In keeping with the era, the Budget had a noticeable environmental, social, and governance (ESG) tint, judging from the prioritisation of ESG issues in the country’s quest for development.
It is worth noting that the government has previously committed to improving the legal and regulatory framework and promoting a green economy. Particularly, in the 2023 budget, it was stated that a carbon credit trading framework and climate change bill would be prepared; however, this has not occurred; instead, a recommitment has been made in the 2024 budget.
Regardless, it is commendable that the government has maintained its tone of ensuring that development pathways are sustainable. Below are some parameters across the ESG pillers:
Environment
Under the Environmental pillar of ESG, retrieving energy from renewable sources has been widely encouraged in the national budget for 2024. The government has proposed to remove customs duty on machinery, equipment, and other goods designed for geothermal energy activities to promote geothermal energy.
Other measures to support the green economy and climate change mitigation include the proposal to remove customs duty on electric motorcycles, electric vehicles, electric buses, and electric trucks, as well as attendant accessories such as charging systems, and to reduce excise duty on hybrid vehicles designed for passenger transportation to 25% from 30%.
In addition, the government has reaffirmed its commitment to improving the legal and regulatory framework to encourage green finance and embed environmentally friendly practices in the financial sector by 2024.
Another intriguing ESG policy revealed is the government’s pledge to restructure the tourism industry and focus on sustainable tourism, which includes cultural tourism, avitourism, health tourism, and sports tourism.
Ease of doing business
On its way to achieving the best regulatory performance, the government indicated that it will evaluate the legislation to reduce the time it takes to issue decision letters regarding environmental impact assessments (EIAs). This will also guarantee that decisions on full applications will be completed within the timeframe provided, after which they will be declared accepted, and will also hasten the realisation of domestic investment, especially sustainable initiatives.
Governance
Under the Governance pillar, to enhance the quality of balance of payments statistics and strengthen the anti-money laundering and counter-financing of terrorism regime, it was announced that the government will fully implement the Electronic Balance of Payment Monitoring System.
The Minister specifically stated that the Bank of Zambia (BoZ) has developed an Export Proceeds Tracking Framework that will, effective 1 January 2024, require all exporters to route export earnings through an account held at a bank domiciled in Zambia while retaining full rights and control over the funds.
In addition, the minister stated the government’s intention to promote effective international taxation and combat tax evasion. It was announced that Zambia will join the Global Forum on Tax Transparency and Information Exchange for tax purposes.
The Global Forum facilitates the exchange of tax information among member countries, ensuring transparency and combining illicit financial flows. For example, the Zambia Revenue Authority, the country’s tax authority, will be able to request a particular piece of information to progress a tax investigation and obtain information necessary to ensure tax compliance, such as on cross-border investments.
Other tax governance measures include the consolidation of legislation relevant to tax administration. Consultation to introduce a unified Tax Administration Act (TAA) is expected to commence in 2024. The TAA will, among other things, allow for the harmonisation of tax treatment across different tax kinds and the simplification of tax administration.
Further, the government intends to amend the Zambia Revenue Authority Act in 2024 to include a whistleblower award. This will allow for the incentive of whistleblowers who share information, resulting in tax recovery.
Social
Under the Social pillar of ESG, and in an attempt to alleviate immediate challenges faced by the most vulnerable, the government will, in 2024, increase the allocation under the Public Welfare Assistance Scheme to cater for 40,000 beneficiaries from the current 16,000. It was also announced in the national budget 2024 that the three industrial yards earmarked for construction in Chinsali, Choma, and Kabwe will create employment opportunities, especially for women and youth.
The scope of the Social pillar goes a little deeper—There are announced initiatives to continue providing livelihood support for women and access to secondary education for girls in extremely poor households through the Girls’ Education and Women’s Empowerment and Livelihoods Project. Particularly, increasing the number of beneficiaries to 129,400 beneficiaries in 81 districts from the current 116,891 beneficiaries in 76 districts, by April 2024.
Conclusion
The Zambian government, at the municipal, provincial, and central levels, has an opportunity to support strong and consistent ESG reporting, raise the bar for performance, communicate success to different stakeholder audiences, and provide clarity for investors.
The various ESG actions are expected to have knock-on effects and help businesses operating in the country. They will also help the government by building its brand and its investment attractiveness, considering that a large and growing portion of global investors use ESG factors to direct where their money is placed.
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