Financial Data
Updated 21 Nov 2017


Mozambique

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Business opportunities and risks

Opportunities for you to do business in Mozambique

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There are a number of opportunities that could make investment in Mozambique a viable option for you. These opportunities and benefits include:

  • Foreign businesses can benefit from an attractive trade and investment environment
  • The Mozambican government generally welcomes foreign investors and encourages foreign direct investment in almost all sectors of the economy
  • Foreign ownership or control of companies is not restricted. Foreign businesses can mostly operate without too much intervention from authorities;
  • The government has created a number of incentives for foreign investors, such as industrial free zones, tax breaks and a stable currency
  • Its Fiscal Benefits Code allows tax incentives such as tax credits and the reduction or exemption of corporate tax.

Companies that invest in rapid development zones and industrial free zones (in agriculture, mining, oil, tourism, and industrial and services projects) can also benefit from incentives that vary by location, the number of employees and whether the products are exported. For example, any operator licensed within a special free zone does not pay VAT on the import of construction materials, equipment and spare parts or goods destined for the establishment and operation of the industrial free zone.

Business opportunities
  • Mozambique presents many investment opportunities, especially in terms of exploitation of the country’s vast natural resources and infrastructure development.
  • The Mozambican government generally welcomes foreign investors and encourages foreign direct investment in almost all sectors of the economy.
  • The region’s strong economic growth bodes well for telecommunications services. The economic development in Mozambique offers very good telecommunications development opportunities.
Operational risks to consider

Growth and development across Africa has attracted foreign investment and many multinational companies to the continent, however, you need to consider that doing business or operating in Mozambique does present unique challenges.

The following are some of the potential encounters you could face:

  • The country has an uncertain crime and security environment
  • There are logistics inefficiencies for businesses along the routes to markets. A functional transport infrastructure exists, but it is filled with inefficiencies that incur higher costs for business
  • Underdeveloped financial markets and poor access to finance means it remains difficult and expensive for the private sector to get credit. In general, interest rates for commercial loans range between 18%-22% per annum.
  • ‘Red tape’ involved in the closure of a business (which takes on average five years) or when securing construction permits (which involves 11 procedures and costs approximately USD1 192) can be burdensome
  • Mozambique also performs poorly in terms of property registration times. The process takes on average about 40 days and entails six procedures. Furthermore, it is costly, equalling 6.9% of the property value, depending on the lawyers’ fees and excluding taxes based on the value of the property you are interested in
  • Although the country’s legal system recognises and protects property rights to buildings and movable property, private ownership of land is not allowed in the country, as land continues to be owned by the state. The government, however, grants land use concessions for periods of up to 50 years (called DUATs), with options to renew
  • Despite several interventions to combat intellectual property right infringement and related public safety issues, there has been limited success in achieving desired results.

Despite the provision of several incentives to foreign investors there are a number of high tax rates that make operating in the country less viable. This particularly concerns terms of profit tax and the time it takes to close a business. Foreign investors who do not qualify for any tax incentives pay one of the highest corporate tax rates in sub-Saharan Africa. While corporations involved in agriculture and livestock are taxed at a rate of 10%, all other sectors are taxed at a flat rate of 32%.

Business challenges
  • A rigid local labour market with a largely unskilled domestic population and strict restrictions on hiring migrant workers is a significant deterrent.
  • Despite the provision of several incentives to foreign investors there are a number of high tax rates that make operating in the country less viable.
  • Although the country’s legal system recognises and protects property rights to buildings and movable property, private ownership of land is not allowed in the country, as land continues to be owned by the state.
  • Prospective investors that are unfamiliar with the country and the Portuguese language face huge challenges. It could help foreign investors to work with a local equity partner who is familiar with the bureaucracy at the national, provincial, and district levels.
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