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THE ESTABLISHMENT OF SPECIAL

ECONOMIC ZONE (SEZ) IN RUFUNSA DISTRICT, LUSAKA

PROVINCE ZAMBIA

November 24, 2016

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INTRODUCTION

Many African countries continue to struggle to compete in industrial sectors and

to integrate into the global value chains that generate the goods and services that are

demanded by consumers around the globe. .SEZs offers a potentially valuable tool to

overcome some of the existing constraints to attracting investment and growing exports.

The Zambian government’s 7th National Development Plan, whose focus is to

achieve a resilient and diversified economy can only, be realized through policies that

encourage private sector participation. The diversification of the economy can only be

achieved through investment in the agriculture sector with emphasis on value addition.

The Chinese Government’s policy of “going out” encourages Chinese companies to pay

more attention to invest in the new markets. China promotes the establishment of more

and more Chinese overseas industrial and trade zones, which help increase demand for

Chinese manufactured products. African countries can learn from the experience and

lessons from the Special Economic Zones (SEZs) established in China. The SEZs have

proved to be particularly relevant for Chinese development in the past 35 years, since

they were created in 1979.

Unless there is a deliberate effort to uplift the rural economy, development in

Zambia’s rural areas will always lag behind. There is urgent need to explore and exploit

the vast rural economic opportunities so that our vision of “building an integrated

multi-sectoral approach to development that enhances inclusiveness in

development without leaving anyone behind” can be achieved. Rufunsa district is

one example of an area that has been left behind. Over 52 years after independence

Rufunsa is not connected to the power grid, has few schools and clinics which fail to

meet the rising demand of physiological needs and the aspirations of the people of

Rufunsa. To actively contribute towards the attainment of the government’s 7th National

Development Plan Goals and Objectives, Waterfalls Investment, a privately owned

Zambian company in joint partnership with Mpanshya Council has embarked on

development programme to improve the social and economic life of the people of

Rufunsa District.

The Plan

The government’s emphasis of putting the agriculture, fisheries and livestock the

focus around which other sectors will develop in an integrated manner under the 7th

National Development Plan is a step in the right direction. Communities like economic

sectors can only develop when they join hands with others to bring together human,

capital and technical resources. Zambians have engaged in agriculture since time

immemorial and yet there is nothing to indicate that. The agro-processing industry is

almost non-existent, just like copper mining where we are left with sink holes, dumps

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and fenced-off caving areas but little or nothing to show in terms of value-added

facilities.” Let us not make the same mistake with agriculture” Most people would

like to engage in Agriculture related activities but face a mountain of obstacles from

highly regulated societies to vagaries of the weather. The main sticking obstacle is

accessibility to agriculture land despite the fact that over 50 per cent of agriculture land

in Zambia lies idle. Waterfalls investment plans to fill in the gap and cut the red tape and

bureaucratic hurdles that in many occasions frustrate investors and Zambians in the

diaspora who want to play a role in revitalizing the Zambian economy through

agriculture. The company will play a facilitation role and ease the burden faced by many

in applying and obtaining title deeds, making acquisition of land by ordinary Zambians

and other investors less painful.

To kick-start the process the company entered into a memorandum of

understanding with the people of Rufunsa through a signed agreement with Her Royal

Highness Mpanshya. The agreement stipulates that waterfalls Investment ltd finds land

of approximate 25,000 hectares (ha), out of an estimated 400,000 ha available land in

Rufunsa district. The 25,000 ha earmarked for settlers is 10km away from any human

settlements in Rufunsa area. This is a deliberate policy to avoid claims of displacing

people .The company engaged surveyors to Map out the area (see map) All survey

costs were borne by Waterfalls Investment. Waterfalls Investment has now embarked

on a recruitment exercise to find local and outside investors to participate in this project.

The project aims to attract 120 farmers who will be allocated 250ha of farmland each. In

order not to leave the local inhabitants behind, It is a condition of acceptance to the

Project that each settler will run an out grower scheme consisting of 5 farmers drawn

from the local community in Rufunsa. The out grower schemes envisaged are livestock

keeping, Dairy farming, Pig farming, Goat farming and free Range chickens and quails.

In the long-term we intend to promote a forestry sector where the locals will be

the main stakeholders. Each local farmer will be allocated a hectare on which to plant

and manage Pine trees with seedlings and technical know-how provided. The long term

benefits of a forestry sector are immense .Apart from reducing the green house effects

the value chain will empower local communities to use the gum trees for commercial

purposes.

Establishment of Core Farms / Financial Institutions Cooperation

Most settlers may lack the financial and technical to develop viable farming

ventures. The promoters (Waterfalls Investment) will source core farms or enterprises to

participate in development of this project. We are targeting companies like Zambeef

Agri-serve, Zanaco to participate in Rufunsa Project. We expect these core farms and

other financial enterprises to run out grower schemes for the settlers.

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Establishment of Feeder Roads / Bridges

In the first year Waterfalls Investment intends to construct 100 km of feeder

roads in the Dambwa Area of Rufunsa. So far 12 km of the Road to the planned project

area of Rufunsa has been done. Manual land clearing is being undertaken by the local

community who we are paying K1500 per kilometre .The Feeder Roads are ten metres

wide and there is need to small bridges for settlers to drive through to the project area.

Establishment of Agri-Tour Enterprises

Apart from farming activities, settlers will be encouraged to build sleepover

chalets and other dwellings to visitors to promote tourism in the area. Rufunsa district is

endowed with beautiful mountains, but wild life such as animals and birds need to be

introduced to revitalize the area’s tourism potential. The new human settlements in

Rufunsa district will in the long-term help in establishing balanced Eco-systems. Dams

constructed by settlers for Fish farming and hydro projects will hopefully bring back bird

life and other small Animals. The beautiful high mountains are perfect for Para-gliding

activities and other sporting events like mountain climbing, cycling and running.

Establishment of Mpanshya Council

Plans are underway for the registration of the Mpanshya Council. A company

limited by guarantee and shall consist of Her Royal Highness and selected Headmen of

Rufunsa district. The aim is to in conjunction with the Rufunsa district council, the

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Mpanshya Council representing the community of Rufunsa put in place plans for the

economic development of Rufunsa district .This will involve the setting of bye-laws,

maintenance of law and order, land planning and settlements including conservation of

forests and Animals ..

Establishment of Rufunsa Corporation

A public company Rufunsa Corporation (RC) will be formed .and in partnership

with the Mpanshya council to run and administer the Rufunsa Development Programme

.RC will source funds from the general public through equity participation; seek funds

from financial institutions local and abroad .and engage with the Donor community in

Zambia and abroad ..

Power Energy is of prime importance to the Rufunsa Project and Rufunsa

Corporation in conjunction with cooperating partners intend to source funds to establish

solar power windmills and possible hydro plants in the Rufunsa Region ..

Social Responsibility

Plans are underway for the promoters (Waterfalls Investment) to construct a

school and clinic in Dambwa area of Rufunsa. The Dambwa Area has had no school or

clinic since independence of the country 52years ago. The whole Rufunsa district is in

need of a massive injection of Infrastructure building to uplift the standard of living for

the people.

Application to Government to Grant Special Economic Zone Status for Rufunsa

District

Rufunsa Development Project (RDP) promoters seek to establish a Special

Economic Zone (SEZ) on a 25 000 ha designated land in Rufunsa district, 150

kilometers east of Lusaka. The SEZ will be set aside for specifically targeted

agricultural economic activities, which will be supported through special arrangements

(which may include laws) and support systems to promote agro- development. The SEZ

programme is a tool that is used by many countries to promote trade, economic growth

and industrialization. The Rufunsa SEZ will be one of the first in Zambia to specifically

target agro-industry.

The Government support in terms of giving necessary permits and incentives for

the establishment of SEZ to the Rufunsa Development project is vital to the success of

the programme of injecting economic activities in the area. Granting a special Economic

Zone status by government will greatly assist in the implementation of this development

programme. Companies and other stakeholders will be willing to invest in Rufunsa

district with necessary incentives that come with the Special Economic zone facility.

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The Rufunsa Development Project will need to put the following incentives in

place in order to attract investors to put in place necessary infrastructure and facilities,

mainly for agro-processing hub.

Fiscal Incentives

• Exemption from all taxes and levies imposed by Local Government Authorities on

products produced in SEZ for ten (10) years.

• Exemption from corporate tax for ten (10) years.

• Exemption from VAT on utility and wharf age charges.

• Exemption from withholding tax on rent, dividends and interests for 10 years.

• Remission of Custom Duty, VAT and other taxes on raw materials and goods of

capital nature related to production in EPZs.

• Remission of customs duty, VAT, and any other tax payable in respect of

importation of one administrative vehicles, ambulances, firefighting equipment

vehicles and up to two buses.

• Treatment of goods destined to SPZ as transit cargo.

Non-fiscal Incentives

• Access to competitive, modern and reliable services available within the SEZ.

• Allowance to sell up to 20% of goods to the domestic market.

• Entitlement to an initial automatic immigrant quota of up to 5 persons during the

start-up period and subsequent processing of additional applications by SEZ.

• Exemption from pre-shipment or destination inspection requirements.

• Provision of temporary visas at point of entry to key technical, management and

training staff for a maximum of 60 days.

• Subject to compliance with applicable conditions and procedures, accessing the

export credit guarantee scheme.

• Unconditional transferability of profits, dividends and loyalties.

Procedural Incentives

• Representation from key ministries/agencies in SEZ Council to avoid

bureaucracy in decision making.

• Investors operations are under a single license issued by the SEZ Authority.

• On site customs inspection in the Export Processing Zones

• One–Stop-Service Centre by SEZ for investors, facilitation and aftercare

services.

• Rapid project approval.

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Objectives of RDP SEZ

• To create an agro-based cluster with a concentration of interconnected

producers, agribusinesses and institutions that are engaged in the same

agricultural or agro-industrial subsector, and interconnect and build value

networks when addressing common challenges and pursuing common

opportunities.

• To set up an agro-industrial park, centrally-managed platform that will offer high-

quality infrastructure, logistics and specialized facilities and services to a

community of tenants, formed by agro-industries, related agribusiness firms,

service providers and knowledge institutions.

• To ensure that the agro-based special economic zone will comprise of firms

engaged in agribusiness and agro-industrial activities and benefit from a more

favourable regulatory, business and fiscal environment than those in the rest of

the country.

• To set up an agribusiness incubator that will provide a common environment

(either physical or virtual) to RDP SEZ to have access to shared infrastructure

and networking, coaching, business and financial services.

• To promote an agricultural value chain of farms and firms and their successive

coordinated value-adding activities that produce particular raw agricultural

materials and transform them into particular agricultural and food products that

are sold to consumers.

Once established, the Rufunsa SEZ will attract investors and partners to locate

into the Food Processing Park to be made available on the 25 000ha RDP.

This project is intended to position Rufunsa as an agro-industry hub by creating

value-adding capacity and ensure that agri-commodities produced in the Rufunsa and

surrounding areas are processed locally and exported. The hub aims to host

multinational and domestic companies in the food production sector and will provide for

logistical services, warehousing, cold storage and manufacturing facilities to enhance

production efficiencies.

The Advantages of Establishing SEZ in Rufunsa:

• It will attract and bring the much needed foreign direct investments along with

domestic investments to Rufunsa.

• The Zone will generate additional economic activity in the district

• The Zone will generate foreign exchange by boosting exports.

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• It will be a platform where the indigenous companies could collaborate with

foreign companies to import technology to the country.

• Unlike the industrial corridors, SEZs have sound infrastructure with only thirty

percent of the area involved in production activities. Thus, social environment,

human resource development and environment is taken care of.

• The SEZ will provide employment as well as skill generation opportunities.

Special Economic Zones (SEZs) have become the new buzzword for African

governments, who see in them the long-awaited salvation from the poverty scourge that

has gripped the continent despite decades of structural reform programmes and

abundant mineral and other natural resources.

African countries and Zambia in particular stand to benefit not only from

collaboration with technologically advanced countries through SEZ. This concept paper

seeks to appeal to the authorities to act quickly in granting the right to set up SEZ in

Rufunsa. Zambia should not be left behind in the scramble for Foreign Direct

Investment. Zambia should be looking at SEZs as the drivers of development.

It is imperative to remember that structural adjustment programmes under the

auspices of the International Monetary Fund (IMF) and the World Bank, the so-called

Washington Consensus, have all but decimated the continent since the 1980s, leading

to increased poverty and decreased income. Prior to the era of structural adjustment in

the 1980s, the gross domestic product (GDP) of Sub-Saharan Africa (SSA) grew almost

40%, but between 1980 and 2000 it decreased 15%. And today, it stands at less than

4%. Discontent with the programmes should spur us into looking at alternatives.

According to recent World Bank, marked successes have been achieved by some of the

114 zones in Africa. These include Ghana, Kenya, Mauritius and Madagascar. Zones

that have had limited success include those in Malawi, Mali, Namibia, Nigeria and

Senegal, due to poor governance and management, lack of sufficient policy and

improper location of zones, among other reasons.

Some of China’s biggest and most successful zone operators were invited by

Sub Sahara African countries in 2006 and 2007 to bid in a rigorous two-round tender

process for the right to establish and manage SEZs. Set up specifically with funding

from the Chinese Government, these zones include: in Ethiopia, Oriental makes electric

machinery, steel and metallurgy and construction materials; in Mauritius, Jinfei focuses

on manufacturing, trade, tourism and finance; in Nigeria, Lekki specialises in transport

equipment, textile and light industries, and telecommunications, while Ogun specialises

in construction materials and ceramics, ironware and furniture, medicine, computers

and lighting; in Zambia, Chambeshi focuses on the copper industry while the Lusaka

sub-zone focuses on garments, food, tobacco, appliances and electronics.

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However none of afore mentioned SEZ’s was specifically targeting agriculture.

Rufunsa Development Project also believes that these SEZ’s should be established and

driven by government in partnership with the private sector as part of a government

drive to put Zambia on the road to an export-led growth economy of value added

products.

Apart from effective legislation, political commitment is vital to the success of

SEZs. For any SEZ to be successful it requires political commitment or support, but its

implementation must be based on clear commercial principles without political

objectives.

Rufunsa Development Project may successfully copy other SEZ model, but

it will depend more on what RDP will do with it than on the model itself. The

model’s success has been proven; Africa’s attempt at effecting economic change

through SEZs has not.

Waterfalls Investment Lltd

November 24, 2016