Zambia powers up energy and mining
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Zambia powers up energy and mining
The Zambian government’s 2026 Budget powers up energy reform and mining oversight
By Bwalya Chilufya-Musonda and Joshua Mwamulima, Partners, and Mwansa Nachula and Precious Mwansa-Chisha, Associates, Bowmans Zambia
In the 2026 National Budget delivered on 26 September 2025, the Zambian Minister of Finance and National Planning, Dr Situmbeko Musokotwane (Minister) reaffirmed the mining and energy sector’s central role in Zambia’s economic development.
The sectors have benefitted from a suite of fiscal incentives, tax reforms, legislative reviews and infrastructure commitments aimed at addressing severe energy shortages, deepening oversight and unlocking investment.
Powering up the energy sector
First, the Minister proposed to increase the intending trader period for hydro-electricity generation for VAT purposes – to 10 years from seven years. This means that eligible businesses in the hydro-electricity subsector, will now be able to claim VAT on inputs for up to 10 years, compared to the current seven-year period.
Second, the Government extended ‘energy priority sector’ incentives to include the transmission and distribution of electricity. Specifically, projects involved in these areas will now receive customs duty relief.
Currently, customs duty relief is provided for machinery and equipment used in power station installation under the Investment, Trade and Business Development (Priority Sector Declaration) Order, which prioritises electricity generation. This relief will now also extend to the transmission and distribution segments.
Third, the Government proposed establishing a ZMW 500 million Electricity Fund (Fund) to strengthen electricity security and ensure stable supply. This is in addition to preceding key reforms such as the Multi-Year Tariff Framework, Electricity Open Access Framework, Net Metering Policy Framework and the Energy Single Licensing System.
While operational details of the Fund have not yet been published, it may support liquidity by ensuring timely payments to IPPs, contribute to transmission infrastructure, or subsidise rural electrification. The Fund could also provide a buffer to meet domestic demand through purchases from regional power markets such as the Southern African Power Pool (SAPP).
Lastly, from a legislative perspective, the Government is proposing to review key energy legislation, namely the Energy Regulation Act and the Electricity Act. A mid-term review of the National Energy Policy 2019 and Implementation Plan will also be undertaken. These reviews are intended to support the deployment of renewable energy and promote open access to the grid.
Improving mining oversight
Copper production in Zambia reached 820 676 metric tonnes in 2024, with the Government targeting one million tonnes in 2025 and three million tonnes annually by 2031. This growth trajectory is supported by a stable fiscal regime, regulatory reforms and increased investor confidence.
Accordingly, the Minister announced that the Government will construct mineral marketing centres in Mumbwa and Rufunsa to support the formalisation of artisanal and small-scale mining and improve transparency in mineral trading.
The centres, expected to be operational by the end of 2026, will serve as regulated platforms for the sale and purchase of minerals. This will simultaneously enhance price transparency, reduce exploitation of small-scale miners, facilitate tax compliance and traceability of mineral transactions, and support the integration of artisanal mining into formal supply chains.
The Minister also announced that the Minerals Regulation Commission, established under the Minerals Regulation Commission Act 2024 (MRC Act), will become operational in 2026 to oversee compliance, licensing and coordination with the Zambia Revenue Authority (ZRA) to ensure adherence to tax laws across the sector.
From a fiscal and policy perspective, regarding mining operations and investment, the Minister proposed the removal of the 10-year carry forward limitation on disallowed interest deductions under the Income Tax Act.
Other proposals include the extension to maintain books of accounts in United States dollars for mineral processing businesses. This measure aims to provide greater flexibility in financial reporting for mineral processing businesses, facilitating more efficient business processes and aligning accounting practices with operational realities in the sector.
The Minister also clarified that machinery and equipment required in mining and exploration are Customs Duty exempt. This measure is aimed at providing clarity on the provisions of Regulation 96 of the Customs and Excise (General) Regulations of 2000, that customs duty exemption is on the machinery, equipment and other goods used in geothermal, oil and gas exploration.
Furthermore, the Minister proposed to allow the recognition of mineral valuation certificates (MVC) under the MRC Act as an alternative basis for determining the free-on-board (FOB) value of exported minerals.
This measure intends to harmonise customs valuation which mandates only transaction-based FOB pricing with the minerals regulation framework that introduced the MVC as the official mechanism for valuing mineral exports.
Last, the Minister proposed an increase in the turnover threshold for artisanal and small-scale mining from ZMW 800 000 to ZMW 5 million to align with the standard turnover tax threshold and enhance compliance in the sector.
Currently, operators with an annual turnover of ZMW 800 000 or less pay presumptive tax at 4% of turnover, after deducting the mineral royalty tax.
A shift towards greater formalisation
The establishment of marketing centres, formalisation of artisanal trade and operationalisation of the Minerals Regulation Commission in Zambia’s mining sector signal a shift towards greater formalisation and oversight. In the energy sector, extending fiscal relief, establishing a liquidity fund and reviewing core legislation will assist in building a more resilient and investor-ready grid. Together, these developments are expected to improve transparency, enhance compliance and catalyse long-term growth.
Image: Zambia is targeting one million tonnes of copper production in 2025. Image credit: Leon Louw for WhyAfrica
Zambia powers up energy and mining