The Business Year

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Ismael Faquir

Country Managing Partner, EY

João Martins

Senior Partner, PwC

What are the main issues foreign investors should be aware of when coming to Mozambique? ISMAEL FAQUIR When establishing a business here, certain particularities must be considered, such as the […]

What are the main issues foreign investors should be aware of when coming to Mozambique?

ISMAEL FAQUIR When establishing a business here, certain particularities must be considered, such as the formal nature of the country. Mozambique is the only Portuguese-speaking country in the region, which makes for a different environment, culture, and legislative framework. For international clients, especially English speaking ones, it can be difficult. My advice to anyone wishing to invest in Mozambique is to get the right advice from the outset. If you do not set up a business properly, if you do not approach the CPI, and if you do not obtain the right authorization from the Ministry of Labor, or the right tax incentive, and so on, you will face problems that will hinder your performance here. Getting the right advice in terms of structure, legality, licensing, and the authorization you need to transfer money abroad will make all the difference. If you get off on the right foot, your business will run smoothly.

What challenges does Mozambique face due to the investment influx?

JOíƒO MARTINS The first challenge is infrastructure, which needs to be addressed urgently. We have many outstanding projects requiring approval that are as yet not implemented. If these do not see the light of day within the next two to three years, we might face difficulties, as one should not forget that Tanzania and South Africa also both have gas reserves. We need to be entirely competitive. Therefore, we have to make sure that the infrastructure we have scheduled and approved is actually built on time; otherwise, the window of opportunity might elapse. The second challenge is specialized human capital, and by this I do not merely refer to highly qualified university graduates; we also need artisans. The third challenge is for Mozambique to manage expectations arising from the economic boom in a balanced manner. The fourth challenge, which is crucial to maintaining the flow of investment, is to improve the perception indices in terms of the ease of doing business in Mozambique. That means climbing the business rankings worldwide with an enhanced international profile. Another key criterion is the degree to which Mozambique is perceived as competitive and capable of delivering a healthy return on investments.

Where do you identify the greatest potential for growth?

IF Challenges persist across different sectors. Mozambique remains a poor country and cannot forget 16 years of civil war during which its basic infrastructure was destroyed. There are many challenges related to that, but also opportunities. We can look toward international investors with strong capabilities to help finance infrastructure. I believe that people mostly talk about Mozambique in terms of natural resources, oil and gas, and mining, as we are relatively rich in those areas. However, in terms of infrastructure, roads, railways, ports, accommodation, telecommunications, and energy, there remains huge potential for development with the commercial opportunities that come with it.

Has the government effectively adapted the tax framework to capitalize on booming resources?

JM Yes, definitely, and not least by approving legislation on the taxation of capital gains. This new legislation will put an end to the long-standing debate on the taxation of capital gains, both in the hands of taxed and non-taxed residents in Mozambique. I think the government has put clear rules into place. One may not wholly agree in terms of the rights that have been put forward, but at least today there is a specific and transparent regulatory framework in place. In this manner, taxpayers, both resident and non-resident, know exactly where they stand. The second aspect to consider is the revision of the taxation of mining activities, which is also in progress. And while this still awaits approval, it confirms that the government is trying to adapt the taxation system to today’s reality of a natural resources oil and gas boom. As far as possible, it intends to tax income generated or attributable to Mozambican assets—be it an oil field or a mine—and to retain a measure of revenue generated by those assets for the Mozambican state.



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