2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011
Report

Overview of Foreign Investment Climate

The government of Mozambique is receptive to foreign investment, which it views as a means to drive economic growth and promote job creation. Virtually all business sectors are open to foreign investors. No government approval is required to invest, and there are almost no restrictions on the form or extent of foreign investment. CPI, the government's Investment Promotion Center, seeks to bring investors to Mozambique and should be an investor's primary contact with the government. CPI is particularly interested in increasing investment in the central and northern regions of the country in order to address large regional development imbalances. Contact information for the Investment Promotion Center (CPI) is as follows:

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: www.cpi.co.mz

Mozambique's Law on Investment, No. 3/93, dated June 24, 1993, and its related regulations govern foreign investment. Additional amendments were passed on July 21, 1993, Decree No. 14/93, and on August 8, 1995, Decree No. 36/95. The law and amendments generally do not make distinctions based upon investor origin, nor do they limit foreign ownership or control of companies. With the exception of private security and media companies there is no legal requirement that Mozambicans own shares of foreign investments. The 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 bureaucratic and legal complexities of the business environment. The Mozambican judicial system is at times ineffective. However, the judicial system does in theory uphold the sanctity of contracts, although usually at a slow pace and with great expense.

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 investment requiring guaranties and incentives provided by the Investment Law and its regulations.

Currently CPI handles the approval process for both foreign and domestic investors. The final approval is granted by the following government entities: 1) The Provincial Governor for domestic investment up to $100,000; 2) The Minister of Planning and Development for domestic investment exceeding $100,000 and foreign investment up to $100 million; and 3) The Council of Ministers for any investment project exceeding $100 million and those involving large tracts of land, (5,000 hectares for agricultural investment and 10,000 hectares for livestock and forestry projects). The minimum investment threshold for tax and import incentives is $50,000.

To date, Mozambique's privatization program has been relatively transparent, with open and competitive tendering procedures in which both foreign and domestic investors have participated. Most remaining parastatals are public utilities, 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.

The World Bank's "Doing Business in 2011" report shows overall improvement in 5 of 9 economic indicators over 2010. This year, the Doing Business rank is 126 out of 183 countries, up from 130 in 2010. The ease of starting a business in Mozambique rank also improved to 65, well above the 96 ranking in 2010. This improvement was due to the simplification of licensing to start a new business.

Mozambique experienced a slight drop in economic growth in 2010 with a real growth rate of 6.3 percent, achieving a gross domestic product (GDP) of $9.79 billion. Last year, the IMF projected GDP growth at 6.5 percent for 2010, and continues to project a growth rate for 2011 at 7.5 percent. Mozambique is a challenging place to do business and offers high risks and the potential for high return for experienced investors. Investors must factor in pervasive corruption, an underdeveloped financial system, poor infrastructure and high on-the-ground costs. Surface transportation inside the country is slow and expensive, while bureaucracy and port inefficiencies complicate imports. Despite these challenges foreign investment levels continue to rise and investors are seeing the business climate improvements documented by the World Bank’s Doing Business report.

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Measure

Year

Index/Ranking

TI Corruption Index

2010

2.7

Heritage Economic Freedom

2010

56.8

World Bank Doing Business

2011

126

MCC Gov’t Effectiveness

2011

0.56 (89%)

MCC Rule of Law

2011

0.35 (73%)

MCC Control of Corruption

2011

0.36 (84%)

MCC Fiscal Policy

2011

-3.7 (32%)

MCC Trade Policy

2011

81.0 (92%)

MCC Regulatory Quality

2011

0.37 (84%)

MCC Business Start Up

2011

0.982 (90%)

MCC Land Rights Access

2011

0.67 (72%)

MCC Natural Resource Mgmt

2011

53.07 (29%)

Conversion and Transfer Policies

Currency is freely convertible at banks and exchange houses. A January 2011 change to the exchange regulation requires corporations to remit 50 percent of their export earnings to Mozambique and convert the remittance to local currency, commonly referred to as an “export surrender” requirement. Investment registration and repatriation procedures must be followed to repay foreign loans and for the repatriation of invested capital, profits and dividends. The Central Bank approves all repatriation of capital, profits and dividends. This administrative processing and can take a significant amount of time, as the Central Bank requires proof of no outstanding tax obligations and an auditor’s statement confirming repatriated profits come from the previous year.

Expropriation and Compensation

Private property, including all land, was nationalized throughout Mozambique in 1975 following independence from Portuguese colonial rule. After Mozambique's turn away from socialism in the 1980s, citizens had a period of time to reclaim residential property. The government retained commercial property, but later sold it off as part of its privatization efforts. All but a handful of religious properties that were nationalized have been returned; negotiations are ongoing for the remaining few.

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 adoption of the1990 Constitution.

Dispute Settlement

In December 2005 the National Assembly 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 did not provide an effective basis for modern commerce or resolution of commercial disputes. The revised code is generally viewed as a very positive development. The new Commercial Code went into effect July 1, 2006.

The judicial system is largely ineffective in resolving commercial disputes. Instead most disputes among Mozambican parties are either settled privately or not at all and there are no discernable patterns to investment disputes. Pro-worker regulations mean that "hiring and firing" of workers is exceedingly difficult in Mozambique.

In February 1999, the National Assembly legally recognized Alternative Dispute Resolution, which provides for foreign investors to have access to arbitration. The Center for Commercial Arbitration, Conciliation and Mediation (CACM), which is supported by USAID, offers commercial arbitration. CACM has two locations - one in Maputo and a second in the central city of Beira. Since 2009, CACM also does labor issues mediation and arbitration. For disputes between international and domestic companies, the law closely follows UNCITRAL, the United Nations Commission of International Trade Law. For domestic arbitration, the law is formulated to cover a wide range of potential disputes, including non-commercial issues. In 2009, a government decree authorized labor disputes to be mediated by CACM. Mozambique acceded in mid-1998 to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. For disputes between American and Mozambican companies where a violation of the nations' Bilateral Investment Treaty (BIT) is alleged, recourse via international ADR under the BIT may also be available. Investors who feel they have a dispute covered under the BIT should contact the U.S. Embassy Economic Section. Mozambique does not currently have a unified bankruptcy law and bankruptcy filings are very rare. Portions of the bankruptcy regulation are found throughout the civil code. A draft bankruptcy law based on international standards is currently waiting for approval by the National Assembly.

Performance Requirements/Incentives

Mozambique is generally in compliance with WTO Trade-Related Investment Measures (TRIM) obligations. A variety of tax incentives exist to encourage direct foreign investment, which vary according to the region of the country and the nature of the investment but often include a 50 to 80 percent reduction in taxes. After the end of the period of tax reductions, additional benefits, which vary according to the location of the investment, are available. For example, investment in new or rehabilitated projects benefit from a 50% reduction in Corporate Tax Rates during the period necessary for recovering the investment, which may not exceed 10 years. For investments in the provinces of Niassa, Cabo Delgado, and Tete, the reduction is 80% of the normal rates.

After the end of the period of tax reductions, additional benefits, which vary according to the location of the investment, are granted. Special tax benefits are granted to investors for the rehabilitation or expansion of operating projects. For a five-year period, an immediate 100% write-off is allowed for investments in new equipment and in the construction of civil installations and agricultural infrastructure. Customs exemptions are possible for the importation of capital equipment and raw materials. To qualify, a minimum investment of $50,000 and pre-approval from CPI are required. However, a handling fee of 1% is charged on all goods, irrespective of the goods being exempt from the payment of any import duties of the duty applicable to 0% goods.

The government grants special fiscal, labor and immigration arrangements to companies operating in designated Rapid Development Zones. Rapid Development Zones include the whole of Niassa Province, Nacala District, Ilha de Mocambique, Ibo Island and the Zambezi river valley. Investments in these zones are exempt from import duties on certain goods and from real property transfer tax and are granted an investment tax credit equal to 20% of the total investment (with a right to carry forward for five years).

In August 2009, Decree 43/2009 created Gazeda, the Special Economic Zones Office. Both Gazeda and CPI support and assist investors; however, Gazeda focuses its activities on the Beluluane Industrial Free Zone in Maputo Province and the Nacala Special Economic Zone, in Nampula Province. The two zones allow exemptions from customs duties and value added taxes on imports of equipments and raw materials for use within the zones.

Specific performance requirements are built into mining concessions and management contracts, and sometimes into the sale contracts of privatized entities. Investments involving partnerships with the government usually include milestones that must be met for the investor's project to continue. The government also does not require investors purchase from local sources nor does it require technology or proprietary business information be transferred to a local company.

The process of obtaining a visa and work permits for foreigners in Mozambique is lengthy and bureaucratically complex. The Ministry of Labor must approve the employment of foreigners. The Ministry of Interior's immigration department issues a DIRE (a work permit/identification card) once the Ministry approves the application. Assistance through a local lawyer, consulting firm or an individual familiar with the process will facilitate obtaining necessary work permits. In 2009, the Ministry of Labor began enforcing a quota system which requires the number of foreign employees to be no larger than 10 percent of a company's workforce, depending on the overall size of the company. Foreign nationals found that the bureaucratic process and documentary requirements inherent in requesting or renewing work authorizations through the Ministry of Labor were exceedingly difficult. Some investments, covered under separate "mega-project" agreements are exempt from these quotas; however, in some cases the Ministry of Labor arbitrarily required the same companies to comply with foreigner quota regulations.

Right to Private Ownership and Establishment

The legal system recognizes and protects property rights to building and movable property. Private ownership of land, however, is not allowed in Mozambique. Instead the government grants land-use concessions for periods of up to 50 years, with options to renew. The government at times has granted overlapping land concessions. Essentially, land-use concessions serve as proxies for land titles; however, they are not allowed to be used as collateral. Land surveys are being carried out throughout the country to enable individuals to register their land concessions. This process is moving slowly and will not provide any real legal protection to investors for some time to come.

The Mozambican banking community uses property other than land such as, cars, and private houses as collateral. Investors should also be aware of the requirement to obtain both, land use, and allocation endorsements of their projects at a local level from the affected communities.

.

The Investment Promotion Center, as part of its goal of attracting foreign investment, assists investors with finding suitable land for development and obtaining the appropriate documentation. This includes government assistance to find appropriate agricultural land. The government will also assist in relocating individuals currently occupying land designated for development.

Protection of Property Rights

The government recognizes and enforces the protection of private property and provides a mechanism that protects and facilitates their acquisition and disposition. Secured interests in property, both movable and real is recognized and enforced. Depending on the type of property, it can be registered at differing government agencies. Some investors have reported unscrupulous individuals trying to sell fraudulently notarized documents related to real property and mortgages.

The inefficient nature of the Mozambican judicial system can make protection of property rights problematic. Pirated copies of audio, videotapes, DVDs and other goods are sold in Mozambique.

The National Assembly 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 guarantees the security and legal protection of industrial property rights, copyrights and other related rights. In addition, Mozambique is a signatory to the Bern Convention on International Property Rights, as well as the New York and Paris conventions.

Over the last five years private sector organizations have been working together with various government entities on an IPR task force team in an effort to combat intellectual property right infringement and related public safety issues. The task force has successfully acted on IPR infringement issues, highlighting a successful private/public partnership.

Transparency of the Regulatory System

Investors face a myriad of requirements for permits, approvals and clearances, all of which take a significant amount of time and effort to obtain. The difficulty of navigating the system creates space for corruption, and bribes are often requested to facilitate routine transactions.

Regulations in the areas of labor, health and safety and the environment are routinely not enforced, or are selectively enforced to generate revenue from fines. In addition, civil servants have at times threatened to enforce antiquated regulations that remain on the books to obtain favors or bribes.

The government is aware of the problems and has launched a donor-funded effort to streamline procedures. The new Commercial Code that went into effect in 2006 is seen as a step forward in combating many of these issues.

Changes to laws and regulations are published in the National Bulletin. Public comments to proposed new laws and regulations are usually limited and input may come from a few private sector associations, such as CTA. CTA is the organization that officially represents the interests of a wide number of private sector business associations.

In 2010 Mozambique also enacted new International Financial Reporting Standards to bring its financial practices in line with international norms. The implementation of the new standards has been expensive and time consuming for some investors.

Efficient Capital Markets and Portfolio Investment

Mozambique has a small capital market of sixteen commercial banks, of which four dominate the market. The banks compete for important clients and deposits. Access to credit for the private sector remains difficult and expensive -- interest rates for commercial loans are generally around 22 percent per year. Housing loans are around 15 percent per year. Access to capital in the rural areas is constrained by the fact that land leases cannot serve as collateral. Various entities, such as the Aga Khan Foundation, Banco Oportunidade and Novo Banco, offer micro-credit financing programs to partially fill this need.

The Mozambican Stock Exchange, founded in October 1999, was started with less than $5 million in capitalization. Although a fundamental instrument for the raising of finance by companies, to date the Exchange's principal listing is Cervejas de Mocambique. The capital base requirement for listing is $1.5 million.

Competition from State-Owned Enterprises (SOEs)

Current state-owned enterprises have their origin in the socialist period directly following Mozambique's independence in 1975. State owned enterprises are divided into two groups, those wholly owned by the state and those partially owned by the state. Each enterprise is subordinate to a specific ministry. There are a variety of state-owned enterprises that compete with the private sector. The state-owned companies: Telecomunicações de Mocambique (TDM), Aeroportos de Mocambique (ADM), Electricidade de Mocambique (EDM) and Portos e Caminhos de Ferro de Mocambique (CFM) have a monopolies in their respective industries (landline telephones, airports, electricity, and railways.). Some of these state-run enterprises benefit from state subsidies. The state is also actively involved in the operations of some of these enterprises.

Political Violence

National presidential, legislative and provincial elections conducted on October 28, 2009, occurred with only a few incidents of localized violence. International electoral observers noted that undue influence exercised by the ruling Frelimo party resulted in an "unlevel playing field." Supporters of the opposition party Renamo complained of intimidation and arbitrary arrests. Newly formed opposition party MDM was excluded, many say unfairly, from most legislative contests. Renamo issued complaints of election fraud to several agencies. Despite these concerns no violence ensued.

Labor unions lack the financial and institutional capacity to muster effective, coordinated efforts among their members. Protests, when they do occur, rarely turn violent. There have been work stoppages, usually as a result of failure to receive salary owed. As in many capital cities, crime is problematic in Maputo, where carjackings, muggings and armed home break-ins do occur. An undertrained and poorly resourced police force sometimes responds with an excessive show of force. In September of 2010, sometimes violent street protests over rising consumer prices in Maputo and several provincial cities results in at least 13 deaths, most committed by police.

In several instances, the police themselves have been targeted for assassination by organized crime. While acts of violence and violent crime are problematic in Mozambique, they have not reached the same scale or frequency as in neighboring South Africa.

Corruption

Corruption, including bribery, raises the costs and risks of doing business, and has a corrosive effect on the broader business climate. It also deters international investment, stifles economic growth and development, distorts prices, and undermines the rule of law.

It is important for U.S. companies, irrespective of their size, to assess the business climate in the relevant market in which they will be operating or investing, and to have an effective compliance program or measures to prevent and detect corruption, including foreign bribery. U.S. individuals and firms operating or investing in foreign markets should take the time to become familiar with the relevant anticorruption laws of both the foreign country and the United States in order to properly comply with them, and where appropriate, they should seek the advice of legal counsel.

The U.S. Government seeks to level the global playing field for U.S. businesses by encouraging other countries to take steps to criminalize their own companies’ acts of corruption, including bribery of foreign public officials, by requiring them to uphold their obligations under relevant international conventions. A U.S. firm that believes a competitor is seeking to use bribery of a foreign public official to secure a contract should bring this to the attention of appropriate U.S. agencies, as noted below.

U.S. Foreign Corrupt Practices Act: In 1977, the United States enacted the Foreign Corrupt Practices Act (FCPA), which makes it unlawful for a U.S. person, and certain foreign issuers of securities, to make a corrupt payment to foreign public officials for the purpose of obtaining or retaining business for or with, or directing business to, any person. The FCPA also applies to foreign firms and persons who take any act in furtherance of such a corrupt payment while in the United States.

Other Instruments: It is U.S. Government policy to promote good governance, including host country implementation and enforcement of anti-corruption laws and policies pursuant to their obligations under international agreements. Since enactment of the FCPA, the United States has been instrumental to the expansion of the international framework to fight corruption. Several significant components of this framework are the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (OECD Anti-bribery Convention), the United Nations Convention against Corruption (UN Convention), the Inter-American Convention against Corruption (OAS Convention), the Council of Europe Criminal and Civil Law Conventions, and a growing list of U.S. free trade agreements. This country is party to UN Convention, but generally all countries prohibit the bribery and solicitation of their public officials.

UN Convention: The UN Anticorruption Convention entered into force on December 14, 2005, and is the first global comprehensive international anticorruption agreement. The UN Convention requires countries to establish criminal and other offences to cover a wide range of acts of corruption. The UN Convention goes beyond previous anticorruption instruments, covering a broad range of issues ranging from basic forms of corruption such as bribery and solicitation, embezzlement, trading in influence to the concealment and laundering of the proceeds of corruption. The Convention contains transnational business bribery provisions that are functionally similar to those in the OECD Anti-bribery Convention and contains provisions on private sector auditing and books and records requirements. Other provisions address matters such as prevention, international cooperation, and asset recovery. Mozambique is a signatory to the United Nations Convention against Corruption.

Free Trade Agreements: While it is U.S. Government policy to include anticorruption provisions in free trade agreements (FTAs) that it negotiates with its trading partners, the anticorruption provisions have evolved over time. The most recent FTAs negotiated now require trading partners to criminalize “active bribery” of public officials (offering bribes to any public official must be made a criminal offense, both domestically and trans-nationally) as well as domestic “passive bribery” (solicitation of a bribe by a domestic official). All U.S. FTAs may be found at the U.S. Trade Representative Website: www.ustr.gov/trade-agreements/free-trade-agreements. Mozambique does not have a free trade agreement (FTA) in place with the United States, but does have a Bilateral Investment Treaty (BIT).

Local Laws: U.S. firms should familiarize themselves with local anticorruption laws, and, where appropriate, seek legal counsel. While the U.S. Department of Commerce cannot provide legal advice on local laws, the Department’s U.S. and Foreign Commercial Service can provide assistance with navigating the host country’s legal system and obtaining a list of local legal counsel.

Assistance for U.S. Businesses: The U.S. Department of Commerce offers several services to aid U.S. businesses seeking to address business-related corruption issues. For example, the U.S. and Foreign Commercial Service can provide services that may assist U.S. companies in conducting their due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas. The U.S. Foreign and Commercial Service can be reached directly through its offices in every major U.S. and foreign city, or through its Website at www.trade.gov/cs.

The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs. Problems, including alleged corruption by foreign governments or competitors, encountered by U.S. companies in seeking such foreign business opportunities can be brought to the attention of appropriate U.S. government officials, including local embassy personnel and through the Department of Commerce Trade Compliance Center “Report a Trade Barrier” Website at www.tcc.export.gov/Report_a_Barrier/index.asp.

Guidance on the U.S. FCPA: The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement of the Justice Department’s present enforcement intentions under the anti-bribery provisions of the FCPA regarding any proposed business conduct. The details of the opinion procedure are available on DOJ’s Fraud Section Website at www.justice.gov/criminal/fraud/fcpa. Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and about international developments concerning the FCPA. For further information, see the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, Website, at www.ogc.doc.gov/trans_anti_bribery.html. More general information on the FCPA is available at the Websites listed below.

Exporters and investors should be aware that generally all countries prohibit the bribery of their public officials, and prohibit their officials from soliciting bribes under domestic laws. Most countries are required to criminalize such bribery and other acts of corruption by virtue of being parties to various international conventions discussed above.

Mozambique: Mozambique ranked 116th out of 178 countries on Transparency International's (TI) 2010 Corruption Perceptions Index (CPI), an improvement from 130th in 2009, and close to 2007, when Mozambique ranked 111th. The Corruption Perceptions Index indicates corruption in the country is "rampant" but improving.

The police force continued to be poorly paid; due to low wages and poor conditions, some police members tipped off criminals to police operations. Corruption and extortion by police are widespread, and impunity remains a serious problem. Corruption is a concern across the government, and senior officials often have conflicts of interest between their public roles and their private business interests. Bribery is considered a criminal offense in Mozambique, and political declarations have repeatedly denounced corrupt practices and promising actions against the guilty. The Office of the Prosecutor General has embarked upon several high-profile corruption prosecutions, including several former ministers, and it has obtained convictions in several other cases involving officials of government parastatals and provincial government offices.

Over the past several years the United States has been one of the lead donor countries in providing assistance to the government to fight corruption. With U.S. resources, the government set up an Anti-Corruption Unit in the Office of the Attorney General (renamed in 2005 the Central Office for the Combat of Corruption). This body is charged with investigating corruption-related crimes, which it then refers to the Prosecutor General. In 2005 the government passed Decree 22/2005, which created provincial-level offices to combat corruption. Offices were opened in Beira and Nampula, and are in operation.

The National Assembly passed an anti-corruption bill in 2004 that updated previous antiquated legislation. Civil society (particularly the media and a few dedicated NGOs) has remained vocal on corruption-related issues, with some support from the U.S. government. One NGO, the Center for Public Integrity, continues to be active in publicly pressuring the government to act against corrupt practices.

Bilateral Investment Agreements

In December 1998 Mozambique negotiated a Bilateral Investment Treaty (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 U.S. 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, meeting most recently in March 2009. OPIC signed an agreement with Mozambique in 1999, later ratified in 2000.

Mozambique has also signed bilateral investment agreements with the following nations Algeria, Belgium, China, Cuba, Denmark, Egypt, Finland, France, Germany, Indonesia, Italy, Mauritius, The Netherlands, Portugal, South Africa, Sweden, Switzerland, The United Kingdom, and Zimbabwe. Double Taxation Treaties have been agreed with Portugal, Mauritius, Italy, and the United Arab Emirates.

South Africa is Mozambique's biggest trading partner. Since 1995 Mozambique has engaged in regular discussions with South Africa to harmonize trade regulations and facilitate cross-border trade and investment. Other countries with significant investment in Mozambique include the China, United Kingdom, India and Portugal. The United States is a relatively minor trading partner, but continues to be a substantial source of foreign direct investment.

OPIC and Other Investment Insurance Programs

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, up to a total of $400 million for projects with U.S. involvement.

Mozambique is a member of the Multilateral Investment Guarantee Agency (MIGA), part of the World Bank Group.

Labor

The estimated work force is approximately 9.6 million, out of a total population of 21 million. However, only approximately 16.4% are in salaried positions. The minimum wage for industry and services is approximately $78 a month and the minimum wage for agricultural workers approximately $52 a month. This minimum wage applies only to those working in the formal sector; those working in the informal sector may earn significantly less. Many people work several jobs to earn a sufficient income and often grow corn and vegetables on a small plot of land for personal consumption. Approximately 80% of the labor force works in agriculture, 6% in industry and 13% in services. Current estimates place nationwide adult literacy levels at under 50%, with most of the literate Mozambicans living in urban centers.

Although the contracting of Mozambican workers is unrestricted, contracting of foreign workers by national or foreign entities, including administrators and representatives of foreign companies, is subject to the authorization of the Ministry of Labor. Foreign workers must possess professional qualifications and may only be contracted where there are no Mozambicans with such qualifications or their number is insufficient. In 2009, the Ministry of Labor began enforcing quotas on foreign workers as a percentage of the workforce within individual private companies. Quota levels are dependent on the size of the company, with even the largest companies allowed no more than a 10% foreign workforce. All investments must specify in the investment project proposal the number and category of Mozambican and foreign workers to be employed.

The establishment of wages and other forms of compensation to be paid to the employee are not subject to control. However, the labor legislation provides for a minimum wage of $50 to $110 per month depending on the industry sector. Employers are obliged by law to pay a social security tax assessed at 7% of the employees' wages. A maximum of 3% of this is deductible from the employee's salary, while the remaining 4% is met by the employer. Foreign resident workers may be exempt if they can demonstrate participation in an alternate social security scheme.

Labor unions created during the socialist years of the 1970s and 1980s remain weak and have difficulty disengaging themselves from the ruling party, Frelimo, which played a lead role in their establishment. Total membership among Mozambique's fourteen unions is close to 200,000 persons. Labor unions do exert pressure on the government to maintain some extremely pro-worker provisions in labor legislation, particularly regarding dismissal of local personnel, and work force composition, although they show flexibility on other major issues. The minimum wage, decided every year, remains a major concern for the unions. Potential investors should be aware that severance payments and other benefits can be costly. Despite the introduction of a new labor law in 2007, the labor market remains rigid and an impediment to business.

Mozambique is a signatory to the International Core Labor Standards.

Foreign Trade Zones/Free Ports

The government issued Decree No. 61/99 on September 21, 1999, establishing export processing zones, called Industrial Free Zones. The decree set up an Industrial Free Zone Council, which approves companies as industrial free zone enterprises, thereby providing those companies customs and tax exemptions, along with other benefits. There are three essential requirements for Industrial Free Zone status: job creation for Mozambican nationals, the exportation of at least 85% of annual production, and a minimum investment of $50,000. The decision to grant Industrial Free Zone status lies with the Mozambican Council of Ministers and is conditional on the proposal creating 500 permanent positions for Mozambican employees, of which each company operating with the Industrial Free Zone must employ at least 20 of these employees. Almost all industries, with the exception of prospecting and exploration of natural resources, processing of raw cashew nuts and seafood, including prawns, can be authorized under an Industrial Free Zone status.

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.

Free Zone concessions are granted for a renewable period of 50 years. Mozambique's large export-oriented investment projects of recent years, such as MOZAL and SASOL, operate as Industrial Free Zones. There is no requirement for free zone companies to be located at specific sites.

In addition, 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. A special tax and custom regime has been created for the Zambezi Valley until 2025.

Foreign Direct Investment Statistics

Historical Data: The government established the Investment Promotion Center (CPI) in 1985. From January 1, 1990 through December 31, 2009 CPI approved a total of 3,297 projects (both foreign and national). CPI reported over $578 million in FDI was approved for 225 projects in 2010.

From 2005 to 2009 the largest projected FDI investor was the United States with over $5 billion in 15 approved projects. The second largest was Portugal with almost $800 million in 127 projects. The third largest was Norway with $742 million in 2 projects; the fourth largest was South Africa with $424 million in 318 projects. China was the fifth largest FDI investor with $175 million in 41 projects.

Many of these approved projects turned out to be smaller than planned or not implemented, however, while other projects are not reported to CPI at all. For these reasons, approved projects do not represent the actual FDI for any given year.

The largest U.S. investor in Mozambique is Anadarko Petroleum. Anadarko has invested more than $650 million in oil and gas exploration off the northern coast of Mozambique.

The second largest U.S. investor is Mozambique Leaf Tobacco (MLT) Limitada, part of the Universal Corporation. MLT has invested more than $30 million in a loose-leaf tobacco processing facility in Tete Province. MLT also works with 120,000 small farmer tobacco out-growers.

If a scroll bar appears below the following table, swipe the table to move left/right of the dashed line.

Sectors in Mozambique

Projects in 2010

FDI (USD)

Agriculture and Ag-Industries

37

222,963,344

Fish and Aquaculture

3

694,286

Banks and Insurance

3

39,696,000

Construction and Public Works

21

23,753,069

Industry

76

113,824,767

Energy

1

Transportation and Communication

10

13,811,400

Tourism and Hotels

39

33,209,515

Services

44

130,857,227

Total

234

578,809,608

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2010 Foreign Direct Investment to Mozambique and Originating Country

Position

Country

Projects

FDI (USD)

1

Portugal

63

154,147,532

2

South Africa

48

88,090,405

3

Italy

5

57,674,508

4

Belgium

2

51,932,000

5

China

13

38,570,000

6

Spain

4

33,503,370

7

United Kingdom

9

29,427,329

8

Singapore

1

23,751,968

9

Kenya

1

16,000,000

10

Switzerland

2

13,307,970

11

India

11

10,689,369

12

Malawi

4

9,541,700

13

Mauritius

12

9,320,559

14

United States

2

8,170,500

15

Jordan

1

5,000,000

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