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MOZAMBIQUE: An Introduction to General Business Law: International Firms

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General Business Law Mozambique 

Economic outlook 

During recent years, Mozambique was severely struck by a cycle of natural calamities and economic events which compromised the country's stability and socio-economic development. These events include the debt crisis that increased the country’s levels of public indebtedness and exposure leading to a debt-servicing default, Idai and Kenneth cyclones, the armed insurgency in the northern province of Cabo Delgado, and more recently the Covid-19 pandemic that continues to affect the global financial and economic outlook.

Despite the confluence of these negative factors, the hopes of resumption of the financial support and contributions for the State’s budget by various international partners, such as the European Union, IMF and World Bank, the developments in the oil and gas industry, and the financial and administrative policies and reforms adopted by the government and the Central Bank, contribute to high investment prospects anticipating a return to economic growth which, this year, was revised downwards from 2.2% before the pandemic to 0.8% in November 2020.

Five-year plan 2020-2024 

The government's five-year plan (2020-2024) champions as main priorities the improvement of human capital and social justice; increasing economic growth, productivity and job creation; planning a sustainable allocation and management of natural resources; bolstering democracy and national unity; promoting sound administration and decentralisation; and strengthening international cooperation.

To fulfil these goals, the government has pledged to channel a large portion of funding into the areas of education and health but has also launched a number of initiatives and projects, namely related to infrastructures, renewable energies, agriculture and tourism, with a view to attracting foreign investment and diversifying the economy.

The reform of the public sector initiated in 2011 is also beginning to take shape. The government has developed an e-government strategy that includes an electronic government network, government portal, e-government communication infrastructure project and national biometric system of civil and criminal registration.

Oil and gas industry 

The oil and gas industry remains one of the most promising sectors for Mozambique's economy due to the large discoveries made in the previous decades, strategic geographic location and non-alignment of the country. In June 2020, funding for the construction of the two-train LNG project for the exploration of the Golfinho-Atum field in the Rovuma Basin was secured for a total of USD23 billion. This project alone will generate an estimated 13 million tonnes per annum (13MMTPA) from 2024 onwards and may place the country as a global mega player in this field. In relation to Area 4, assembly of the last production module of the Coral Sul FLNG platform was announced at the beginning of November, which is part of the natural gas treatment and liquefaction plant of the Coral Sul FLNG platform, which is expected to start operating in 2022 and expected to produce around 3.4 MMPTA.

Sovereign Wealth Fund 

In order to cope with extraordinary expenses related to natural disasters, build infrastructures, tackle commodities’ fluctuation and reduce overall levels of poverty, the State is preparing to set up a national Sovereign Wealth Fund financed with revenues from the exploration of natural resources which is expected to attract USD96 billion (EUR81.4 billion) – more than six times the current GDP.

The proposal is currently under public discussion and it sets down as its primary objective the accumulation of savings and contribution to the fiscal stabilisation of the country, with rules of transparency and accountability, as it will involve a tripartite structure composed by the Parliament, the Ministry of Finance and the Bank of Mozambique.

Business environment 

The investment potential of Mozambique remains high, but the climate of doing business is still not conducive. In the ease of doing business index, Mozambique ranks 135th out of 190. In establishing a business, it features at place 174, and the approval of credit and high interest rates make it difficult for SMEs to access affordable financing and leaves the country at place 161. Determined to improve these rankings, new laws and regulations are expected in the forthcoming months. A broad reform of the Commercial Code is anticipated which will set forth less bureaucratic procedures for setting up businesses. Reforms to the Labour Law, Electricity Law and Banking and Financial Companies’ Law are also imminent alongside a more innovative regulatory framework directly related to local content, which will promote and foster the involvement of national entrepreneurship in the economic development of the country.