On 19 April 2024, the Zambian government enacted Statutory Instrument No. 25 of 2024 (SI 25) to increase the fees payable to many government ministries, including fees relating to corporate transactions and governance.
The SI 25 increases the fee unit and penalty units to ‘Forty Ngwee’ from ‘Thirty Ngwee’, thereby increasing some costs of doing business in Zambia.
The increase follows the Cabinet’s approval of the recommendation by the Minister of Finance and National Planning to amend the Fees and Fines (Fee and Penalty Unit Value) Regulations, 2014, during the 5th Cabinet meeting on 18 March 2024.
Many fees and fines payable to Zambian government ministries are denominated in statutes and regulations as ‘fee units’ or ‘penalty units’. The Kwacha (ZMW) value of the units is set according to the Fees and Fines Act, Cap. 45 of the Laws of Zambia, and is varied by statutory instruments.
Therefore, many payments to government ministries will be affected by this change, including payments to companies and land registries for the registration of mortgages, charges, and other security interests.
The new fee unit and penalty units were formalised by a minute of 26 April 2024 (Treasury and Financial Management Circular No. 12 of 2024), which directed all government institutions that collect revenue to make all necessary adjustments to the charges under their jurisdiction with immediate effect following SI 25.
The Rationale Behind Penalty Units
You might be wondering why penalty units are used at all. Surely it would be much easier to simply state the maximum fine for an offence in a Kwacha amount?
Not necessarily so.
If the fines are set out in whole Kwacha amounts, inflation effectively means that fines that were once considered substantial will eventually become redundant.
To avoid the administrative costs associated with constantly updating legislation with new fines, penalty units are used as a means of easily adjusting fines in line with inflation.
This value is then multiplied by the specified penalty units for an offence to give the maximum fine for that offence. For instance, if the law imposes 5,000 fee units for a service, the Kwacha equivalent for such a service will now be ZMW2,000 (5,000 x ZMW0.40).
The rate for penalty units is indexed periodically (i.e., each financial year) so that it is raised in line with inflation.
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