Investment Climate in Mozambique
According to African Development Bank Group Economic Outlook, the country’s GDP growth declined to 6.3% in 2015 because of lower export earnings and public expenditure. The GDP growth has been projected at 6.5% in 2016 and 7.5% in 2017 This will however depend on the progress the country will make in the implementation of the gas and coal production projects and the country’s capacity to attract foreign investment. In January 2016 the country’s foreign reserves covered 3.5 months of imports. The budget deficit was reduced from 6.6% in 2014 to 5.4% in 2015. The inflation stood at 27% in December 2016 and Bank of Mozambique aims to reduce inflation rate to about 14 percent by the end of 2017.
Why invest in Mozambique
- Mozambique has an abundance of natural resources that include fertile land, large rivers, minerals, iron, extensive reserves of natural gas and fossil energy resources such as coal.
- The country has 2700 km of coastline and an ocean rich in fish and shellfish.
- The country has abundant flora and fauna that have tourism potential.
Mozambique that gained independence from Portugal in 1975 still suffers from the effects of a 16-year civil war that ended in 1992. Tensions remain between the ruling Frelimo party and the opposition former rebel movement Renamo. Frelimo has dominated politics in Mozambique since it won independence from Portugal in 1975. During his election campaign, Mr Nyusi pledged to transform Mozambique, one of Africa’s poorest nations.
In the Mozambique Third Population and Housing Census conducted 2007 the population of Mozambique was estimated at 20.4 million inhabitants. According to the World Population Review the population is projected to reach 29.5 million people in 2018 with a growth rate of 2.7%.
According to the World Factbook (CIA), 32.2% of total population lived in urban area in 2015 with 3.27% annual rate of change for the period from 2010 to 2015. The number of Mozambicans in cities will rise from 31% now to 40% by 2040.
Doing business in Mozambique
The highlights of World Bank score of doing business in Mozambique is summarised as follows;
|Topic||World Bank 2017 rank||World Bank 2016 rank||Change|
|Starting a business||134||121||-13|
|Dealing with Construction Permits||30||29||-1|
|Protecting Minority Investors||132||129||-3|
|Trading across the boarders||106||105||-1|
Starting business has become more difficult.
Moody’s credit rating for Mozambique was last set at Caa3 with negative outlook. Caa3 is judged as of poor standing.
The Foreign Exchange Act contains an export surrender requirement of fifty percent of export earnings to the Mozambican financial system and its conversion into the local currency. For individuals are allowed a maximum of USD 5,000 per transaction for international travel purposes. Purchase of foreign currency for trade has to be approved by Bank of Mozambique. Loans in foreign currency are only available to exporters and some approved projects that benefit the country.
The country has signed a number of international conventions, treaties such as the New York Convention and bilateral investment treaties for investment protection and also as a means of resolving disputes. There is also a legal framework to guide in the resolution of disputes.
- Negotiations between the authorities and liquefied natural gas (LNG) operators on new projects have taken longer than expected hence delaying investment decisions.
- Lower oil and gas prices are a further concern for the development of the projects.
- The political situation not yet fully addressed.
- The government is having difficult in repaying a bond issued for the Empresa Mocambicana de Atum (EMATUM) state tuna company.
- The currency devaluation may lead to increase in inflation.
Mozambique has fallen from 112th to 142th position out of 175 countries in the annual Corruption ranking published by the global anti-corruption body, Transparency International (TI). The decline may have been caused by the scandal of the hidden debt. The country obtained a corruption index score of 27%.
The security situation is generally fine for visitors except of some tensions between the opposition party and state security forces in some areas. Like any other place in the world, travellers have to be extra vigilant about the personal security. This includes monitoring of the local media and taking note of the travel advice from competent sources.
Unemployment and skilled labour
According to UNDP Human Development Report 2016, Mozambique’s Human Development Index (HDI) value for 2015 was 0.418 that puts the country in the low human development. HDI of 2015 is an improvement from previous score of 0.209.
Attitude to foreign investment
The Government of Mozambique (GRM) is receptive to foreign investment, which it views as a means to drive economic growth and promote job creation. No government approval is required to invest and there are almost no restrictions on the form or extent of foreign investment. The government’s Investment Promotion Center (CPI) has the mandate to attract and facilitate national and foreign investment in Mozambique. CPI operates as a “one-stop-shop”. Mozambique’s Law on Investment, No. 3/93, dated June 24, 1993 provides a legal framework for regulating all investment activities in the country.
Restriction on investment
Mozambique’s law on investments and its regulations generally do not make distinctions based upon investor origin, nor do they limit foreign ownership or control of companies. With the exception of security & safety, media & entertainment and certain game hunting concessions, there was no legal requirement that Mozambican citizens own shares of foreign investments until 2011. A new law governing public-private partnerships, largescale ventures, and business concessions, Law No. 15/2011, often referred to as the “MegaProjects Law”, passed in August 2011, 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, bringing the new law into effect.
Intellectual property rights
The legal framework is in place although Intellectual property rights (IPR) enforcement in Mozambique is still weak. Raids and prosecutions of pirated items are not common. Mozambique is compliant with the WTO agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS) and is a signatory to the Bern Convention on International Property Rights, as well as the New York and Paris Conventions.
The country’s natural resources include sands, gold and gas among others.
Investment Climate in Mozambique has been summarized to include the following
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