MOZAMBIQUECOUTO, GRAÇA & ASSOCIADOS, LDAFirm InformationWebsite address: www.cga.co.mzLanguages spoken: Portuguese, English, French, Spanish andTetumContact: Pedro CoutoTelephone: +258 84 33 33 340Fax: +258 21 486 441Email: pcouto@cga.co.mzCountry InformationMozambique has a 2 470 square kilometre coastline and a totalland area of 801 590 square kilometres. It is a tropical countrywith effectively two seasons, a hot and wet season from Octoberto March, and a dry season from April to September. Thecountry’s official language is Portuguese and it has an estimatedpopulation of about 23 million with a growth rate of 2.8%. Theofficial currency is the Metical but the U.S. Dollar, the South<strong>Africa</strong>n Rand and the Euro are widely used and accepted inbusiness transactions.Political SystemMultiparty Democracy.Latest GDP Figures6.7% (third quarter 2011).Inflation Rate5.46% (December 2011).Investment ClimateMozambique has enormous investment opportunities in varioussectors such as agriculture, fisheries and aquaculture, industry,tourism, public infrastructure, mineral resources and energy. Itstrongly encourages foreign direct investment. The investmentlaw, its regulation and the Code of Fiscal Benefits define theregulatory framework for national and foreign investments thatare eligible for government guarantees and fiscal incentives.The guarantees comprise:legal protection of private property and rights, includingintellectual property rights;no restriction on borrowings and payment of interestabroad;the right to transfer dividends and remittance of fundsabroad in connection with: (i) exportable profits resultingfrom investments eligible for export of profits under theprovisions of the Regulation to the Investment Laws; (ii)royalties or other payments for remuneration of indirectinvestment associated to the granting of transfer oftechnology; (iii) amortization of loans and payment ofinterests on loans contracted in the international financialmarket and applied in investment projects in the country;(iv) proceeds of any compensation by the Government; and(v) invested and re-exportable foreign capital,independently of eligibility if the investment project toexport profits under the Regulations to the InvestmentLaw;a specific framework for the realization in the Mozambicanterritory of ventures that involve national or foreigninvestments;dispute resolution by the International Centre for theSettlement of Investment Disputes (ICSID) or theInternational Chamber of Commerce (ICC);services on issues related to investment risk insurance areavailable from the World Bank’s Multilateral InvestmentGuarantee Agency (MIGA) and the independent agency ofthe United States Government, the Overseas PrivateInvestment Corporation (OPIC).The following customs and fiscal benefits are provided to eligibleprojects depending on their value, location and sector ofactivity: a reduction of 50% on the real property transfer tax(SISA) on acquisition of immovable property for industry,including agribusiness, hotels and resorts, provided that theyare acquired within three years of the investment authorizationdate.Customs duties have been reduced and customs managementhas been streamlined and reformed. Other reforms include therevision of labour laws and the Commercial Code,comprehensive judicial reform and the creation of a commercialcourt to facilitate the settlement of commercial disputes, theliberalization of the financial sector (including the creation of anindependent central bank, the Bank of Mozambique), civilservice reform and improved government budget making, audit,and inspection capability.Although most sectors of Mozambique’s economy are open to100% foreign investment and foreign investors generally receivethe same treatment as domestic investors, some restrictionsremain. The private ownership of land is restricted and miningand management contracts are subject to specific performancerequirements. Foreign ownership or control of companies is,however, not restricted.The CPI, the Government’s Investment Promotion Centre,assists investors to obtain approvals from applicablegovernment authorities. A comprehensive investment guide isavailable on the internet at www.cpi.co.mz.Forms of BusinessPrivate or limited liability company;Close corporation;Joint venture;Government owned companies;Individual trader;External company (i.e. a branch or representative office ofa foreign company).Formation of a CompanyCompanies must:reserve the company’s name at the Conservatory of LegalEntities (to confirm that no other company has the samename);prepare a standard draft of the articles of the company;open a bank account with a local bank to deposit the sharecapital;execute a public deed of theincorporation and the articles of thecompany;formalize the company registration atthe Conservatory of Legal Entities55
56Registration;publish the name of the company and its articles on theOfficial Gazette;register the company with the competent Tax Departmentto obtain the respective tax number (NUIT);obtain relevant licenses from the relevant authorities forthe intended area of business activity.Exchange ControlsThe entry of foreign currency and other forms of foreignremittance into Mozambique is permitted provided that anyamount exceeding US$5000 is declared to the Bank ofMozambique prior to entering Mozambique. The realization ofany type of foreign exchange transaction (i.e. any transactionbetween a resident and a non-resident that results, may result oris deemed by law to result in a payment to or receipt fromoutside Mozambique) requires the authorization from andmandatory registration with the Bank of Mozambique.TaxationCorporate Income Tax (IRPC) is a direct tax levied on income.Commercial companies with a head office or effectivemanagement in Mozambique are considered to be IRPCtaxpayers and are subject to IRPC at 32%. The income of foreignentities arising from inside Mozambique is also subject to IRPC,usually at 20%.Monetary PolicyThe main objective of monetary policy in Mozambique is toreduce inflation. Since 2004, the Bank of Mozambique has madereforms to strengthen monetary management through dailyliquidity forecasting and the use of foreign exchange andTreasure Bill Sales. The government’s tight control of spendingand the money supply, combined with financial sector reform,successfully reduced inflation from 70% in 1994 to an estimated4.21% in 2009. The inflation rate in <strong>2012</strong> is expected to be 5.6%according to the Mozambique Central Bank.Legal SystemMozambique’s legal system is based on Roman and German law.The courts have exclusive jurisdiction to settle disputes byjudicial means unless the parties have agreed to submit adispute to arbitration. The state court operates according to theprinciple of the separation of powers and are classified assovereign bodies under the Constitution of the Republic. The lawdifferentiates between judicial courts, administrative courts andother special courts set up by law.The judicial courts include the Supreme Court, The SupremeAppeal Courts, the Provincial Courts and the Districts Courts.The administrative court has special jurisdiction since it hearsclaims arising from disputes in legal administrative relationships,litigation appeals lodged against the decisions of state bodiesand agents and appeals lodged against tax and customs courtdecisions.Intellectual PropertyProtection of Intellectual Property is guaranteed by law.Treaties and Bilateral AgreementsMozambique has signed investmentpromotion and reciprocal protectionagreements with South <strong>Africa</strong>, Germany,Algeria, Belgium, China, Cuba, Denmark,Egypt, USA, Finland, France, Indonesia, Italy,Mauritius, Netherlands, Portugal, Sweden,United Kingdom, Vietnam, India, Switzerland and Zimbabwe.Mozambique has also signed agreements to prevent doubletaxation and fiscal evasion with Portugal, Mauritius, United ArabEmirates, Macau and South <strong>Africa</strong>.In June 1998 Mozambique became signatory to the 1958 NewYork Convention, on the Recognition and Enforcement ofForeign Arbitral Awards.Membership of International and Regional OrganizationsMozambique is a member of the Southern <strong>Africa</strong>n DevelopmentCommunity (SADC), <strong>Africa</strong>n Union (AU), United Nations (UN),Community of Portuguese Language Countries (CPLP), BritishCommonwealth, <strong>Africa</strong>n Countries of Portuguese OfficialLanguage (PALOP), International Monetary Fund (IMF), WorldBank, Food and Agriculture Organisation (FAO), World TradeOrganisation (WTO), World Tourism Organisation and theInternational Labour Organisation (ILO).EnergyMozambique’s vast energy resources have the capacity to satisfymost of its domestic energy needs. They include hydropower(the Cahora Bassa Dam), natural gas, coal, biomass, solar andwind. The country has considerable hydropower potential(especially in the Zambezi River basin at sites such as CahoraBassa and Mphanda Nkuwa) which has been broadly estimatedat 12 500 MW with a corresponding annual energy generationpotential of 60 000 GWh.The country has expanded its energy generation capacity tomore than 16 000 MW as a result of the commercial extraction ofnatural gas (the Pande gas fields), the rehabilitation andconstruction of new hydroelectric dams and the exploitation ofalternative and renewable energies such as solar, oleic, andbiofuels (bioethanol, biodiesel and biogas). The energy sectorhas been liberalised to allow private participation and the sectoroffers a major investment opportunity.TelecommunicationsAlthough the State owned TDM (Telecommunication deMozambique) still enjoys a de facto monopoly, thetelecommunications sector was liberalised by law in 2004 andthe mobile sub-sector has experienced significant growth.MiningMozambique has significant investment opportunities for theexploration, extraction, processing and utilization of natural gas,coal, gold, titanium, ilmenite, zircon, rutile, tantalite, marble andprecious stones.AgricultureMozambique exports baby-corn, flowers, citrus, cashew nuts,various fruit, pepper and paprika and there are opportunities forthe production of cereals, fruit, flowers and vegetables for thelocal and export market.Labour RelationsThere are laws which regulate the employment relationship andthe employment of foreign workers. In 2007, a new labour lawwas approved which made significant reforms (although somedifficulties still exist especially in relation to dismissalprocedures and costs). The registration of employees and theiremployers with the National Security System is mandatory since2009. The Commission for Mediation and Arbitration deals withlabour disputes.