Zambia: From Nationalisation To Corporate Governance

Last Updated: 31 August 2017
Article by Chibamba Kanyama

After a history of state-owned industry, Zambia's Institute of Directors is spearheading a governance push.

Until the beginning of this century, little was known about corporate governance in Zambia and the reason for this lies in the structure of the its economy.

After gaining independence from British rule in 1964, Zambia nationalised nearly all industries, including the copper mining companies where it acquired majority shareholding. Nationalisation defined a new form of corporate governance in which the government of independence leader Kenneth Kaunda created superstructures that controlled, directed and supervised all state-owned enterprises.

An example was the Zambia Consolidated Copper Mines (ZCCM), which controlled all mining activities, while the Zambia Industrial and Mining Corporation (Zimco) controlled all other companies involved in commerce, transport, manufacturing, media, finance and even mining activities.

The few privately-run enterprises were largely family owned with their own corporate control structures. For example, Abe Galuan, an investor who controlled much of the land in capital city Lusaka, had a string of companies that had family members and a few local businessmen as company directors.

Economic shake-up

Signs for what would become a shake-up to Zambia's corporate governance standards emerged soon after the liberalisation of the economy in the early 1990s. The new government of former trade unionist Frederick Chiluba that took over power from Kaunda embarked on major economic and political reforms. Nearly 300 state-owned enterprises had to be privatised.

By the mid-1990s, Zimco and ZCCM had collapsed. The Lusaka Stock Exchange (now Lusaka Securities Exchange) was born, signalling total transformation around how companies would be managed.

New regulatory standards affecting all incorporated companies were introduced to enhance transparency and accountability. This followed the closure of nine commercial banks in a space of five years, largely because of poor governance.

Then, at the close of the 20th Century, the Institute of Directors Zambia (IoD) was born.

Shaping standards

The IoD came on the scene in 1999, and was then immediately embraced by some of the high-profile individuals that had represented private capital interests during the Kaunda era.

David Phiri, a respected business leader who sat on several private sector boards, was installed as the first president of the institute. That gave IoD the traction as a respected leader in shaping corporate governance standards in Zambia.

"In terms of numbers, the institute has trained nearly 3,000 directors from quasi-government and private-sector institutions"

The contribution of the IoD towards good corporate governance can best be seen through its impact. In terms of numbers, the institute has trained nearly 3,000 directors from quasi-government and private-sector institutions.

Qualitatively, and as stated by the 2016 Report on Corporate Governance in Zambia by the Africa Corporate Governance Network, the IoD has developed a good number of competent directors in both the private and public sectors. It has also always been called upon to offer regular orientation and training programmes for newly inducted directors.

State-owned enterprises

The most pronounced challenge to, or apparent failure of, corporate governance standards, come from remaining state-owned enterprises.

The most recent auditor general's reports have signalled existing gaps in the way these entities are managed; for example, 27 institutions had not produced audited financial statements for the financial years up to 31 December 2015, contrary to their enabling acts and the tenets of good corporate governance.

The reports further exposed glaring irregularities and poor corporate governance. Among the main issues raised were poor financial and operational performance, relatively little awareness of corporate governance systems, weak enforcement, transparency, accountability, unethical behavior, and unsatisfactory balance in skill-sets and representation.

The issue of tenure is also critical in promoting corporate governance. Evidence shows that every government that comes to power, and even changes of a minister, leads to dissolution of boards. The IoD has made efforts to resolve this problem through private discussions with government authorities.

Listed companies

Despite the notable improvements in corporate governance practices in the private sector, listed companies also still need to boost standards so that they are benchmarked against those practiced internationally.

The Zambia Lusaka Securities Exchange (LuSE) is relatively small, with total market capitalisation standing at US$5 billion (that includes shares of the dual-listed Shoprite Chain stores worth about US$2.5 billion).

Given the small size of the LuSE and perceived low spillover effects of any risks, many listed companies lag behind their peers on the global market in terms of responsiveness to market demands and pressures.

To keep pace with international standards, the LuSE has made efforts to demutualise in order to enhance a strong governance culture within its own structures and among the listed companies. Some of the new measures include reducing shareholder and broker board representation from eight to two.

"The impact of demutualisation is hard to ascertain, but it does point to a desire for more transparency"

The motivation for demutualisation is summed up in the new LuSE board charter: 'The board recognises that the LuSE, by virtue of the crucial role that it plays in respect of the economy of Zambia as well as its regulatory role, sets the benchmark against which companies listed on the exchange will measure their corporate governance practices.'

The impact of demutualisation is hard to ascertain, but it does point to a desire for more transparency. The LuSE may need to define certain responsibilities, roles, and disclosure requirements for its directors.

One of the critical issues being discussed informally by the LuSE members is the conflict of interest among directors who sit on the LuSE board when they already sit on the board of a subsidiary of a listed company.

Looking to the future

There are many factors that will shape the future of corporate governance in Zambia, with the government unsurprisingly playing a significant role.

In the past few years, the government has become more businesslike, emphasising profit as the primary motivation for all state-owned enterprises' boards. Although an invisible hand remains in the way boards are run, most of those appointed to directorships are seeking greater independence than before.

The creation of the Industrial Development Corporation to control, direct and supervise state-owned enterprises has some sharp reminders of previous failures under Zimco, something that worries many.

However, the government believes this will improve corporate governance standards for entities that have remained under-capitalised and faltering.

The future of corporate governance is also being shaped by emerging business links between small and medium enterprises and the large multinational corporations. This interaction is leading to adoption of corporate governance standards through things like mentorship, financing requirements and supply-chain benchmarks.

For corporate governance to permeate all sectors, there is an immediate need to strengthen human resource capacities, to continuously review various acts (such as the Companies Act and the Securities Act), increase public awareness and, as is under discussion, for the IoD to assume greater powers to regulate its members.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions