Augustine Clement

In the few years leading up to his election, President Sata strongly voiced opposition to various government actions under his predecessor’s rule, alleging them to be contrary to public interest and  and marred with unfair and corrupt practices. On his accession to power, President Sata promised to look into the activities of the past government including the sale of two of the country’s most prominent institutions, Finance Bank of Zambia and Zamtel to foreign investors.

In October 2011, the Bank of Zambia officially reversed the $5.4 million sale of Finance Bank to South Africa’s FirstRand Group following a presidential order.[i] On the 24th of January 2012, President Sata also ordered the reverse of the sale of Zamtel following the final report of the commission of inquiry into its sale. Aside from the investigations ordered into the sale of Finance Bank and Zamtel, President Sata upon swearing in his new Director of Public Prosecutions, Mutemba Nchito, ordered the launch of a wide-scale investigation into the privatisation of Roan Antelope Mining Corporation of Zambia, Kagem Mining, Lima Bank and the privatisation of Hotel InterContinental in Livingstone – all of which he believed were wrought with corruption.[ii] With the reverse of two major investment transactions and the looming threat of future actions against other investors in relation to the privatisation of other institutions, there is a real cause for alarm by investors, both current and future. It is also certain that while all this is said to be done in the public interest, the immediate and perhaps long term cost to the economy and the taxpayer will certainly outweigh the benefits.


The Zambia Telecommunications Company (Zamtel) came into being in 1994 following the passing of the Telecommunications Act (Chapter 469 of the Laws of Zambia). This led to the splitting up of the Post and Telecommunications Corporation (PTC) and its services into the Postal Services Corporation (created under Chapter 470 of the Laws of Zambia) and Zamtel, responsible for the country’s telecommunications services under the supervision of the Communications Authority (CAZ). The Telecommunications Act has since been repealed and replaced with The Information and Communication Technologies Act No. 15 of 2009, which assigned The Zambia Information and Communication Technology Authority (ZICTA) as the regulatory body.

Being the largest telecommunications provider and 100% government owned, Zamtel enjoyed a wider scope of operating services than its local competitors and had a monopoly in the public switched telephone network (PSTN)[iii] and in the provision of Voice of Internet Protocol (VoiP)[iv]. Over the years however, Zamtel became increasingly inefficient, lacking the resources and vigour to modernise and compete with other international telecommunications competitors.[v]

In 2009, the Zambian government (then under MMD) made the decision to privatise Zamtel. In June 2010, 75% of shares in Zamtel were sold for US$257 million to Lap Green Group leaving the Zambian Government still owning 25%.

The Lap Green Group has invested widely in the African markets, providing voice, data, fixed internet and business continuity services to more than 5 million customers. Its controlling interest in Zamtel added on to its portfolio of controlling interests in Oricel Green (Cote D’ivoire, 75%); Rwandtel Rwanda, 80%); Sonitel (Niger, 51%) and UTL (Uganda, 51%). Lap Green in turn, is wholly owned by Libyan African Investment Portfolio. However, due to UN sanctions freezing the assets of Libya’s former president, Gaddhafi, the fund’s assets were also frozen. Consequently, Lap Green is said to have suffered losses and looking to re-evaluate its investments.[vi]  It is further reported that Lap Green’s operations around Africa have been severely curtailed through either restrictions on its management functions (in line with UN sanctions) or loss of its operating licence.[vii]




The sale of Zamtel proceeded amidst strong opposition from various quarters including prominent businessman and chairman of Unitel Communication, Enoch Kavindele, then opposition party – Patriotic Front, led by Michael Sata, and various civil rights organisations. The main allegations against the sale were that it was marred with illegality, procedural irregularities, corruption and in any event, contrary to public interest.

 Unitel Communication in partnership with Vodacom (a South African licensed mobile company), has been embroiled in an incessant legal dispute with the Zambian communications authorities over its 15 year mobile operating license which was awarded in 2001 following a tender process for a fourth mobile operator in Zambia. However, CAZ  revoked Unitel/Vodacom’s  licence, citing inoperable conditions  such as insufficient technological spectrum within which Vodacom could operate, as these had been taken up by the other existing mobile companies, including Zamtel. The High Court  of Zambia upheld the validity of the licence and cited CAZ for being in breach  of its duty to provide the adequate spectrum within which the company could operate. There is a pending appeal against the High court judgement in the Supreme Court as well as an injunction in favour of Vodacom/Unitel which in addition to other restrictions, restrains the authority from granting a licence to any other national mobile cellular operator until after the determination of the appeal in the Supreme Court.

It was alleged that in other to enhance the saleability of Zamtel, the former president, Rupiah Banda Banda  prohibited the issuing of any new mobile phone licence until 2015, thereby restricting the number of mobile service providers to 3 (to ensure Zamtel found “its feet”).[viii] Statutory Instrument No. 111 of 2009 issued under the Information and Communication Technologies Act No. 15 of 2009 provided for this restriction. The official justification given by the government was that allowing unrestricted entry into the mobile market  would result  in too many players in the market jostling for a few subscribers, which  could eventually force others to exit the market due to unattractive profit margins, despite the substantial investments that they put into their mobile network operations. The government further stated that the market could only be opened up to new entrants once it had attained a certain level in both subscription and potential which  would  enhance continued profitability of all market players. The restriction  is still in place and the current government has indicated that it will only reverse it once the issues relating to the sale of Zamtel are resolved.[ix]

In October 2011, pursuant to a presidential directive, a public inquiry into the sale of Zamtel was commissioned with the minister of justice, Sebastian Zulu S.C. as its chairman. Following the release of the final report of the commission of inquiry, and having accepted it without reservation, it was announced on 24th January 2012 that President Sata found it both desirable and expedient to compulsorily acquire the 75 per cent shareholding of Lap Green Network in Zamtel. He consequently ordered the dissolution of its board of directors and appointed Dr Mupanga Mwanakatwe as Chairman and acting Chief Executive Officer in a move towards regularising the affairs of the company. Prior to this announcement, on 21 January, the Drug Enforcement Commission (DEC) froze the assets of Zamtel (including bank accounts), on grounds that it was conducting a criminal investigation into alleged money laundering activities. Lap Green challenged the DEC’s action before the High Court, but lost.


The main findings of the commission of inquiry chaired by the Minister of Justice, Sebastian Zulu, S.C., were that:

  • Lap Green failed to meet all the three mandatory prequalification criteria set out in the tender documentation;
  • Zamtel was grossly undervalued due to lack of a thorough, detailed and professional evaluation;
  • The appointment of RP Capital Partner Cayman Islands under a memorandum of understanding was irrational and irregular without any evidence relating to due diligence into their credibility and suitability to act as valuators and subsequently as transaction advisors;
  • The Zambia Electricity Supply Corporation (ZESCO), a government owned entity, was forcibly made to enter into an agreement, the Indefeasible Right of Use Agreement, granting the full use and majority (80%) benefits of its current and future optical fibre networks to Zamtel prior to its sale, so as to make Zamtel a more attractive investment, despite the fact that ZESCO had already invested over $20 million on the project and was operating it on a very profitable basis;
  • The Cabinet had acted in haste in approving the valuation of Zamtel’s assets and proceeding with the sale without sufficient analysis, given the magnitude, complexity and implications of the full valuation report and the transaction;
  • The persons appointed to constitute the negotiating team were not ‘independent’ as required under Section 40(1) of the Zambia Development Act and made concessions amounting to over US$440 million to the detriment of the government and Zamtel;
  • The government had to date, only received the sum of US$15 million as proceeds for the sale of Zamtel and was owed US$ 13.3 million, being the balance of the proceeds from the sale.

The findings in the report of the commission of inquiry into the sale of Zamtel provides a very compelling case for the immediate reversal of the sale and raises a lot of issues of real concern and of public interest. However, the findings lack real credibility in the sense that it was constituted by the president’s own hand-picked Minister of Justice and several individuals who have found favour and position in the government of the day. While there are those who will vouch for the integrity and professionalism of the Commission, to the wider public however, the commission was not independent.  Furthermore, taking into consideration President Sata’s statement well before he constituted the commission, that he would reverse the sale of Zamtel, the commission could be  deemed as having a predetermined course of action and conclusion.




The principal concern for investors is the government’s compulsory acquisition of shares in privatised institutions, against a backdrop of legally binding contracts into which the government voluntarily entered. What is increasingly worrying is that prior to ascension to power, the then opposition party (now ruling party) PF, threatened this course of action and given the haste in which such action was taken, it appears, and rightly so, that the decision to reverse the various transactions relating to the sale of Zambian institutions to foreign investors was politically motivated, rather than based on solid evidence of the alleged illegality and corruption. Given the lack of due process or initiatives aimed at seeking amicable arrangements, or an agreement between the government and Lap Green,[x] investors   are now most likely to be of the opinion that the power to compulsorily acquire is easily evoked by the Zambian government. This in turn raises the perceived risks in investing in Zambia, making it more costly to invest in the country because for instance, lending institutions that investors may approach will charge higher rates of interest because of the higher risk.  Furthermore,  investors will have to take on board protective measures such as insurance through such organisations as the Multilateral Investment Guarantee Agency (MIGA) who insure cross-border investments. The higher risks and costs in turn will most likely reduce the number of potential investors.

Compulsory acquisition allows for governments to acquire an asset or investment without the owner’s permission on grounds of public interest and especially where it is either impossible or impractical to buy the asset by agreement. By virtue of its very forceful nature, this type of action should not be one that can be evoked easily and, it should be used in line with clearly identified guidelines that not only prescribe and require strong justification for such action, but also provide safeguards to prevent its abuse and ensure fair treatment (which includes adequate notice and compensation)  to persons whose property is the subject of the acquisition.

Compulsory acquisition goes against the basic fundamental rights relating to one’s right to property enshrined in various international treaties including the Universal Declaration of Human Rights 1948 (Article 17) and the African Charter on Human and People’s Rights (Article 14) and, enshrined under Articles  11(d) and 16(1) of the Constitution of the Republic of Zambia.[xi] Article 16(1) of the Constitution provides that property may only be compulsorily acquired by or under the authority of an Act of Parliament which provides for payment of adequate compensation for the property or interest or right to be taken possession of or acquired. The Zambia Development Agency Act No. 11 of 2006 (ZDA Act) under Section 19(1) states:

An investor’s property shall not be compulsorily acquired nor shall any interest in or right over such property be compulsorily acquired except for public purposes under an Act of Parliament relating to the compulsory acquisition of property which provides for payment of compensation for such acquisition.

Section 19(2) further requires that any compensation payable should be made promptly at the market value and be fully transferable at the applicable exchange rate in the currency in which the investment was originally made, without deductions for taxes, levies, and other duties except where those are due. In the absence of an agreement of the amount of compensation to be paid, the Zambian Constitution under Article 16(3) provides that the amount of compensation be determined by an appropriate court of law.

It seems that the compulsory acquisition of Lap Green’s 75% shareholding in Zamtel was done under the auspices of the ZDA Act. However, while requiring adequate compensation, neither that Act nor the Constitution provides adequate guidelines or safeguards to prevent the abuse of such action and firmly guarantee to investors their rights over the assets that they acquire. It is not enough to simply state that the derogation from the right to property be only exercised in the interest of public need or in the general public interest and in accordance with the provisions of appropriate laws.  Whatever justification is put forward, it must to the greatest extent possible, be explained in detail, backed by concrete evidence and characterised by an extensive consultation process that lends itself to support the notion that the action to compulsorily acquire property is in fact widely accepted as being in the public interest. Such safeguards and processes will help in the discovery, thorough consideration and ruling out of alternative forms of action which include arbitration and other means by which an agreement could otherwise have been reached by the concerned parties. Not only would such safeguards ensure that indeed the public interest and benefits outweigh the costs and impact of the action on the party affected and the economy as a whole, it would also give investors confidence that such an action would only be evoked in exceptional circumstances and only as a last resort.

Accountability and transparency are two very key factors to both the citizenry and the investor and both these factors were lacking, not only in the forerun to the sale of Zamtel, but also during and after the sale and in the reversal of the sale. I believe these could have been facilitated better with a legal requirement to provide and publicly publish a detailed cost-benefit analysis of the transactions (both the sale and reverse) to properly ensure and demonstrate to the public that the benefit of the sale and the subsequent reversal of the sale outweigh the costs. To date, no one is aware of the compensation to be awarded to Lap Green, nor does the ordinary citizen have a basic or estimated value of the total cost of the government’s decision to reverse the sale of Zamtel or indeed any other institution. It does not matter whether past investment contracts were poorly negotiated or entered into for the wrong reasons; the crux of the matter is that the government entered into legally binding contracts, of which the rescission or termination of will most likely be very costly, perhaps too costly for the Zambian economy.

A critical flaw in the laws of Zambia especially in relation to the exercise of executive or regulatory action is the lack of a legal obligation to engage in extensive consultative processes not only in promulgating laws and regulations but also in taking action of enormous impact, importance and cost to the economy/taxpayer. I refer here to consultative processes not only involving professionals in a particular sector, appointed board members and staff employed under the relevant government ministry or agency but the wider public too. Several laws provide for the consultation with the various regulators or boards constituted by representatives of the various stakeholders but they do not give the consultative process any meaningful force of law in that there is no obligation on the part of the executive or regulator to actually consider or take into account or justify the refusal to take into account any recommendation or issues arising from such consultation. In addition to the usual checks and balances afforded by the functions of the different branches of government, Zambia could stand to benefit more from engaging wider consultative processes which could prevent arbitrary decisions such as the sale of Zamtel by government for reasons other than that of being in the public interest. This could prevent the humiliating and costly task of new government leaders having to undo the transactions of past government leaders as is the case now.




The Zambian government’s decision to reverse the sale of 75% of its shares to La Green Network Group, a Libyan telecommunications company as well as other institutions sold under the previous government, may prove noble given the allegations of illegality and corruption that were said to have marred the transactions. In fact, the findings of the commission of inquiry sanctioned to investigate the Zamtel sale are alarming and provide a compelling case for the immediate reversal of the sale. However, the commission’s report, due to a perceived lack of independence of its panel and therefore, its credibility, and the hastiness with which the government compulsorily acquired the shares back from Lap Green, may do little to comfort current and future investors not only  of the safety of their investments, but also on the stability of the economy as it faces the costs arising from the already effected and planned future reversal of sale of various institutions in the country. It is also a concern that a lot of the hard evidence in the form of documentation requested by the commission of inquiry was unavailable or at the very least scanty. The pending issue of compensation, missing documentary evidence and the government’s course of action may cause a long, protracted and costly legal suit against the government.  Coupled with the pending investigations and action regarding other privatised institutions, the market will be characterised by uncertainty, perhaps instability and an investment impasse.

It is recognised worldwide that because the compulsory purchase or acquisition of shares or other property goes against the will of the holder/owner of those shares or property, higher thresholds or exceptional circumstances are required for the exercise of such rights or power to compulsorily purchase or acquire the property in question. The Zambian laws do not offer sufficient and clear guidelines for the evocation of such rights or power nor do they provide adequate safeguards to prevent abuse and ensure the fair treatment of those affected by such action.

The Zambian laws also do not provide for sufficient forms of accountability and transparency in relation to executive and regulatory actions and decisions of enormous impact, importance and cost to the economy and/or taxpayer. Laws requiring detailed and published cost-benefit analysis and extensive consultative processes involving the wider community could well help to prevent governments engaging in transactions other than for the advancement and benefit of the public interest.


Author: Kaluba C. Sianga

Mrs. Sianga is a financial regulation and commercial transaction specialist and a Rhodes Scholar.  She qualified as a lawyer in Zambia and a non-practicing solicitor.


See Lusaka Times

[ii] See ‘DPP Nchito told to probe sale of Roan Mine, Lima Bank’ 13 January 2012.

The public switched telephone network (PSTN) is the network of the world’s public circuit-switched telephone networks. It consists of telephone lines, fiber optic cables, microwave transmission links, cellular networks, communications satellites, and undersea telephone cables, all inter-connected by switching centers, thus allowing any telephone in the world to communicate with any other. Originally a network of fixed-line analog telephone systems, the PSTN is now almost entirely digital in its core and includes mobile as well as fixed telephones. See

refers to communications services—Voice, fax, SMS, and/or voice-messaging applications—that are transported via the Internet, rather than PSTN. See

, April, 2006.

[vi] See (07/01/2012).


[viii] The Post Online “Kavindele asks Sata to restore Vodacom’s operating licence”, By Chiwoyu Sinyangwe, Thursday, 29 December 2011. See

[ix] “Fourth Mobile Phone Not Now”, (08/01/2012).

Lap Green has continually issued statements to the effect that the government had not been in contact with them either in an effort to reach an agreement or to discuss the reverse of the sale or value of compensation. See ‘Zambia’s decision worries Libyan telecoms firm’, httw:// (24/01/2012).

[xi] (As amended by Act No. 18 of 1996).

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