Zambia’s strategic approach to modern governance

Think about the difference between building a giant skyscraper and a garden shed – in each case there are obvious differences in the level of risk exposure for both construction workers and those using the structure after construction. Regulators are tasked with ensuring safety in a variety of construction scenarios. Companies that build simple structures should not have to meet the same stringent requirements as companies that build complex structures; best practice is to tailor building permits and inspections to each project’s risk level. This is an example of risk-based regulation (RBR), an approach used by Zambia to improve the regulatory environment and reduce the compliance burdens that companies face in complying with licensing and inspection requirements. More than a quarter of companies in Zambia consider business licenses and permits to be the main obstacle to their operations – almost twice the regional average (enterprise survey) – confirming the need for regulatory improvements.

The principle of adapting regulatory efforts to the level of risk is crucial in all sectors. By broadly applying RBR principles, governments can create a more favorable business environment, improving predictability for investors and reducing bureaucracy that disproportionately burdens small and medium-sized enterprises because they have fewer resources to devote to compliance. RBR policies can improve safety, health and environmental protection. In Australia, for example, since the adoption of RBR principles for workplace safety through the Global Health and Safety at Work Act in 2011, authorities have reported a 30% reduction in work-related fatal accidents.

Over the past decade, Zambia has built a robust governance architecture to improve its regulatory environment. For example, since 2014, the country has commissioned regulatory agencies and public authorities to conduct regulatory impact assessments (RIAs). At the same time, the government created the Business Regulatory Review Agency (BRRA) to assess RIAs and ensure that regulations are legal, effective and not too burdensome.

Building on this foundation, and with technical assistance from the WB under the European Union-funded ACP Business Friendly Program, BRRA has laid an important foundation for improving the business climate in Zambia through the introduction of the RBR Guidelines. The guidance, aimed at policymakers and regulators, promotes the use of RBR to improve regulation and attract private investment. The guidelines were approved by the Ministry of Trade, Commerce and Industry (MCTI) in Lusaka on November 14, 2023 (Figure 1). At the event, Minister of Commerce, Trade and Industry Chipoka Mulenga stated that “risk-based regulation will help us (Zambia) deliver policy objectives in a more effective and cost-effective manner by focusing on the sectors and activities that pose the highest risk.”

How Zambia is developing RBR on the ground

Technical assistance from the World Bank Business Friendly ACP team built on previous efforts to review existing sub-national licenses, permits and fees in all 10 provinces of Zambia. The review, completed in 2023, prepares the ground for the digitization of sub-national requirements in the national electronic register. With regulatory resources captured, national and local authorities can now effectively focus on improving permitting, licensing, authorization and inspection through RBR principles.

Based on the assessment, the Government of Zambia recognizes that provincial and district governments need effective training in implementing the new RBR guidelines and assessing the relevant risks in specific sectors (and the appropriate regulatory instruments). To this end, Chongwe County was selected as a pilot implementer of the RBR guidelines with technical support from the WB team. The team’s immediate goal is to overhaul Chongwe’s licensing, permitting and inspection systems, which will help the district make the most of its resources. This pilot project will demonstrate how the RBR guidelines can work in practice, setting a precedent for their wider adoption by municipal councils across Zambia and supporting the implementation of the country’s decentralization agenda.

An emerging model for the region

As Zambia continues to implement groundbreaking reforms to improve its business environment, it is leading the way to increased regulatory efficiency and serving as an example to ACP peers. In March 2024, Ghana’s Business Regulatory Review (BRR), the equivalent of Zambia’s BRRA, visited Lusaka to learn from Zambia’s extensive experience, including: in the field of RIA and RBR. This interaction highlights Zambia’s role as a leader in regulatory reform, exemplifying its commitment to smarter governance, and paves the way for a dynamic and inclusive economic future that will benefit small and medium-sized enterprises (SMEs).

AKP Business Friendly Program is an intra-ACP (African, Caribbean and Pacific Group of States) activity financed by the European Union and the Organization of African, Caribbean and Pacific States (OACPS) and implemented by the World Bank, the United Nations Development Organization and the International Trade Council Centre. The program supports value chains through inclusive policies, investment promotion and alliances.

More information about the program can be found on the ACP World Bank’s business-friendly website.