Zambia: Copper and the European Market

Zambia is the second-largest copper producer in Africa. It is one of the few African countries with three links to the EU at the same time. In 2023 it signed a strategic partnership with the EU on raw materials value chains. It has a project selected under the Critical Raw Materials Act in the first selection round. It is also part of the Lobito Corridor, a flagship project of the EU's Global Gateway. The rail extension of the corridor into the Zambian Copperbelt is planned to be ready by 2029.

Zambian copper output is rising strongly because major mines are expanding. A cobalt sulphate refinery is being developed, which is a step from mining toward processing. Europe needs copper for electrification, and the benchmarks of the Critical Raw Materials Act include copper.

The EU rules on critical raw materials

The Critical Raw Materials Act entered into force on 23 May 2024. Under this act, the EU has targets for 2030. By then, ten percent of the EU's yearly use of strategic raw materials should be extracted in the EU. Forty percent should be processed in the EU and twenty-five percent should come from recycling. At most sixty-five percent of each strategic raw material should come from a single country outside the EU. Projects outside the EU can also get Strategic Project status. Such a project gets advice on funding and attention from the EU financing hub, which brings together EU funds and the European Investment Bank. Its buyers, called off-takers, get more certainty. The Commission names off-take agreements with European companies that use these materials as one way to secure supply.

A European company signs these agreements. A Dutch entity can be that company. It signs contracts with European industry and can use European trade finance. It can also be the importer and use the Article 23 licence. With this licence, the import VAT is declared in the periodic VAT return. You can read more in the guide to a European entity for critical raw materials.

What a European entity adds for Zambian groups

Copper concentrate and cathodes are outside CBAM. European companies buy Zambian copper through normal commercial contracts. These are off-take agreements with European smelters, cable makers and industrial buyers. There is also trade finance against European receivables, and the trading margin between the Copperbelt price and the delivered price in Europe. A Dutch entity can be the European party in each of these.

The strategic partnership is an extra advantage for Zambia. Projects in partner countries score better when the EU assesses Strategic Project applications. Under the partnership, European public finance is also easier to get. For a Zambian producer, a European company is the best way to use this. Its financing, contracts and reports are then in a form that European institutions know.

Structure and tax

The Netherlands and Zambia have a double tax treaty. The Dutch conditional withholding tax applies to payments to countries on a Dutch list, and Zambia is outside that list. Your Zambian group can therefore own the Dutch company directly. The Lobito extension will shorten the transport route from the Copperbelt to the Atlantic. With the shorter route, a European trading company for delivered sales becomes more useful.

Setting up in the Netherlands

The Dutch BV is set up by notarial deed and registered with the Dutch Chamber of Commerce (KVK). Your group owns the shares. You sign a power of attorney, so the incorporation can be done from abroad. The BV then takes on the roles your plan needs: off-take counterparty, trading company, joint venture company or importer of record.

Banks look closely at commodity trade from this region. We start the talks with the bank at the same time as the incorporation. You can read more about a commodity trading entity and joint venture structures.

Frequently asked questions

Is Zambia part of the EU critical raw materials framework?

Yes, in three ways. Zambia signed a strategic partnership with the EU on raw materials value chains in 2023. It has a Strategic Project that was selected in the first selection round under the Critical Raw Materials Act. It is also part of the Lobito Corridor under the EU's Global Gateway.

Does CBAM apply to Zambian copper?

Copper concentrate and cathodes are outside the six CBAM sectors. For Zambian copper, the European part of the trade consists of off-take agreements, trade finance and the trading margin on delivered sales.

Does the Netherlands have a tax treaty with Zambia?

Yes. The Netherlands and Zambia have a double tax treaty. The Dutch conditional withholding tax applies to payments to countries on a Dutch list, and Zambia is outside that list.

What is the Lobito Corridor?

It is a rail and port system. It connects the port of Lobito in Angola with the mining regions of the DRC and Zambia. It has support from the EU's Global Gateway and the US. The extension into the Zambian Copperbelt is planned to be ready by 2029.