Manufacturing Sector

i. Overview
The manufacturing sector in Zambia accounts for about 7.7% of the country’s Gross Domestic Product (GDP) and has been growing at an average annual growth rate of 3% in the last five years (since 2011). Growth in the sector is largely driven by the agro processing (food and beverages), textiles and leather subsectors. Secondary processing of metals is another main activity in the sector, including the smelting and refining of copper and related metal products. Production of fertilizers, chemicals, explosives and construction materials, wood and paper products are examples of activities in this sector.

Given that the manufacturing sector is of vital importance to the country’s economic growth, the Zambian government has put in place measures to support manufacturing activities, such as the establishment of Multi-Facility Economic Zones (MFEZs) and Industrial Parks and provision of sector-specific investment incentives.

ii. Opportunities for Investment in the Manufacturing Sector
The priority areas for investment in the manufacturing sector include; food processing, textiles and clothing, mineral processing, chemical products, engineering, leathering, electronics, pharmaceuticals and packaging products.

iii. Incentives in the Manufacturing Sector
a. Refund of Zambian Value Added Tax (VAT) on export of Zambian products by non – resident businesses under the Commercial Exporters Scheme;
b. Guaranteed input tax claim for two years prior to commencement of production;
c. Income from organic and chemical manufacturing of fertilisers is taxed at 15%;
d. capital allowances on industrial buildings used for the purposes of  manufacturing shall be entitled to a deduction of 10% in case of low cost housing and 5% for other industrial buildings of the cost of the building;
e. Persons who incur capital expenditure on an industrial building are entitled to claim a deduction called Initial Allowance at 10% of the cost incurred in the charge year in which the industrial building is first brought into use;
f. Any person who incurs capital expenditure on an industrial building is entitled to an Investment Allowance at 10% of such an expenditure in the first year that the building is used for manufacturing purposes;

g. 0% Customs Duty on machines-tools (including presses) for working metal by forging, hammering or die stamping, bending, folding, straightening, flattening, shearing, punching or notching;

h. 0% on machines or ceramics, concrete, asbestos-cement or like materials for cold working glass;

i. 0% Customs Duty sawing machines and grinding machines; and

j. zero percent duty for machinery for soldering, brazing or welding.