Despite the Ministry of Finance’s best efforts to say that the latest statutory instrument created by the recently passed Bank of Zambia law do not constitute “exchange controls,” that’s exactly how they are being understood by Zambia’s largest foreign investors.
According to an article by Andrew England in the Financial Times, mining groups such as Glencore, Vedanta, First Quantum and Vale may have to reconsider investment plans in the country considering the uncertain limitations and rules on their capital flows.
From Thursday all exporters will be required to repatriate the proceeds of exports with a value in excess of $10,000 within 60 days. If they then want to shift funds offshore, they will have to provide evidence for the planned use of the money, such as dividend payments or equipment purchase.
The FT article quotes Miles Sampa, deputy finance minister, who says only “bogus” investors have anything to fear. He also rules out further nationalisations and defends the deportations, saying those targeted were “breaking the law”.
“Somebody asked whether we are capitalists or communists, I said who is a capitalist? The Americans are bailing out banks and the Chinese themselves are now going a capitalist way,” Sampa told the FT. “So we just look at any issue as its needs to be dealt with.”
The article in the British newspaper also spoke with a financial expert who was quite critical of the government’s new policy: “It is using a sledge hammer to kill a fly. (…) It has been designed on the assumption that everybody is a criminal rather than a law-abiding citizen.”
“The concept of what they are trying to do shouldn’t be alarming to investors. I think what is slightly concerning is the route to do it doesn’t seem to have been particularly well thought out,” the executive says. “My concern is that it has an unexpected impact on the productive sector of the economy.”