Public Private Partnerships
Author: Ernest Lyatitima Mate
07 November 2022
The preferred project structure
Recent policy changes including many tax incentives suggest that public private partnerships (“PPP’s”) are the government’s preferred structure for the many infrastructure projects that it has planned. To this end, the government plans to repeal and replace the Public Private Partnership Act with a more enabling statute. We already see PPPs being used for transport and logistics projects including road and border posts; and we expect to see many more considering the recent policy announcements in the 2023 National Budget, for such projects.
Priority projects for the government in the PPP space include the development/improvement of the following roads: Lusaka-Ndola dual carriageway, Chingola-Solwezi, Ndola-Mufulira, Chingola-Kasumbalesa and the Lumwana-Kambimba roads; and border posts at Sakania, Chalwe, Mokambo, Kambimba, Kipushi, Katima-Mulilo, Mpulungu, Chanida, Mwami, and Nakonde.
Notably, the government also hopes to improve the rail network to facilitate trade in the region. Further, the government plans to ensure that at least 30% of bulk cargo is moved off the roads to the railway line through improvements to rail infrastructure. It is noteworthy in this regard that the Railways (Transportation of Heavy Goods) Regulations, Statutory Instrument No. 7 of 2018 already requires transporters of bulk goods such copper and cobalt concentrates, coal, cement, sugar, sulphur, and fuel to transport 30% of such goods by rail.
Tax incentives announced in the 2023 budget to support PPPs include the following:
- a reduction in the tax chargeable on income received by a special purpose vehicle (“SPV”) under a PPP for the first five years that a project makes profit by 20% of the tax which would otherwise be chargeable on that income;
- the introduction of an accelerated rate of wear and tear allowance on a straight-line basis, not exceeding 100 % for any implement, plant and machinery acquired and used under a PPP;
- Value Added Tax (“VAT”) relief on imported equipment and machinery where duty is waived under the Customs and Excise (Regulations) for a PPP project;
- an extension of the provisions under the VAT (General) Regulations of an “intending trader” to SPVs for PPP projects for a period of four years. The measure will ensure that a SPV established under a PPP can claim input VAT in its set up phase for up to four years; and
- removal of Customs Duty on plant, machinery and equipment acquired for use in a PPP project.
For a further discussion on PPPs please feel free to contact us.
+260 211 372 300 / 01 / 04
+260 211 372 300 / 01 / 04