2017 Investment Climate Statements: Mozambique

Policies Towards Foreign Direct Investment

The Government of Mozambique is open to foreign investment, which it views as a means to drive economic growth and promote job creation. Fundamentally, all business sectors are open to foreign investors. The GRM reviews and approves each foreign and domestic investment; however, there are almost no restrictions on the form or extent of foreign investment. The government’s Investment Promotion Center (CPI) has been investors’ primary contact with the government; however, CPI will merge in 2017 with two export and investment-related agencies.

Contact information for CPI is:

Investment Promotion Center (CPI)
Rua da Imprensa, 332 (ground floor)
Caixa Postal 4635, Maputo
Tel: (258) (21) 313310/75 or (21) 313295/99
Fax: (258) (21) 313325
E-mail: cpi@cpi.co.mz
Internet: http://www.cpi.co/ 

Mozambique’s Law on Investment, No. 3/93, dated June 24, 1993, and its related regulations, govern national and foreign investment. Earlier amendments, from 1993 and 1995, were replaced by Decree No. 43/2009 in August 2009, which provided new regulations to the Investment Law.

In November 1, 2016, the Council of Ministers merged CPI, the Office of Economic Zones for Accelerated Development (GAZEDA-Portuguese acronym), and the Institute for the Promotion of Exports (IPEX- Portuguese acronym), creating the Agency for Investment Promotion and Exports (APIEX in its Portuguese acronym). The Decree will come into effect in April 2017, but the agencies will continue to have separate roles until May 2017.

CPI assists both local and foreign investors in obtaining licenses and permits. However, in general, large investors receive much more support from the government in the business registration process than small and medium-sized investors. Government authorities must approve all foreign and domestic investments that require guarantees or receive incentives under the Investment Law.

The GRM maintains an ongoing dialogue with the Confederation of the Economic Business Associations (CTA- Portuguese acronym). CTA is represented throughout the country and has 132 associations as members. CTA organizes several provincial meetings and a national event every year to provide feedback to the government on the business environment. CTA holds an annual Private Sector Conference (CASP –Portuguese acronym) with the president and quarterly Doing Business Monitoring Council (CMAM – Portuguese acronym) with the prime minister.

Despite generally conducive laws, investors in Mozambique find that public institutions have differing levels of knowledge, enforcement, and capacity to implement legislation. Courts and magistrates are overtasked and investors complain of meddling from influential local interests.

Limits on Foreign Control and Right to Private Ownership and Establishment

Mozambique’s Investment Law and regulations generally do not make distinctions based upon investor origin, nor do they limit foreign ownership or control of companies. With the exception of investments related to Security & Safety, Media & Entertainment, and certain game-hunting concessions, there have been no legal requirement that Mozambican citizens own shares of foreign investments since 2011.

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 who is familiar with the bureaucracy at the national, provincial, and district levels.

CPI assists investors in finding land for development and obtaining appropriate documentation, including appropriate agricultural land. The GRM advises companies on relocating individuals currently occupying land designated for development; however, companies are ultimately responsible for planning and executing resettlement programs.

Law No. 15/2011 passed in August 2011, often referred to as the “Mega-Projects Law” that governs public-private partnerships, large-scale ventures, and business concessions, states that Mozambican persons should participate in the share capital of all such undertakings in a percentage ranging from 5% to 20% of the equity capital of the project company. Regulations of this law were approved by the Council of Ministers in June 2012.

The GRM is developing a “Local Content” law defining the legal regime that would require inclusion of local goods and services by businesses operating in Mozambique. Other legal obligations being considered would give exclusivity to Mozambican legal and natural persons to import and supply final goods and services within the country. For the oil and gas sector, concessionaires would need to procure insurance with certified Mozambican companies, provided that such insurance is generally applicability and not specific to petroleum operations, construction, or to facilities. The concessionaries shall give preference to Mozambican insurers, when the locally available insurance is comparable to international standards and the prices do not exceed the price of comparable insurance coverage by more than 10 percent from international markets, inclusive of taxes and related fees.

The government recognizes and enforces the protection of private property and provides a mechanism that protects and facilitates acquisition and disposition. The government owns all land, but there is a lease system in place. Developers are entitled to 50-years leases that can be renewable for an equal period of time. Infrastructure built on leased land is owned by the license holder who can rent it or sell it to others without restrictions.

Provincial governors can approve domestic investment projects with an investment value of less than 1.5 billion meticais (approximately $55 million). Approval of the Director General of CPI is required for foreign and/or national investment projects with an investment value of less than 2.5 billion meticais (approximately $92 million). The Minister of Economy and Finances must approve foreign and/or national investment projects with an investment value of less than 13.5 billion meticais (approximately $500 million). The Council of Ministers must approve investment projects with an investment value greater than 13.5 billion meticais, including projects that require a land area greater than 10,000 hectares to be used for any purpose. Any other projects with political, social, economic, financial or environment impacts should be approved by the Council of Ministers, as proposed by the Minister of Economy and Finances.

Other Investment Policy Reviews

Mozambique has undergone investment policy reviews by both the United Nations Committee on Trade and Development (UNCTAD) and the Organization for Economic Cooperation and Development.

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

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

Business Facilitation

CPI and GAZEDA are responsible for promoting and facilitating investment in Mozambique. They provide the following services to all investors: incorporation, business licensing, Entrance Visa, work permits, residence permits, identification and licensing of land, identification of business partners, troubleshooting, project monitoring, and implementation follow-up.

All information regarding registration of business and administrative practices are available at: http://www.portaldogoverno.gov.mz/por/Empresas/Registos 

Investors have to 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.” Detailed information on the required documents and the corresponding agencies is available here: http://www.portaldogoverno.gov.mz/por/Empresas/Registos 

In 2016, Mozambique ranked 137 among 190 countries in the World Bank Doing Business report. The report highlights that it takes 24 days to start a business, one day to receive construction permits, and 32 days to get electricity. The World Bank reports that Mozambique requires 34 days and 12 procedures to establish a foreign-owned limited liability company (LLC), which puts Mozambique at slightly better than the regional average for Sub-Saharan Africa.

Outward Investment

The GRM 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.

In December 1998, Mozambique negotiated a Bilateral Trade Agreement (BIT) with the United States. The U.S. Senate ratified the treaty in November 2000, followed by the Mozambican Council of Ministers in December 2004. The U.S.-Mozambique BIT came into effect on March 3, 2005. In June 2005, the United States and Mozambique signed a Trade and Investment Framework Agreement (TIFA) that established a Trade and Investment Council to discuss bilateral and multilateral trade and investment issues. The Council held its first meeting in October of 2006.

In 2016, the United States and the GRM held the fourth round of TIFA talks, continuing the collaborative work on Trade Africa and TIFA objectives, including addressing trade constraints, improving Mozambique’s business and investment environment, and expanding and diversifying trade between the United States and Mozambique. The talks also discussed how the U.S. Government could work with the GRM to meet its World Trade Organization (WTO) obligations, and develop and advance trade facilitating activities relating to sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT).

Mozambique has also signed bilateral investment agreements with: Algeria, Belgium, China, Cuba, Denmark, Egypt, Finland, France, Germany, Indonesia, Italy, Mauritius, The Netherlands, Portugal, South Africa, Sweden, Switzerland, the United Kingdom, and Zimbabwe.

Mozambique does not have a bilateral taxation treaty with the U.S. Government, but has double taxation treaties with Portugal, Mauritius, Italy, South Africa, Botswana, India, Vietnam, Macau, Oman, and the UAE. Double taxation treaties with Qatar and Uruguay are under negotiation.

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 when officials facilitate routine transactions.

Regulations in the areas of labor, health and safety, and the environment 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 government is aware of the problems and in recent years has launched a donor-funded effort to streamline procedures.

Draft bills are usually made available for public comments through the business associations or relevant sectors. 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. However, there have been complaints of short comment periods and that comments not being properly reflected in the National Gazette. The Association of Commerce and Industry, or ACIS, based in Beira, is a Mozambican non-profit business organization that represents the interests of over 300 companies, both national and international, including major U.S. companies. The GRM is considering a law that would make public consultation on future legislation mandatory.

International Regulatory Considerations

Mozambique is a member of SADC (Southern Africa Development Community). In June 2016, the GRM signed an Economic Partnership Agreement (EPA) with SADC. Besides Mozambique, the other signatory countries are Botswana, Lesotho, Namibia, South Africa, and Swaziland. 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. The U.S. Government serves as donor facilitator for this committee.

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 – the result of a collaborative effort starting in 1998 between the Mozambican government, the private sector, and donors. 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. The revised code went into effect July 1, 2006, and is generally viewed as a positive development.

Laws and Regulations on Foreign Direct Investment

On February 21, 2017, the GRM approved a new regulation to facilitate visas for foreign nationals intending to invest in projects in Mozambique. The measure reduced the minimum investment amount required from $50 million to $500,000 for an investment visa. Under the new visa regulations, citizens of nations that have Mozambican embassies or consulates may now also request visas upon entry, although implementation of this law is unproven. The new border visa is valid for 30 days and allows two entries.

Decree 37/2016 of August 31 approved the regulation of Mechanisms and Procedures for Contracting Foreign Citizens. The regulation unequivocally clarifies that private employment agencies can contract foreign citizens only for their function and cannot contract for job placement. However, an exception is made for managing partners and representatives, but the foreign employee must have the required academic/professional qualifications and the contract must occur only if nationals do not have the required qualifications.

Competition and Anti-Trust Laws

Law 10/2013 of April 11, 2013, (the Competition Law), established a modern legal framework for competition in Mozambique and created the Competition Regulatory Authority (the Authority). Although the Competition Law lacks several provisions, an August 2014 statute expanded the law. The framework is inspired by the Portuguese competition enforcement system. Violating the prohibitions contained in the Competition Law (either entering into an illegal agreement or practice or implementing a concentration subject to mandatory filing) can result in a fine of up to 5% of the turnover of the company in the previous year.

Competition Regulatory Authority decisions may be appealed in court, namely to the Judicial Court in Maputo, in the case of procedures leading to the application of fines and other sanctions, and to the Administrative Court, with regard to merger control procedures and requests for exemptions relating to restrictive agreements. Companies with a presence in Mozambique are advised to carefully consider the impact of the law on their activities.

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.” The GRM has bought back land and property along the new circular road completed around the capital city of Maputo and in Catembe. No American companies have been subject to expropriation issues in Mozambique since the adoption of the 1990 Constitution.

Dispute Settlement

Mozambique acceded in mid-1998 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. For disputes between U.S. and Mozambican companies where 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. In 1999, the Parliament passed Law no. 11/99 of July 8 (Law on Arbitration), which allows access to modern commercial arbitration for foreign investors. The Center for Commercial Arbitration, Conciliation, and Mediation (CACM) offers commercial arbitration with offices in in Maputo and Beira.

Bankruptcy Regulations

In June 2014, the GRM passed a comprehensive legal regime for bankruptcy, streamlining the bankruptcy process and settings the rules for business recovery. Globally, Mozambique stands at 65 in the ranking of 190 economies on the ease of resolving insolvency according the 2017 Doing Business Report.

Investment Incentives

The Code of Fiscal Benefits contains specific incentives granted to 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% of the total investment (with a right to carry credit forward for five years). Additional modest incentives are available for professional training and in 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 January 2009, can be found at http://www.speed-program.com/Trade-Investment . The Regulations of the Code of Fiscal Benefits are set forth in Decree No. 56/2009 approved in October 2009.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government established export processing zones called Industrial Free Zones in 1999. The decree set up an Industrial Free Zone Council, which approves companies as Industrial Free Zone enterprises, providing customs and tax exemptions and other benefits, including profit repatriation. A special labor and immigration tax scheme is available for industrial free zones.

Industrial Free Zone developers enjoy an exemption from customs duties, VAT, and tax on the importation of construction materials, machinery, equipment, accessories, accompanying spare parts and other goods destined for the establishment and operation of the Industrial Free Zone.

There are three essential requirements for Industrial Free Zone status: job creation for Mozambicans, the exportation of at least 85% of annual production, and a minimum investment of $50,000. Almost all industries, with the exception of prospecting and exploration of natural resources and processing of raw cashew nuts and seafood (including prawns), can participate. Free Zone concessions are granted for a renewable period of 50 years.

Special Economic Zones can be established on a case-by-case basis with the objective of developing specific geographical areas that benefit from exemption from custom duties and taxes, a free “off-shore” type foreign exchange regime, and special labor and immigration regimes. For example, a special tax and custom regime has been created for the Zambeze Valley until 2025.

Performance and Data Localization Requirements

Foreign workers may only be contracted where there are no Mozambicans with such qualifications or their number is insufficient. The Ministry of Labor enforces quotas for foreign workers as a percentage of the workforce within individual private companies. All investments must specify the number and category of Mozambican and foreign workers to be employed.

Specific performance requirements are built into mining concessions and management contracts, and sometimes into the sale contracts of private entities. Investments involving partnerships with the government usually include milestones that must be reached for projects to continue.

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; however, the proposed “Local Content” law could create additional requirements in this realm.

Regulations for new mining and petroleum laws might oblige investors to give preference in purchasing from local sources available in Mozambique, which are of an internationally comparable quality and that are offered at competitive prices, in terms of delivery. The government of Mozambique intends to codify local content requirements.

The government agency responsible for enforcing IT policy and rules is:

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

Real Property

The legal system recognizes and protects property rights for buildings and movable property. Private ownership of land is not allowed in Mozambique, as land is owned by the State. The government grants land-use concessions for periods of up to 50 years with options to renew, called DUATs (Direitos de Uso e Aproveitamento de Terra, or a land-use title). Land-use concessions serve as proxies for land titles, but cannot be used as collateral. Although the overall land-related policy and legal framework is sound, there are some gaps in implementation of relevant laws and regulations, including a lack of clarity, limited capacity, unclear institutional arrangements, and low land tax and associated distortive incentives for land access.

There is not a robust market for land use rights, making land use titles difficult to transfer. The process to award land concessions is also not transparent. The government at times has granted overlapping land concessions. Since the 1999 regulations to the 1997 Land Law were adopted, the land registration agency has accelerated the bureaucratic process of granting concessions and has reduced the period for issuance of land titles to an average of 90 days for most of the concessions. However, a small percentage of land concessions continue to takes much longer, due to disputes and the complexity of the procedures. Land surveys are being conducted throughout the country to enable individuals to register their land concessions, although the process is moving slowly. 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.

Intellectual Property Rights

The Parliament passed a copyright and related rights bill in 2000. This bill, combined with the 1999 Industrial Property Act, brought Mozambique into compliance with the WTO agreement on the 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 (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.

Intellectual property rights enforcement in Mozambique remains sporadic and inconsistent. Raids and prosecutions are extremely rare. Occasionally, media reports describe large-scale raids on pirated items, but threats of prosecution seem to have had little effect. Pirated copies of audio, videotapes, DVDs and other goods are commonly sold in Mozambique.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The Mozambique Stock Exchange (BVM – Portuguese acronym) is a public institution under the guardianship of the Minister of Economy and Finance. Corporate and government bonds are traded on the Stock Exchange 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.

Credit is allocated on market terms but eligibility requirements exclude much of the population form obtaining credit. Banks request collateral, but since land cannot be used as collateral, the majority of individuals don’t 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. 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 Government of Mozambique notified the International Monetary Fund (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

Since 2015, the banking sector in Mozambique has seen several actions from the Central Bank (Bank of Mozambique), tightening the monetary position due to low foreign exchange reserves, inflationary pressures, currency devaluation, and weak banking institutions. Presently, the local banking sector is stable, after the Central Bank took administrative control over Moza Banco, Mozambique’s fourth largest commercial bank, dissolving its board and replacing it with a provisional board. Moza Banco’s shareholders failed to recapitalize the bank in March 2017, effectively putting the bank up for sale, which looks likely, as there are already numerous credible offers to purchase the bank. The Central Bank also revoked the license of Nosso Banco due to severe liquidity and management problems, the first and only bank to be liquidated in Mozambique. The Central Bank increased interested rates and the amount that commercial banks must hold in reserves with the Central Bank. As of April 2017, the Central Bank implemented a new monetary policy intervention rate.

There are 17 commercial banks operating in this market. In 1992, the GRM approved Law 1/92 that made preservation of the local currency the main objective of the Central Bank. The Central Bank also manages monetary policy and supervises local financial institutions. Mozambique allows foreign banks to establish operations in the country.

Foreign Exchange and Remittances

Foreign Exchange

The currency is freely convertible at banks and exchange houses for recurring transactions, while capital transactions have to be approved by the Central Bank. Guidelines for capital transactions with the Central Bank are normally outlined in the investment approval documents and can only be performed through a local bank. Foreign Direct Investment (FDI) into Mozambique must be registered with the Central Bank within 90 days to allow for the monitoring of foreign exchange. Private individuals are limited to a maximum of $5,000 per foreign exchange transaction and larger transactions must receive the approval of the Central Bank. The administrative procedures required for the repatriation of capital, profits and dividends, all of which are foreign exchange transactions, can take a significant amount of time and require coordination with the Ministry of Economy and Finance to obtain tax clearance. Investors should raise any foreign exchange concerns early in the negotiation process with the GRM and ensure that profit, dividends and other repatriation of foreign currency is included in their investment approval documents to avoid future issues. In early 2016, the Central Bank encouraged commercial banks to limit the sale of foreign exchange, making it difficult to obtain foreign currency in some instances.

Mozambique has officially had a free-floating exchange rate since 1992. The exchange rate remained stable until the middle of 2015, when declining reserves prevented the Central Bank from artificially supporting the metical. The metical lost significant value starting in the final quarter of 2015 and continuing through 2016. In December 2015, the Central Bank required that external payments made with a credit and/or debit card could not exceed $14,000 per year. However, the Central Bank will end this measure by April 2017.

Transfers of currency are protected by Article VII of the International Monetary Fund (IMF) Articles of Agreement (http://www.imf.org/External/Pubs/FT/AA/index.htm#art7 ).

Remittance Policies

The Foreign Exchange Law (Law no. 11/2009 of 11 March) and its subordinate regulation (Decree no. 83/2010 of 31 December) require companies to remit their export earnings to Mozambique and convert 50% to local currency, commonly referred to as an “export surrender” requirement.

Sovereign Wealth Funds

The GRM is exploring establishing a sovereign wealth fund for liquefied natural gas revenues expected in the next decade. Currently there is an off-budget account for capital gains revenues. Article 5 of the 2017 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.

State-owned enterprises (SOEs) have their origin in the socialist period directly following Mozambique’s independence in 1975. There are a variety of SOEs that compete with the private sector in the Mozambique economy. Government participation varies depending on the company and sector, and SOEs are managed by the Institute for the Management of State Participation (IGEPE-Portuguese acronym). Following past privatization and restructuring programs, IGEPE holds majority and minority interests in 128 firms, down from 156.

Some of the largest SOEs, such as Telecommunications of Mozambique (Information & Communication – landline telephones), 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. Some of these SOEs benefit from state subsidies. In some instances, SOEs have benefited from non-competed contracts that by law should have been competitively tendered. SOE accounts are generally not transparent and are not audited by the Supreme Audit Institution. SOEs represent unknown, but potentially significant contingent liabilities for the GRM.

SOEs are listed here: http://www.igepe.org.mz/index.php?option=com_content&view=article&id=76&Itemid=72&lang=pt 

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 tent to follow their own responsible business conduct (RBC) standards. For some large investment projects, RBC-related issues are negotiated directly with the GRM. RBC is an increasingly high-profile issue in Mozambique, especially for large mining companies, which have had to relocate entire small communities to gain access to concession sites. Major LNG projects in the province of Cabo Delgado will also require resettlement of some communities. The Mozambican corporate social responsibility network (www.pactum.co.mz) was created to promote sound initiatives and provide technical assistance to companies wishing to invest in the communities where they operate.

Business integrity initiatives are mainly supported by business associations, civil society organizations, such as the League of Human Rights (LDH-Portuguese acronym), and some multinational companies. CTA is preparing a “Business Code of Conduct” which will include monitoring, sanctions, and an enforcement mechanism. IoDmz promotes business integrity initiatives, including the adoption of a Business Code of Ethics and a Business Pact against Corruption (BIPAC) in procurement and political funding. ACIS (Commercial, Industrial and Services Association), with their Code of Business Principles, also promotes RBC. Mozambique is Extractive Industries Transparency Initiative (EITI) compliant.

The National Assembly passed an anti-corruption bill in 2004. Mozambique established an Anti-Corruption Unit in the Office of the Attorney General (renamed Central Office for the Combat of Corruption in 2005) to investigate corruption-related crimes. In 2005, the government passed Decree 22/2005, which created provincial-level offices to combat corruption. The 2012 Law on Public Integrity banned government officials and parliamentarians from simultaneously holding positions in SOEs. This and other legislative reforms provide a sound basis for combating corruption, but implementation is often lacking. Mozambique passed a Right to Information law in 2014, which was publicly released in January 2016, although there have been cases of some journalists being denied requests for information.

Though Mozambique has made progress developing the legal framework to combat corruption, the policies and leadership necessary to ensure effective implementation have been insufficient.

Mozambique ranked 142th out of 176 countries on Transparency International’s 2016 Corruption Perceptions Index. Corruption is a concern across the government, and senior officials often have conflicts of interest between their public roles and their private business interests. The problem of corruption and bribery also remain a major problem for Mozambican police forces.

A few civic organizations and journalists, with support from the U.S. Government, remain vocal on corruption-related issues. One NGO, the Center for Public Integrity (CIP), continues to be active in publicly pressuring the government to act against corrupt practices. In a 2016, CIP and Transparency International assessed integrity and transparency in Mozambique’s business environment, giving it a zero out of 100 for enforcement of laws prohibiting bribery of public officials. The assessment further noted that since so many local businesses are closely linked to the government, they have little incentive to promote transparency. The assessment concluded that despite strong rules prohibiting bribery of public officials, enforcement, and evidence of sanctions is poor.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Ana Maria Gemo
Central Anti-Corruption Office (Gabinete Central de Combate à Corrupção)
Avenida 10 de Novembro, 193
(258) 823034576
gabinetecorrupção@yahoo.com.br or
anagemo@teledata.mz

Mozambique experienced waves of politically motivated violence between 2013 and 2016 as a result of the armed conflict between GRM forces and main opposition party Renamo. Following a short detente after a September 2014 peace agreement, the October 2014 national elections resulted in minor, targeted disruptions and isolated violence and demonstrations. Violence flared up again in 2015 when Renamo rejected the national elections results and demanded to govern six central and northern provinces. Renamo’s leader was forced into hiding later that year after surviving two alleged convoy attacks and a forced entry into his home by GRM forces.

Tensions peaked in 2016, a year which saw GRM forces deploy armed convoys along the country’s two main commercial highways in response to Renamo attacks against vehicles and administrative posts. Thousands of Mozambicans sought asylum in neighboring Malawi. International human rights organizations described alleged human rights violations against the refugees and their families carried out by GRM forces, as well as allegations of mass graves. There was also a shooting of an independent journalist and the political assassination of a prominent Renamo negotiating team member. However, a cessation of hostilities was declared in December 2016. Since then, there have been few reports of politically motivated violence and a new phase of peace negotiations has begun.

Both the general and economic environments have grown increasingly politicized over the last several years. This is due in part to the discovery of large natural gas deposits (currently estimated to be 100 trillion cubic feet or more of gas) in the Rovuma Basin in northern Mozambique, with projected annual revenues potentially reaching beyond $2.5 billion. With the anticipated resource economic windfall, there has been pressure from both ruling party Frelimo and Renamo to increase their political power and maximize opportunities for resource capture. In 2016, the political and economic situation was further stressed by the revelation of $2 billion in GRM-backed debt to three private companies majority owned by government bodies that resulted in allegations of malfeasance carried out by the former administration. As a result, the IMF and donors suspended direct budget support and an independent, forensic audit into the debt is currently underway.

Though the recent cessation of hostilities has ameliorated the situation to some extent and relative calm has returned to the country, a lasting peace is far from secured. Two bipartisan commissions with additional independent experts are currently negotiating decentralization and military affairs ahead of the upcoming 2018 local and 2019 national elections, and a Contact Group comprised of seven accredited local ambassadors (of which the U.S. is co-chair) is providing technical support. Political and economic tensions will likely continue at low levels until a bipartisan agreement between Frelimo and Renamo is reached on the issue of decentralization and military participation. If that does not happen, Mozambique risks sliding back into conflict.

The labor market is dominated by the informal economy. The vast majority of people (approximately 80%) work in agriculture, particularly in rural areas, while 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 passed a labor regulation in 2016 strengthening the requirement for employers of foreign nationals to devise a skills transfer program to train Mozambican nationals to eventually replace the foreign workers. The GRM maintains quotas that limit the number of foreign nationals a business can employ in relation to the number of Mozambican citizens it employs.

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 an employers’ or workers’ organization, 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 doesn’t exist and other social safety net programs do not exist for workers laid off for economic reasons.

The Overseas Private Investment Corporation (OPIC) is an independent U.S. government agency that can assist with project finance, through loans or loan guaranties, and political risk insurance in Mozambique, for projects with U.S. involvement ranging from $500,000 to $400 million.

OPIC signed an investment incentive agreement with Mozambique in 1999, which was ratified in 2000. In 2011, at least one company, led by an American, sought an OPIC loan to set up business operations in Mozambique. Following a 2012 visit to Mozambique by OPIC President and CEO Elizabeth Littlefield, at least three more companies expressed interest in future OPIC loans. Potential for OPIC investment is likely to increase in line with Mozambique’s own expected economic growth due to commercialization of Mozambique’s natural resources.

*National Statistics Institute (INE); Investment Promotion Center (CPI)

Table 3: Sources and Destination of FDI

Damon DuBord
Economic Officer
+258 21 492797
DubordDA@STATE.GOV