Risk and reform: Zambia's strategic approach to modern governance

Think about the difference between building a towering skyscraper and a garden shed—each presents obvious differences in the level of risk exposure for both the construction workers and those using the structures post-construction. Regulators are tasked with ensuring safety across a diverse set of construction scenarios. Firms building simple structures should not face the same stringent requirements of those building complex structures; it’s best practice to adjust building approvals and inspections according to the risk levels of each project. This is an example of risk-based regulation (RBR), an approach being used by Zambia to improve the regulatory environment and ease the compliance burden faced by businesses in adhering to licensing and inspection requirements. Over a quarter of firms in Zambia identify business licensing and permits as a major hurdle to their operations—nearly double the regional average (Enterprise Surveys)—confirming the need for regulatory improvements.

This principle of tailoring regulatory efforts to match the level of risk is critical across sectors. By applying RBR principles universally, governments can create a more conducive business environment by improving predictability for investors and reducing red tape, which disproportionately burdens small and medium-sized enterprises as they have fewer resources available to dedicate to ensuring regulatory compliance. RBR principles can enhance safety, health, and environmental protection. In Australia, for example, since the adoption of RBR in workplace safety, through the World Health and Safety Act in 2011,, authorities reported a 30% reduction in work-related fatalities.

For a decade now, Zambia has built a robust governance architecture to improve its regulatory environment. For example, the country has mandated regulatory agencies and public bodies to perform Regulatory Impact Assessments (RIAs) since 2014. Concurrently, the government created the Business Regulatory Review Agency (BRRA), whose mandate is to evaluate RIAs and ensure regulations are legal, effective, and not overly burdensome.

Building on this foundation with technical assistance from the WB through the ACP Business Friendly Program funded by the European Union, the BRRA laid an important foundation to bolster Zambia’s business climate by introducing RBR guidelines. The guidelines, aimed at policymakers and regulators, promote the use of RBR to streamline regulations and attract private investment. The guidelines were endorsed by the Ministry of Commerce, Trade, and Industry (MCTI) in Lusaka on November 14, 2023 (picture 1). During the event, Commerce, Trade and Industry Minister Chipoka Mulenga stated that, “the risk-based regulations will help us (Zambia) to realize policy objectives in a more efficient and cost-effective way, by focusing on sectors and activities that pose the highest risk.”

How Zambia is advancing RBR on the ground

Technical assistance from the ACP-Business Friendly World Bank team built on previous operations to review existing licenses, permits, and fees at the subnational level across all 10 Zambian provinces. Completed in 2023, the review sets the stage for the digitization of subnational requirements into the national e-registry. With the regulatory stock now captured, national and local governments can now effectively focus on streamlining permits, licenses, authorizations, and inspections through RBR principles.

Building on the stock-taking, the government of Zambia recognizes that provincial and district governments need effective training in implementing the new RBR guidelines and in assessing the appropriate risks across sectors (and relevant regulatory instruments). To this end, Chongwe District was selected as a pilot for the implementation of the RBR guidelines with the technical support of the WB team. The immediate aim of the team is to overhaul Chongwe's systems for licensing, permitting, and inspections, helping 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 broader adoption by municipal councils throughout Zambia and advancing the country’s decentralization agenda.

An emerging model for the region

As Zambia continues to embrace groundbreaking reforms to improve its business environment, it sets a path for enhanced regulatory efficiency and serves as an example for peer ACP countries. In March  2024, Ghana’s Business Regulatory Review (BRR), the counterpart to Zambia’s BRRA, visited Lusaka to learn from Zambia’s extensive experience with RIA and RBR, among others. This interaction underscores 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 benefits small and medium-sized enterprises (SMEs).

The ACP-Business Friendly Program is an Intra-ACP (African, Caribbean and Pacific Group of States) action funded by the European Union and the Organisation of African, Caribbean and Pacific States (OACPS) and implemented by the World Bank, United Nations Development Organization, and the International Trade Center. The program supports value chains through inclusive policies, investment promotion and alliances.

For more information on the program visit the World Bank’s ACP Business Friendly Webpage.