Policies Towards Foreign Direct Investment

The government of Mozambique welcomes foreign investment and sees it as a key driver of economic growth and job creation. With the exception of a few sectors related to national security, all business sectors are open to foreign investment.

Mozambique’s Law on Investment, Decree No. 3/93, passed in 1993, and its related regulations, govern national and foreign investment. In August 2009, Decree No. 43/2009 replaced earlier amendments from 1993 and 1995, providing new regulations to the Investment Law. In general, large investors receive more support from the government than small and medium-sized investors. Government authorities must approve all foreign and domestic investment requiring guarantees and incentives. Regulations for the Code of Fiscal Benefits were established by Decree No. 56/2009 and approved in October 2009. The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, can be found at: http://investmentpolicyhub.unctad.org/InvestmentLaws/laws/110 .

The Agency for Promotion of Investments and Exports (APIEX, Agencia para a Promocao de Investimentos e Exportacoes) is the primary investor contact within the GRM, operating under the Ministry of Industry and Commerce. Its objective is to promote and facilitate private and public investment. It also oversees the promotion of national exports. APIEX can assist with administrative, financial, and property issues. Through APIEX, investors can receive exemptions from some customs and value-added tax (VAT) duties when importing “class K” equipment, which includes capital investments.

Contact information for APIEX is:

Agency for Promotion of Investments and Exports
http://www.apiex.gov.mz/ 
Rua da Imprensa, 332 (ground floor)
Tel: (+258) 21313310
Ahmed Sekou Toure Ave., 2539
Telephone: (+258) 21 321291
Mobile: (+258 ) 823056432

Limits on Foreign Control and Right to Private Ownership and Establishment

Mozambique investment law and its regulations generally do not distinguish between investor origin or limit foreign ownership or control of companies. With the exception of security, safety, media, entertainment, and certain game hunting concessions, there were no legal requirements that Mozambican citizens own shares of foreign investments until 2011.

Law No. 15/2011, passed in August 2011 and often referred to as the “Mega-Projects Law,” governs public-private partnerships, largescale ventures, and major business concessions. It states that Mozambican persons must hold between 5 percent to 20 percent of the equity capital of the project company. Implementing regulations were approved by the Council of Ministers in June 2012.

Article 4.1 in Law 14/2014, often referred to as the “Petroleum Law,” states that the GRM regulates the exploration, research, production, transportation, trade, refinery, and transformation of liquid hydrocarbons and their by-products, including petrochemical activities. Article 4.6 established the state-owned oil company, the National Hydrocarbon Company (ENH, Empresa National das Hidorcorbonetos) as the government’s exclusive representative for investment and participation in oil and gas projects. ENH typically owns up to 15 percent of shares in oil and gas projects in the country.

Depending on the size of the investment, the government approves both domestic and foreign investments at the provincial or national level–there is no other formal investment screening process.

Other Investment Policy Reviews

Mozambique has undergone investment policy reviews by the following international organizations:

OECD Investment Policy Review (2013)
http://www.oecd.org/daf/inv/investment-policy/mozambique-investment-policy.htm 

WTO Trade Policy review – Report by the Secretariat – Mozambique – Revision (2017) https://www.wto.org/english/tratop_e/tpr_e/tp454_e.htm 

UNCTAD Investment Policy Review (2012) http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=222 

Business Facilitation

APIEX promotes and facilitates investment in Mozambique. It provides multiple services to investors including: incorporation, business licensing, entrance visas, work permits, residence permits, identification and licensing of land, identification of business partners, troubleshooting, project monitoring, and implementation follow-up.

Lengthy registration procedures can be problematic for any investor – national or foreign – but those unfamiliar with Mozambique and the Portuguese language face greater challenges. Some foreign investors find it beneficial to work with a local equity partner familiar with the bureaucracy at the national, provincial, and district levels.

In 2019, Mozambique ranked 135 among 190 countries in the World Bank Doing Business report. Mozambique performs slightly better than the sub-Saharan average for the ease of doing business but below peers such as Botswana and South Africa in the Southern African region. Mozambique ranks 174 out of 190 countries in how easy it is to start a business, taking 17 days to complete the process, requiring 10 procedures, and costing 120 percent of the per capita income. The report also indicates that access to credit and enforcing contracts are comparatively more challenging in Mozambique than most countries. The GRM has made improvements in areas such as getting construction permits and electricity.

Outward Investment

The government does not promote or incentivize outward investment. It also does not restrict domestic investors from investing abroad. The law does request that domestic investors remit investment income from overseas, except for amounts required to pay debts, taxes, or other expenses abroad.

Transparency of the Regulatory System

Investors face myriad requirements for permits, approvals, and clearances that take substantial time and effort to obtain. The difficulty of navigating the system provides opportunities for corruption and bribery, a scenario that is aggravated by the prevailing low wages for administrative clerks. Labor, health, safety, and environmental regulations often go unenforced, or are selectively enforced. In addition, civil servants have threatened to enforce antiquated regulations that remain on the books to obtain favors or bribes.

The private sector, through the Confederation of Business Associations (CTA, Confederacao das Associacoes Economicas), Mozambique’s primary business and industry association, maintains an ongoing dialogue with the government, holding quarterly meetings with the Prime Minister and an annual meeting with the President. CTA provides feedback to the GRM on laws and regulations that impact the business environment on behalf of its members and other business associations. However, because of its exclusive role in communicating with the government on behalf of the private sector, some businesses have expressed concern that minority voices are not heard and that CTA, because of its close relationship with the government, is no longer an effective advocate.

Draft bills are usually made available for public comments through the business associations or relevant sectors or in public meetings. Changes to laws and regulations are published in the National Gazette. Public comments are usually limited to input from a few private sector organizations, such as CTA. There have been complaints of short comment periods and that comments are not properly reflected in the National Gazette. The government is considering a law that would make public consultation on future legislation mandatory.

Overall fiscal transparency in Mozambique is improving gradually in the wake of the 2016 hidden debt crisis which saw the government own up to contracting around $2 billion dollars in secret loans in 2013 and 2014. Publicly available budget documents provide an incomplete picture of the government’s planned expenditures and revenue streams, especially with regard to natural resource revenues and allocations to and earnings from state-owned enterprises, which generally did not have publicly available audited financial statements. The government also maintains off-budget accounts not subject to adequate audit or oversight. For portions of the budget that were relatively complete, the provided information is generally reliable.

International Regulatory Considerations

Mozambique is a member of SADC (Southern African Development Community). In June 2016, the SADC EPA Group, which includes Mozambique, Botswana, Lesotho, Namibia, South Africa, and Swaziland, signed an Economic Partnership Agreement (EPA) with the European Union. Mozambique exports aluminum under the EPA agreement.

The GRM ratified the Trade Facilitation Agreement (TFA) in July 2016 and notified the WTO in January 2017. A National Trade Facilitation Committee was established to coordinate the implementation of the TFA.

Legal System and Judicial Independence

Mozambique’s legal system is based on Portuguese civil law and customary law. In December 2005, the Parliament approved major revisions to the Commercial Code which went into effect in 2006. The previous Commercial Code was from the colonial period, with clauses dating back to the 19th century, and it did not provide an effective basis for modern commerce or resolution of commercial disputes. In 2018, the Council of Ministers passed new provisions for the Commercial Code, which were debated and approved in Parliament. In recent years Mozambique’s legal system has shown a degree of greater independence, for example pursuing some politically connected former officials and their family members for their role in the hidden debt scandal.

Laws and Regulations on Foreign Direct Investment

The Code of Fiscal Benefits, Law No. 4/2009, passed in January 2009, and Decree No. 56/2009, approved in October 2009, form the legal basis for foreign direct investment in Mozambique. Operating within these regulations, APIEX (http://invest.apiex.gov.mz/ ) analyzes the fiscal and customs incentives available for a particular investment.  Investors must establish foreign business representation and acquire a commercial representation license. During project development, investors must document their community consultation efforts related to the project. If the investment requires the use of land, the investor will also have to present, among other documents, a topographic plan or an outline of the site where the project will be developed.

If the investment involves an area under 1,000 hectares and the investment is up to approximately $25 million, the governor of the province where it will be located can approve the investment. There has been no update to the law since the introduction of provincial level State Secretaries with the new government in 2020. APIEX has the authority to approve any project between $25 million-$40 million. The Minister of Economy and Finance must approve national or foreign investment between $40 -$225 million. If the investment (national or foreign) occupies an area of 10,000 hectares or an area superior to 100,000 hectares for a forestry concession, or it amounts to more than $225 million, the project must be approved by the Council of Ministers.

Competition and Anti-Trust Laws

Law 10/2013, passed on April 11, 2013, and known as the Competition Law, established a modern legal framework for competition in Mozambique and created the Competition Regulatory Authority. A budget has still not been allocated to this body, but the government appointed a director in April 2020.

The framework is inspired by the Portuguese competition enforcement system. Violating the prohibitions contained in the Competition Law (either by entering into an illegal agreement or practice or by implementing a concentration subject to mandatory filing) could result in a fine of up to 5 percent of the turnover of the company in the previous year. Competition Regulatory Authority decisions may be appealed in the Judicial Court in Maputo, for cases leading to fines or other sanctions, or to the Administrative Court for merger control procedures.

Expropriation and Compensation

While there have been no significant cases of nationalization since the adoption of the 1990 Constitution, Mozambican law holds that “when deemed absolutely necessary for weighty reasons of national interest or public health and order, the nationalization or expropriation of goods and rights shall (result in the owner being) entitled to just and equitable compensation.” No American companies have been subject to expropriation issues in Mozambique since the adoption of the 1990 Constitution.

Dispute Settlement

ICSID Convention and New York Convention

Mozambique acceded in 1998 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

For disputes between U.S. and Mozambican companies where a Bilateral Investment Treaty (BIT) violation is alleged, recourse via the international Alternative Dispute Resolution may also be available. No investment disputes in the past ten years have involved U.S. investors. Investors who feel they have a dispute covered under the BIT should contact the U.S. Embassy.

International Commercial Arbitration and Foreign Courts

In 1999, the Parliament passed Law no. 11/99 (Law on Arbitration), which allows access to modern commercial arbitration for foreign investors. The Judicial Council approved Resolutions No. 1/CJ/2017 and No. 2/CJ/2017 in 2017, creating the Regulations of Mediation Services in Judicial Courts and the Judicial Mediators’ Code of Conduct. These new resolutions are designed to promote the mediation process as an alternative to litigation. Labor and commercial arbitration are recognized by local courts as well as cases judged internationally.

The Center of Arbitration, Conciliation, and Mediation (CACM) offers commercial arbitration. During 2019, CACM handled 22 cases of commercial arbitration, and another ten cases are in process. CACM has 316 arbitrators, 12 of which are international. One of the main constraints to the use of arbitration is that many contracts do not incorporate a clause that allows conflicts to be resolved via arbitration instead of in the courts.

Bankruptcy Regulations

In June 2014, the GRM passed a comprehensive legal regime for bankruptcy, streamlining the bankruptcy process and setting the rules for business recovery. Globally, Mozambique stands at 86 of 190 economies on the ease of resolving insolvency issues, according to the 2019 Doing Business Report.

In the 2020 World Bank Doing Business Report, Mozambique ranked 86 overall for resolving insolvency, scoring well above average for sub-Saharan Africa, but below South Africa and Mauritius in the most recent report.

Investment Incentives

The Code of Fiscal Benefits contains specific incentives for entities that intend to invest in certain geographical areas within Mozambique that have natural resource potential but which lack infrastructure and have low levels of economic activity. Rapid Development Zones (RDZ) were also created to facilitate investment. Investments in these zones are exempt from import duties on certain goods and are granted an investment tax credit equal to 20 percent of the total investment (with a right to carry the credit forward for five years). Additional modest incentives are available for professional training and the construction and rehabilitation of public infrastructure, including, but not limited to roads, railways, water supply, schools, and hospitals.

The Code of Fiscal Benefits, Law No. 4/2009, passed in 2009, is available at: https://investmentpolicyhubold.unctad.org/InvestmentLaws/laws/108 . The Regulations for the Code of Fiscal Benefits are set forth in Decree No. 56/2009, which was approved in October 2009. APIEX can assist companies with the investment incentives stipulated in the Code of

Fiscal Benefits

With the exception of sectors like oil and gas where government participation is mandatory, the government does not issue joint guarantees or jointly finance foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Mozambique has seven free trade zones in the country, which provide a variety of fiscal exemptions depending on the sector of investment as well as the project location. Investors should pay close attention to documents and procedures requested in order to establish a business locally or to request fiscal and customs incentives if investing in an industrial free zone. Information regarding business registration and administrative practices are available at: http://www.portaldogoverno.gov.mz/por/Empresas/Registos .

Performance and Data Localization Requirements

The government generally does not require investors to purchase from local sources, nor does it require technology or proprietary business information to be transferred to a local company. Within certain sectors, however, the government has implemented sector specific local content requirements. A proposed “Local Content” law could create additional requirements in this realm and consolidate the various requirements into a single law. This proposed law has been drafted and presented at the Council of Ministers, and is likely to be approved before the end of 2020.

Regulations for new mining and petroleum laws may require investors to give preference to local sources available in Mozambique if the goods or services are of an internationally comparable quality and competitively priced.

Companies may hire foreign workers only when there are not sufficient Mozambican workers available that meet specific job qualifications. The Ministry of Labor enforces quotas for foreign workers as a percentage of the workforce within companies that varies based on the size of the company. Per the 2007 Labor Law (23/2007) companies with 10 employees or fewer can employ no more than 10 percent expatriates (effectively 1 person in a 10 person company), companies with 11-100 employees may employ up to 8 percent expatriates, and large companies with over 100 employees may employ no more than 10 percent expatriates. Many companies use foreigners as outside consultants, which allows them to get around the quota system by hiring a “company” instead of a foreigner who would be subject to the quota requirement. Work permits for foreigners cost approximately USD370 and take at least one month to be issued. All investments must specify the number and category of Mozambican and foreign workers.

There are currently no data localization policies in effect in Mozambique. The government agency responsible for enforcing IT policies and rules is:

UTICT – Unidade Tecnica de Implementacao da Politica de Informatica
Technical Implementation Unit for IT Policy
Tel: (258) 21 309 398; 21 302 241
Mobile (258) 305 3450
Email: cpinfo@infopol.gov.mz

Real Property

The legal system recognizes and protects property rights to buildings and movable property. Private ownership of land, however, is not allowed in Mozambique. Land is owned by the State. The government grants land-use concessions called DUATs (Direitos de Uso e Aproveitamento de Terra, or a land-use title) for periods of up to 50 years, with options to renew for an additional 50 years. Essentially, land-use concessions serve as proxies for land titles. There is no robust market in land use rights and land use titles are not easily transferable. The process to award land concessions is not transparent and the government at times has granted overlapping land concessions that often require lengthy negotiation to resolve. It takes an average of 90 days to issue a land title for most of the concessions. Banks in Mozambique rely on property other than land – cars, private houses, and infrastructure – as collateral, as it is not possible to securitize property for lending purposes.

In urban areas, the DUAT of a plot passes automatically to the purchaser following the sale of a house or building. In rural areas, the purchaser of physical infrastructure or improvements and crops must request authorization from the government for the DUAT to be transferred. This requirement is often cited as a barrier for loans in the agricultural sector and is seen as a potential barrier to investment in the agriculture sector and the transition to more intensive, commercial forms of agriculture.

Investors should be aware of the requirement to obtain endorsement of their projects in terms of land use and allocation at a local level from the affected communities. APIEX assists investors in finding land for development and obtaining appropriate documentation, including agricultural land. The government advises companies on relocating individuals currently occupying land designated for development; however, companies are ultimately responsible for planning and executing resettlement programs.

Intellectual Property Rights

Intellectual property rights (IPR) enforcement in Mozambique remains sporadic and inconsistent. Mozambique’s National Inspectorate of Economic Activities (INAE) has increased seizures, confiscating Hewlett-Packard (HP) toner cartridges, Nike, Adidas, Ralph Lauren, and other falsely branded merchandise in several raids in 2019. However, in general, enforcement and prosecutions are limited. Pirated DVDs and other counterfeit goods are commonly sold in Mozambique.

The Parliament passed a copyright and related rights bill in 2000, which, when combined with the 1999 Industrial Property Act, brought Mozambique into compliance with the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The law provides for the security and legal protection of industrial property rights, copyrights, and other related rights. In addition, Mozambique is a signatory to the Bern Convention, as well as the New York and Paris Conventions.

Despite enforceable laws and regulations protecting intellectual property rights (IPR and providing recourse to criminal or administrative courts for IPR violations, it remains difficult for investors to enforce their IPR. The registration process is relatively simple. and private sector organizations have been working with various government entities on an IPR taskforce to combat IPR infringement and related public safety issues stemming from the use of counterfeit products.

Mozambique is not included in he United States Trade Representative (USTR) Special 301 Report or the Notorious Markets List.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at https://www.wipo.int/directory/en/details.jsp?country_code=MZ  .

Capital Markets and Portfolio Investment

The Mozambique Stock Exchange (BVM, Bolsa de Valores de Mocambique) is a public institution under the guardianship of the Minister of Economy and Finance and the supervision of the Central Bank of Mozambique. In general, the BVM is underutilized as a means of financing and investment. However, the government has expressed interest in reforming market rules in an effort to increase capitalization and potentially prepare the ground for new rules that would require foreign companies active in Mozambique to be listed on the local stock exchange. Corporate and government bonds are traded on the BVM and there is only one dealer that operates in the country, with all other brokers incorporated into commercial banks, which act as the primary dealers for treasury bills. The secondary market in Mozambique remains underdeveloped. Available credit instruments include medium and short-term loans, syndicated loans, foreign exchange derivatives, and trade finance instruments, such as letters of credit and credit guarantees. The BVM remains illiquid, in the sense that very limited activity occurs outside the issuing time. Investors tend to hold their instruments until maturity. The market also lacks a bond yield curve as government issuances use a floating price regime for the coupons with no price discovery for tenures above 12 months.

The GRM notified the IMF that it has accepted the obligations of Article VIII sections 2, 3, and 4 of the IMF Articles of Agreement, effective May 20, 2011.

Money and Banking System

According to the Mozambican Association of Banks (AMB) and KPMG, in 2019 the Banco Comercial e de Investimentos SA (BCI), Banco Internacional de Mocambique SA (BIM), and Standard Bank accounted for more than 65% of the total assets, total loans and advances, and total deposits held by commercial banks in Mozambique. In 2018, Mozambique had 669 bank branches, up from 641 in 2017. The majority of these branches is concentrated in major cities and rural districts often have no banks at all. As of December 2019 there were 1790 Automated Teller Machines (ATMs) throughout the country. Thanks to the partnership between mobile communications companies and banks for electronic or mobile-money transactions, the number of services available from ATMs is also increasing.

Credit is allocated on market terms, but eligibility requirements exclude much of the population from obtaining credit. Banks request collateral, but since land cannot be used as collateral, the majority of individuals do not qualify for loans. Foreign investor export activities in critical areas related to food, fuel, and health markets have access to credit in foreign and local currencies. All other sectors have access to credit only in the local currency.

The value of non performing loans increased by 16 percent from 18.6 billion meticais as of December 2017 to 21.5 billion meticais as of December 2018. This increase happened at a time when the value of all loans remained largely unchanged when compared to the previous year. The non performing loans (NPLs) ratio for the sector has slightly improved from 8.3 percent at the end of 2017 to 7.1 percent by December 2018, due in part to write offs.

Foreign Exchange and Remittances

Foreign Exchange

In December 2017, Mozambique approved new exchange control rules in Decree 49/2017. Residents in Mozambique are now required to remit export earnings to Mozambique into an export earnings account in foreign currency, which can only be used for specifically defined purposes. Under the new decree, the mandatory registration of foreign exchange operations will now be processed electronically in real time by the commercial banks. Applications for capital operations are now processed by commercial banks and forwarded to the Central Bank of Mozambique. Foreign direct investment (FDI) up to USD 250,000 no longer requires prior authorization from the Bank of Mozambique and only needs to be registered with the commercial bank handling the transactions. Shareholder and intercompany loans made by foreign entities up to USD 5 million require no authorization from the Central Bank, provided the loans are interest free or lower than the base lending rate for the relevant currency, the repayment period is at least three years, and no other fees or charges apply.

A special foreign exchange regime for oil, gas, and mining sectors allows for greater flexibility in foreign exchange and financing operations. The law, which went into force in January 2018, stipulates that profits from petroleum rights are entirely taxed at an autonomous tax rate of 32 percent. The law also guarantees tax stabilization for up to 10 years, starting from the beginning of commercial production with an investment amount of USD 100 million. The Ministry of Economy and Finance can also approve the use of U.S. dollars, if the company has invested at least USD 500 million and more than 90 percent of its transactions are in U.S. dollars. The law also revoked a 50 percent tax rate reduction related to the production tax that was available when extracted products were used locally.

Remittance Policies

Under the 2017 Decree, there is no longer an obligation to convert 50 percent of export proceeds into the local currency. The new decree only requires that a sufficient quantity be converted into the local currency to cover payments to residents locally.

Sovereign Wealth Funds

The government is exploring establishing a sovereign wealth fund for LNG revenues that are expected in the next decade. Currently there is an off-budget account for capital gains revenues, in particular the approximate USD 830 million the government received following the transfer of Anadarko’s Mozambique assets to Total. The Budget Law authorizes the government to save or spend windfall revenues on investment projects, debt repayment, and emergency programs. However, there are limited details on how off-budget spending should be planned and approved. The Ministry of Economy and Finance is currently leading efforts to develop a proposal for a sovereign wealth fund that it hopes to present to parliament before the end of 2020.

Mozambique’s State-owned enterprises (SOEs) have their origin in the socialist period directly following independence in 1975, with a variety of SOEs competing with the private sector in the Mozambican economy. Government participation varies depending on the company and sector. SOEs are managed by the Institute for the Management of State Participation (IGEPE – Portuguese acronym). Following past privatization and restructuring programs, IGEPE now holds majority and minority interests in 128 firms, down from 156. IGEPE’s holdings are listed on its website: http://www.igepe.org.mz/ 

Some of the largest SOEs, such as Airports of Mozambique (ADM) and Airlines of Mozambique (Travel – airports and air transportation), and Electricity of Mozambique (Energy & Mining – electrical utility), have monopolies in their respective industries. In some cases, SOEs enter into joint ventures with private firms to deliver certain services. For example, Ports and Railways of Mozambique (CFM-Portuguese acronym) offers concessions for some of its ports and railways. Many SOEs benefit from state subsidies. In some instances, SOEs have benefited from non-compete contracts that should have been competitively tendered. SOE accounts are generally not transparent and not thoroughly audited by the Supreme Audit Institution. SOE debt represents an unknown, but potentially significant liability for the GRM. SOEs were also at the heart of the hidden debt scandal revealed in 2016.

In March 2018, the Parliament passed a new law that broadens the definition of state-owned enterprises (SOEs) to include all public enterprises and shareholding companies. The law seeks to unify SOE oversight and harmonize the corporate governance structure, placing additional financial controls, borrowing limits, and financial analysis and evaluation requirements for borrowing by SOEs. The law requires the oversight authority to publish a consolidated annual report on SOEs, with additional reporting requirements for individual SOEs. The Council of Ministers approved regulations for the SOE law in early 2019, but there has still not been a meaningful increase in public disclosure by the state owned companies.

Privatization Program

Mozambique’s privatization program has been relatively transparent, with tendering procedures that are generally open and competitive. Most remaining parastatals operate as state-owned public utilities, with government oversight and control, making their privatization more politically sensitive. While the government has indicated an intention to include private partners in most of these utility industries, progress has been slow.

Larger companies and foreign investors in Mozambique tend to follow their own responsible business conduct (RBC) standards. For some large investment projects, RBC-related issues are negotiated directly with the GRM. Responsible business conduct is an increasingly high-profile issue in Mozambique, especially in the extractive industries, with some projects requiring resettlement of communities.

The Government of Mozambique (GRM) joined the Extractive Industries Transparency Initiative (EITI) in May 2009. The EITI Governing Board labeled Mozambique as a compliant country in 2012.

Corruption is a major concern in Mozambique. Though Mozambique has made progress developing the legal framework to combat corruption, the policies and leadership necessary to ensure effective implementation have been insufficient. While the 2016 hidden debt scandal involving a cadre of former government officials is the most infamous example of government corruption, it is not the only case.

However, the government is taking concerted action to address the problem. In 2019, Mozambique made a string of arrests of 20 politically connected individuals related to the hidden debt case. The government also moved forward with cases against the former Minister of Transport and Communications Paulo Zucula, the former CEO of the national airlines (LAM – a parastatal), and Mateus Zimba, former director of Sasol. In 2019, the government in cooperation with the IMF also released a Diagnostic Report on Transparency, Governance and Corruption outlining 29 measures to fight corruption and improve transparency. The full report is available online at: https://www.imf.org/en/Publications/CR/Issues/2019/08/23/Republic-of-Mozambique-Diagnostic-Report-on-Transparency-Governance-and-Corruption-48613 .

Thanks in part to these efforts, Mozambique rose six places on Transparency International’s 2019 Corruption Perceptions Index, and now ranks 146 out of 180 countries in 2019.

Mozambique’s civil society and journalists remain vocal on corruption-related issues. Action related to the hidden debt scandal is being led by a civil society umbrella organization known as the Budget Monitoring Forum (FMO, Forum de Monitoria de Orcamento) that brings together around 20 different organizations for collective action on transparency and corruption related issues. Another civil society organization, the Center for Public Integrity (CIP, Centro de Integridade Publica), also continues to publicly pressure the government to act against corrupt practices. CIP finds that many local businesses are closely linked to the government and have little incentive to promote transparency.

Resources to Report Corruption

Contact at government agency or agencies responsible for combating corruption:

Ana Maria Gemo
Central Anti-Corruption Office (Gabinete Central de Combate a Corrupcao)
Avenida 10 de Novembro, 193
+258 82 3034576
gabinetecorrupção@yahoo.com.br

Contact at “watchdog” organization

Fatima Mimbire
Project Coordinator Extractive Industries
Center for Public Integrity (Centro de Integridade Publica)
Rua Fernão Melo e Castro, 124
+258 82 5293957
fatima.mimbire@cipmoz.org

The greatest security concern in Mozambique is the growing Islamic insurgency in the country’s northern provinces. What started as a homegrown threat in October 2017, likely emboldened by Tanzania-based extremist leaders, has evolved into a more organized insurgency, and was officially recognized by the Islamic State (IS) as an affiliate organization in June 2019. IS now provides support to the combatants in northern Mozambique and frequently claims credit for their attacks. The violence has resulted in an estimated 930 deaths and led to more than 150,000 internally displaced persons in Cabo Delgado Province (CDP). Since 2017, the IS-affiliate has carried out more than 250 deliberate attacks against unarmed civilians, creating a high risk for atrocities committed by the violent extremist organization. 2020 is on pace to be the conflict’s deadliest year.

The Islamic State-affiliate primarily operates in CDP, which is also the site of the major LNG investments being led by Total and the ENI/ExxonMobil consortium, but maintains networks in neighboring Niassa and Nampula provinces, and has proven capable of attacking villages in southern Tanzania. In early 2019, the insurgents killed a contractor associated with the LNG project and there have since been several other victims among LNG company staff. However, to date, the insurgents’ target remains villages and government forces and institutions. While the violence has not directly impacted the LNG project site, it has raised costs and put a damper on follow-on investments in CDP that could provide services to the projects in a more permissive security environment. Mozambique’s military and police forces have often proved ineffective in defending many communities in CDP. While the GRM is in need of outside military assistance, the continued use of private military companies risks further aggravating local grievances.

In March 2020, the GRM announced the creation of the Integrated Development Agency of the North. The United States and other international partners look forward to working with this new agency to address the underlying socio-economic drivers of violent extremism in Cabo Delgado.

In addition, following Mozambique’s largely peaceful elections in October 2019, there has been a resurgence of violence in central Mozambique led by a Renamo splinter group known as the “Junta” despite the definitive ceasefire and peace agreement signed in August 2019. Renamo denies any connections to or support for the Junta. Until recently, the splinter group primarily targeted road transport along the major north-south and east-west highways that pass through Manica and Sofala provinces. However, in April 2020, the group attacked a logging camp killing one expatriate worker and wounding several others. The Junta leader does not recognize the leader of the Renamo party and has stated that the attacks will continue until the government enters into direct negotiations with him.

The labor market is dominated by the informal economy with the vast majority of people (approximately 70 percent) working in subsistence agriculture, particularly in rural areas. People in cities often work in informal trade.

There is an acute shortage of skilled labor in Mozambique. As a result, many employers import foreign employees to fill these skill gaps. The government limits the number of expatriates a business can employ in relation to the number of Mozambican citizens it employs. The government passed a labor regulation in 2016 strengthening the requirement for employers to devise a skills transfer program that trains Mozambican nationals to eventually replace the foreign workers.

The constitution and law provide that workers, with limited exceptions, may form and join independent trade unions, conduct legal strikes, and bargain collectively. The law requires government approval to establish a union. The government has 45 days to register employers’ or workers’ organizations, a delay the International Labor Organization (ILO) deemed excessive. Approximately three percent of the labor force is affiliated with trade unions. An employee fired with cause does not have a right to severance, while employees terminated without cause do. Unemployment insurance does not exist and there is not a social safety net program for workers laid off for economic reasons.

The Government of Mozambique is reviewing the Labor Law to align it with international conventions related to forced labor, health and safety issues in mining, and the worst forms of child labor. The proposed law would also extend the maternity leave period from 60 to 90 days. The new labor law will also address sexual harassment.

The DFC (then OPIC) signed an investment incentive agreement with Mozambique in 1999. In September 2019, the DFC announced it would provide up to $5 billion in financing to support the development of Mozambique’s LNG resources. DFC’s Development Credit Agency is also actively engaged in lending in partnership with five local banks to support investment in the agricultural sector.

UAE and Mauritius are both have bilateral tax agreements with Mozambique and host holding company accounts used by companies involved in Mozambique’s LNG industry.

Table 4: Sources of Portfolio Investment
Data not available.

Elizabeth Filipe
Economic Assistant
U.S. Embassy Maputo
Avenida Kenneth Kaunda, 193
+32 258 21 29 27 97
filipeec@state.gov