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

The document analyzes Zambia's energy sector and the incentives provided by the government to attract private investment in renewable energy. It details a framework of fiscal incentives (tax exemptions on dividends, import duties, and corporate tax), financial incentives (grants from the Rural Electrification Fund and government-backed loan guarantees for ZESCO), and other support services provided by the Zambia Development Agency (ZDA) and the Office for Promoting Private Power Investment (OPPPI). While stakeholders report a generally positive trend and increased interest in projects, the report notes a lack of transparency regarding the actual costs of these incentives and a need for greater legal clarity regarding which renewable energy technologies qualify for support.

• Zambia possesses significant untapped renewable energy potential across multiple technologies, with hydropower resources estimated at 6,000 MW, of which 1,760 MW has been developed. Bioenergy resources are estimated to support approximately 500 MW of electricity generation, and solar radiation levels are high, with a potential energy output of approximately 5.5kWh/m2/day.
• The Zambian government provides a tiered system of fiscal incentives 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 access 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 exemption for the first five years of profitability.
• Financial support for renewable energy is administered through several mechanisms: the Rural Electrification Fund, which is funded by a 3 per cent levy on electricity consumption; the Rural Electrification Authority (REA), which can provide up to 100 per cent capital support for mini-hydro and mini-grid projects; and government-backed loan guarantees, though the latter are only available to the state-owned ZESCO.
• The energy sector was officially declared a priority sector in 2011 via Statutory Instrument No. 15 of 2011, expanding the eligibility for ZDA incentives beyond just mini hydro power plants to include major power plant projects.
• Stakeholders indicate that the Investment Promotion and Protection Agreement (IPPA) is a critical milestone for project development, as it defines the financial support available and enables financial appraisal. Several projects, including the Lunsemfwa Lower/Mkushi River hydro power project, have progressed through the IPPA process.
• There is a significant lack of transparency and data regarding the costs of investment incentives, making it difficult for the public or decision-makers to determine if these measures provide good value for Zambian citizens.
• The report identifies a need for greater legal clarity in the ZDA Act, as the current framework primarily refers to mini hydro, thermal, and solar photovoltaic (PV), leaving the status of large hydro, biomass, geothermal, and wind energy 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} }