ZAMBIA Trends and Developments Contributed by: Emmanuel Manda and Innocent Mung’omba, Musa Dudhia & Co.
Introduction In the last 12 months, there have been a number of key legislative interventions that are expected to sig - nificantly reshape and redefine business transactions in Zambia. These include the issuance of the Bank of Zambia Currency Directives 2025 (the “Currency Directives”) and the Geological and Minerals Devel - opment (Local Content) (Preference for Goods and Services in the Mining Sector) Regulations, Statutory Instrument No 68 of 2025 (the “Local Content Regula - tions”). In this article, we analyse the impact that the Currency Directives and the Local Content Regula - tions are likely to have on business transactions in Zambia. The Currency Directives The Currency Directives became effective on 26 December 2025, the date of publication in the Gov - ernment Gazette, and apply to domestic transactions. A domestic transaction is defined as a private or pub - lic transaction within Zambia that involves payment of a sum of money for the credit of a person resi - dent in Zambia except as contained in the schedule of exemptions. Principally, the Currency Directives require all domestic transactions to be settled in Zam - bia’s local currency, the Zambian kwacha and ngwee, except for certain transactions listed in the schedule of exemptions. While the Currency Directives do not prohibit con - tracts for domestic transactions to be denominated in foreign currency such as the US dollar, settlement of the contract price must be the corresponding amount expressed in Zambian kwacha converted at the mar - ket exchange rate. Where the parties do not agree on the market exchange rate to be used, the prevailing Bank of Zambia kwacha/US dollar mid exchange rate will be the reference rate. Some of the transactions set out in the schedule of exemptions which may be settled in any other appli - cable foreign currency include: • mining transactions involving payment to suppli - ers for highly specialised mining equipment and components; • payment of a sum of money in or towards the sat - isfaction of an existing or a future foreign currency
liability with a financial product issuer or service provider; and • the production and trading of electricity. A failure to comply with the Currency Directives may in addition to other penalties under the Currency Direc - tives expose a party to a “domestic transaction” to an administrative penalty of up to ZMW400,000 (approxi - mately USD21,000). For many years, businesses in Zambia have had a strong preference for denominating and settling domestic transactions in the US dollar rather than the Zambian kwacha. This has been particularly evident in high-value commercial transactions. The reasons for the historically strong preference for the US dollar over the Zambian kwacha include the following: • the volatility of the Zambian kwacha; • the need to hedge against inflation and currency depreciation; • the import-dependent nature of various key sectors of the Zambian economy; and • established market practice, particularly in sectors such as mining, real estate and construction. As such, pricing transactions in US dollars enabled businesses to preserve value and achieve greater cer - tainty in commercial outcomes. With the coming into effect of the Currency Directives, parties to domestic transactions are no longer legally able to settle such transactions in foreign currency, except for exempted transactions. This has introduced a significant shift in contract drafting and negotiation. In particular, foreign currency-denominated contracts now require parties to expressly address the following: • the applicable exchange rate mechanism; • the timing of conversion, including the invoice date and payment date; and • the allocation of exchange rate risk between the parties. This has in turn led to more complex and protracted negotiations, as parties seek to mitigate potential currency exchange losses arising from fluctuations in the Zambian kwacha/US dollar exchange rate. In
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