorporated in Zambia, as a company incorporated outside Zambia may register as a foreign company under the Companies Act, 2017 (Section 299). However, local incorporation may be required, depending on the nature of the project. For example, under the Public-Private Partnership Act, 2023, a preferred bidder is required to establish an SPV incorporated in Zambia before execution of the PPP agreement (Section 52). The Act defines such an SPV as a “project company incorporated in the Republic”.

Zambian law provides for the reorganisation of financially distressed companies through business rescue proceedings under the Corporate Insolvency Act, 2017. A company may voluntarily commence business rescue where it is financially distressed and there is a reasonable prospect of rescuing the company (Section 21). During business rescue, the company is placed under the temporary supervision of a business rescue administrator and a moratorium applies to claims against the company, while a business rescue plan may be developed to restructure its affairs, business, property, debt, liabilities and equity.

Other Reorganisation and Restructuring Mechanisms

The Corporate Insolvency Act, 2017 also provides for a court-sanctioned scheme of arrangement or compromise between a company and its creditors or members. This procedure may be used whether or not the company is financially distressed, and may also be used in connection with a reconstruction or amalgamation (Sections 46–48).

Separately, the Companies Act, 2017 provides for the amalgamation of two or more companies under a statutory amalgamation procedure (Sections 282–296), as well as other forms of corporate restructuring, including alterations of share capital and the buyback or redemption of shares, subject to the applicable statutory requirements.

The commencement of insolvency proceedings may restrict a lender’s ability to enforce its loan or security. In particular, during business rescue proceedings, a moratorium applies and legal proceedings against the company or its property may only be commenced with the written consent of the business rescue administrator or leave of the court (Section 25 of the Corporate Insolvency Act, 2017). The exercise of rights over property in the company’s lawful possession is similarly restricted without the administrator’s consent (Section 26).

A guarantee or surety given by the company undergoing business rescue cannot be enforced against that company during the proceedings without leave of the court (Section 25(2)). This restriction does not, merely by reason of the borrower’s business rescue, extend to a guarantee given by a separate third-party guarantor.

Where the company enters liquidation, enforcement and recovery are subject to the applicable insolvency regime, including the rules governing secured creditors, preferential claims and the distribution of the company’s assets. A lender’s priority will therefore depend on the nature and perfection of its security and the applicable statutory ranking of claims under the Corporate Insolvency Act, 2017. In particular, an unperfected security interest in movable property is ineffective against a liquidator or receiver (Section 5 of the MPSI Act).

Upon the insolvency of a company, the Corporate Insolvency Act, 2017 prescribes the order in which claims are paid. The costs and expenses of the winding-up rank first, followed by taxes, duties and rates payable to government and local authorities, specified employee and workers’ compensation claims, and thereafter other creditors (Section 127(1)–(2)). Creditors within the same class rank equally and, where the available assets are insufficient, their claims abate proportionately (Section 127(3)–(4)).

Secured creditors’ rights are additionally determined by the nature and priority of their security. In particular, the Act makes specific provision for debenture holders secured by a floating charge where the company’s assets are insufficient to meet the relevant preferential debts, with priority between such debenture holders determined in accordance with the MPSI Act.

The principal risks for lenders on the insolvency of a borrower, security provider or guarantor include:

• restrictions on enforcement during business rescue proceedings;
• the application of statutory insolvency priorities which may affect recoveries; and
• the potential for certain security or pre-insolvency transactions to be challenged or avoided.

In particular, an unperfected security interest over movable property is ineffective against a liquidator or receiver (Section 5 of the MPSI Act), while a floating charge created within one year before commencement of winding-up may be void unless the company was solvent immediately after its creation (Section 129 of the Corporate Insolvency Act, 2017).

This is particularly relevant where new money is advanced to a company that is already financially distressed. Lenders should assess solvency carefully at the time of lending and should not assume that security created within that period will be available on a subsequent winding-up.

Certain regulated entities are subject to special insolvency regimes rather than the ordinary insolvency procedures applicable to companies generally. In particular, financial service providers are subject to the insolvency, winding-up and dissolution regime under the Banking and Financial Services Act No 7 of 2017. A third party may not commence winding-up or dissolution proceedings against a financial service provider; such proceedings must be commenced in accordance with the special regime under that Act (Section 135). The Bank of Zambia also has power to order the compulsory winding-up or dissolution of a financial service provider (Section 127).

Licensed insurers, reinsurers and intermediaries are also subject to specific winding-up requirements under the Insurance Act No 38 of 2021, including the requirement for prior written approval of the Pensions and Insurance Authority before voluntary winding-up or dissolution (Section 136).

Insurance over assets, liabilities or interests situated in Zambia must generally be placed with an insurer licensed in Zambia (Section 166 of the Insurance Act, 2021). However, the Registrar may permit insurance to be placed with an insurer outside Zambia in the circumstances provided for under the Act.

Insurance premiums are subject to an Insurance Premium Levy of 5%, applicable to all classes of insurance business other than reinsurance. The obligation to collect and remit the levy rests with the insurer, insurance agent or broker.

Insurance proceeds over project assets may be payable to a foreign creditor where the creditor is designated as a loss payee or otherwise has rights to the proceeds under the relevant insurance and security arrangements. In fact, the prescribed security agreement under the Movable Property (Security Interest) Regulations contemplates insurance policies naming a secured creditor as an additional insured and loss payee.

Payments of principal are not subject to withholding tax, but interest payments are subject to withholding tax under Section 82A of the Income Tax Act. The applicable rate is generally 15% for payments to resident lenders and 20% for payments to non-resident lenders. However, interest payable to a bank or financial institution licensed under the Banking and Financial Services Act, 2017 is exempt from withholding tax.

The rate applicable to a non-resident lender may be reduced under an applicable double taxation agreement. Other payments to lenders, such as management or consultancy fees, may also attract withholding tax, depending on their nature.

Lenders should take into account the applicable registration and perfection fees where security is taken, including fees for the registration of security interests over movable property and mortgages over immovable property. Interest on lending and commitment and arrangement fees in the provision of credit are exempt from VAT.

There is currently no general statutory cap on the amount of interest that may be charged on commercial loans in Zambia; interest rate caps applicable to financial service providers were removed by the Bank of Zambia in 2015.

The Money-lenders Act does impose controls on loans falling within the scope of said Act: interest exceeding 48% per annum is presumed to be excessive and the transaction harsh and unconscionable, and the court may reopen such a transaction (Sections 14 and 15).

The Banking and Financial Services Act No 9 of 2026, which has been enacted but has not yet commenced, will repeal both the Banking and Financial Services Act, 2017 and the Money-lenders Act. The new Act will, however, continue to provide for Bank of Zambia regulation of lending interest rates charged by financial service providers.

Project agreements – such as EPC contracts, power purchase or offtake agreements, and concession or PPP agreements with a Zambian public sector counterparty – are typically governed by Zambian law. This reflects the location of the project and its assets in Zambia and, particularly for public sector projects, the involvement of Zambian public authorities and applicable regulatory requirements.

In relation to PPPs, the Public-Private Partnership Act, 2023 requires a PPP agreement to specify the applicable governing law and dispute resolution mechanism but does not itself mandate Zambian law; in practice, contracting authorities generally require the PPP agreement to be governed by Zambian law.

Financing agreements, including loan agreements and intercreditor arrangements, are frequently governed by English law where international commercial banks or development finance institutions are involved, consistent with regional market practice for cross-border African project financings, with New York law occasionally used where the financing involves US export credit or bond financing. Purely domestic, kwacha-denominated facilities provided by local banks are more commonly governed by Zambian law. Security documents creating or perfecting security over Zambian assets are, in any event, governed by Zambian law regardless of the governing law of the related financing agreement (see 9.3 Domestic Laws).

Certain matters are governed by Zambian law regardless of the parties’ contractual choice of law, including:

• the creation, perfection and enforcement of security over assets located in Zambia or shares in a Zambian company, under the MPSI Act, the Lands and Deeds Registry Act and the Companies Act, 2017;
• the incorporation, capital structure and governance of the Zambian project company, including any contracting authority consents required under the Public-Private Partnership Act, 2023;
• insolvency and business rescue, under the Corporate Insolvency Act, 2017;
• taxation;
• land tenure and ownership, under the Lands Act;
• sector-specific licensing, such as mining rights; and
• environmental and other regulatory approvals.

The recognition and enforcement of foreign judgments and arbitral awards in Zambia is likewise governed by Zambian procedural law, as described in 3.2 Foreign Law, 3.3 Judgments of Foreign Courts and3.4 A Foreign Lender’s Ability to Enforce, even where the underlying contract is governed by a foreign law.