Investment Incentives for Renewable Energy in Southern Africa: Case study of Zambia

This case study examines the investment incentive landscape for renewable energy in Zambia as of December 2012. It details the country's energy sector structure, the resource potential for various renewable technologies, and the specific financial and fiscal incentives provided by the government to attract private investment, while noting a lack of transparency regarding the costs of these incentives.

• Zambia's electricity generation is heavily dependent on hydropower, which accounted for an estimated 99.7 per cent of the country's electricity in 2010. The state-owned Zambia Electricity Supply Corporation Limited (ZESCO) owns the vast majority of generation capacity, totaling 1,744 MW out of an estimated 1,860 MW total.
• The government provides a variety of financial incentives for renewable energy, including the Rural Electrification Fund—funded by a 3 per cent levy on electricity consumption—and capital support of up to 100 per cent for mini-hydro and mini-grid projects through the Rural Electrification Authority (REA). Additionally, ZESCO can access government-backed loan guarantees, though this facility is unavailable to private companies.
• Fiscal incentives are tiered based on investment size and sector priority. Investors contributing at least US$10 million, or US$500,000 in a priority sector or Special Multi-Facility Economic Zone (MFEZ), can receive a 0 per cent tax rate on dividends for five years, 0 per cent import duty on raw materials and capital goods for five years, and a full corporate tax holiday for the first five years of profit.
• Zambia possesses significant untapped renewable energy potential across several technologies: hydropower resources are estimated at 6,000 MW (with 1,760 MW developed), and biomass resources could potentially support 500 MW of electricity generation. Solar radiation is considered high, with potential output of approximately 5.5kWh/m2/day, while wind resources are generally low to fair, averaging 2.5 m/s countrywide.
• The Zambia Development Agency (ZDA) and the Office for Promoting Private Power Investment (OPPPI) serve as key facilitators for investors. The OPPPI specifically helps developers navigate the complexity of permits and licenses and negotiates Power Purchase Agreements (PPAs), which may offer prices above market rates to incentivize generators.
• There is a critical lack of government data regarding the actual costs of investment incentives, making it difficult to determine if they provide good value for citizens. Furthermore, the ZDA Act is criticized for lacking legal clarity, as it specifically mentions only mini-hydro, thermal, and solar PV, leaving the status of other renewables like wind and geothermal ambiguous.

APA

Walimwipi, H. (2012). Investment Incentives for Renewable Energy in Southern Africa: Case study of Zambia. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/investment_incentives_zambia.pdf

Chicago

Walimwipi, H. Investment Incentives for Renewable Energy in Southern Africa: Case study of Zambia. International Institute for Sustainable Development, 2012. https://www.iisd.org/system/files/publications/investment_incentives_zambia.pdf.

Wikipedia

{{cite report |last1=Walimwipi |first1=H. |title=Investment Incentives for Renewable Energy in Southern Africa: Case study of Zambia |publisher=International Institute for Sustainable Development |date=December 2012 |url=https://www.iisd.org/system/files/publications/investment_incentives_zambia.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{walimwipi2012investment, author = {Walimwipi, H.}, title = {{Investment Incentives for Renewable Energy in Southern Africa: Case study of Zambia}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = dec, url = {https://www.iisd.org/system/files/publications/investment_incentives_zambia.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }