How To Start A Business in Mozambique
Starting a Business in Mozambique
Mozambique is experiencing a period of political and economic transition, with a newly elected president and the expected launch of natural gas projects that promise to alter the country’s economic and social landscape dramatically. The October 2014 legislative and presidential elections provided the ruling party Frelimo with a renewed mandate and President Nyusi took over the reins of power from the outgoing president Armando Guebusa in January 2015. Within this context of change, the government recently approved a long-term National Strategy for Development (ENDE) for the 2015-35 period. The ENDE places particular emphasis on industrialization and the key priority areas of agriculture, fisheries, industrial diversification, infrastructure, the extractive industries and tourism.
The Mozambican economy’s strong momentum continued in 2014 with a real GDP growth of 7.6%, compared to 7.4% in 2013. This growth rate was 0.4% below initial projections mostly due to lower-than-expected coal production, and the military tensions in the country’s central region that negatively impacted economic activity. FDI, one of the main drivers of growth, suffered a 28% reduction from the record levels of 2013, reaching nonetheless USD 4.2 billion (22% of GDP). Public expenditure, another major driver of economic growth, increased from 31.6% of GDP in 2012 to a record 41.4% in 2014, with capital expenditure programed at 14.5% of GDP. The main sectors benefiting are construction, services to enterprises, transport and communications, and the extractive industries, all highly correlated with mega-projects and infrastructure development. The resulting increased income per capita, coupled with strong credit expansion (25% year-on-year in 2014) has fueled financial sector growth, particularly in urban areas. Despite its progressive decline in importance, official development aid flows still represent 9.5% of GDP at around USD 1.7 billion, and are a substantial driver of development in the education and health sectors, as well as general infrastructure.
In 2014 the national accounts were rebased on 2009 values. This recalculation resulted in GDP figures for 2013 being increased by 0.4%. However, the structure of the economy remains unchanged with a narrow productive base and residual integration into global value chains. Tertiary activities contribute 55.8% to GDP, the secondary sector 14.9%, and the primary sector represents 34.1%. The agriculture sector, which employs 80% of the population and contributes more than a quarter of GDP, continues its relative underperformance, recording 4.6% growth in 2014. The sector is marked by low productivity, and is in need of technology transfer and investment. In addition rural areas are the most vulnerable to drought, floods and cyclones. Main cash crops remain the traditional ones of tobacco, sugar, cotton, and timber, with these having limited weight in exports, while the country still imports a significant share of its food. Issues of access to land and/or poor infrastructure have hampered large-scale investments such the tripartite Japan-Brazil-Mozambique ProSavana project, and other sizable foreign investments from China and Vietnam. A new “Law on Agriculture, Food Security and Nutrition” is being drafted and is expected to be debated and approved in 2015.
The manufacturing sector employs 2.8% of the work force and is dominated by the Mozal aluminium smelting plant, which accounts for a quarter of all exports. In 2014, a USD 150 million landmark investment by China Tong Jian Investment Company and the Mozambican government was made in an automotive assembly company. However, aside from Mozal, during the last decade the sector has significantly underperformed. The government is preparing a new industrial policy for 2015, while the new ENDE focuses on industrialization as an area for transformation. New special economic zones (SEZ) are being fast tracked offering export companies special customs procedures/duties, institutional support, and tax incentives.
In 2014, the first large-scale gas-fired power plant in Mozambique was inaugurated. The 175 MW Central Térmica de Ressano Garcia (CTRG) is a USD 273 million investment, and is supplied by Mozambican natural gas produced in the Pande fields. A concession was also awarded for the construction of a 600 MW coal-fired power plant associated with Vale’s Moatize coal mine in the Tete province. Power demand is growing at an annual rate of 15% requiring a structural investment boost in the sector. Crucial for unlocking development in the power sector is the USD 5 billion joint Sociedade Transmissão de Energia (STE) power line – Mphanda Nkuwa Dam project. However the project has been stalled since 2012 due to shareholding disagreements.
The extractive sector was the fastest growing in 2014 at 22%, propelled by the boost of coal exports. However, the sector is representative of the challenges Mozambique faces. Since 2007 multi-billion dollar investments were made in mega coal mines and transport infrastructure, raising the country’s expectations about a knock-on effect on economic development and fiscal revenues. However, since then international coal prices halved and exports have been hampered by infrastructure and logistic insufficiencies. Currently all coal mining projects are operating at a loss. Rio Tinto decided to exit the country with a loss of nearly USD 4 billion, selling its Benga project to India’s International Coal Ventures Pvt Ltd (ICVL) for USD 50 million. Vale has also stated that was looking to sell part of its stake in the Moatize project. Its USD 4.5 billion investment in a 900 km railway from Moatize, through Malawi, to the Nacala port in northern should become operational in 2015.
The oil and gas sector is facing a defining moment. During 2014 Mozambique completely revised its legal and fiscal framework for the mining and hydrocarbons sector. The revised legislation seeks to align with international standards, and it also introduced measures requiring local participation in FDI-funded projects. The government believes that the changes will significantly increase revenues from the sector. A new decree, The Rovuma Law, regulates the concession contract with the US’s Anadarko and Italy’s ENI for the development of a USD 20 billion on-shore LNG plant. However, the current depression of international oil markets could delay the final investment decision. In turn this could considerably postpone the flow of fiscal revenues well until the end of the next decade.
The outlook for Mozambique remains positive with GDP growth expected at 7.5% in 2015 and 8.1% in 2016, primarily driven by continued investment in mega-projects and infrastructure. The main short-term challenge is to maintain the growth momentum while ensuring fiscal and debt sustainability. A fiscal consolidation is expected beginning in 2015; however, there are downside risks. Given the financial constraints on the part of the donors undergoing austerity programs, and also of divergences with the government in relation to public finance management issues, in 2015 the country will witness a significant drop in the general level of budgetary support provided by donors. The fiscal consolidation could be further affected by the political transition process, and should political-military tensions rise. The country still suffers from high levels of poverty and vulnerability. In 2014 the Human Development Index (HDI) report ranked Mozambique 178th out of 187 countries with an HDI index of 0.393. The poverty rate remains high at 55% (national poverty threshold is below international norms at USD 0.6) with most of the poor living in rural areas. Poverty is then compounded by vulnerability and by economic growth that is failing to create sufficient jobs. Over the medium-term the continued challenge is the achievement of an inclusive growth model, the diversification of the economy away from mega-projects and natural resources, and improved public spending to foster human development.
Robust construction and mining activities have kept the domestic economic recovery on course with gross domestic product (GDP) growing by 5.3% in 2014, up from 5.1% in 2013.
Accounting for 60% of GDP in 2014, the tertiary sector remains the largest contributor to GDP although a weak performance in tourism is slowing growth. Tertiary sector growth is estimated to have fallen from 6.5% in 2013 to 6% in 2014 as tourism’s weak growth countered robust wholesale and retail activities. By the end of the third quarter of 2014, hotels and restaurant activity grew by just 0.1% in 12 months, as the number of beds booked declined and international arrivals slowed. However, benefiting from strong consumer demand, wholesale and retail activities grew by 14% during the period..
The secondary sector accounts for 19.3% of GDP and grew at 10.6% in 2014, from 8.7% the previous year, to help drive growth. The construction sector was buoyant and electricity and water rebounded. Construction benefited from accelerated investment in mining and public housing. Good rainfall and the rehabilitation of the Ruacana power plant contributed to increased electricity supply. Manufacturing, which at 68% dominates the secondary sector, contracted because of a slowdown in mineral processing and a decline in the textiles sector.
The primary sector, representing 20% of GDP, saw near zero growth in 2014 as agricultural growth declined and falling global uranium prices and weak offshore mining slowed mining growth. Mining (63%) dominates the primary sector with diamonds contributing the largest share. Agriculture is mainly driven by livestock production because of the arid climate.
A decomposition of aggregate demand shows that private consumption and investment continue to drive growth. Anchored by a stimulus environment, private consumption grew by 13% in 2013 after 11.8% in 2012. Gross Domestic Fixed Capital Formation grew by 13% to 29.8 billion Namibian dollars (NAD) in 2014 driven by private investment in mining. Private sector investment accounted for about 75% of that and expanded by 17.3% compared to 4.4% for public investment. The contribution of net exports of goods and services to GDP growth improved slightly although it remained in negative territory. Benefiting from the slight improvement in exports and significant capital flows, the current account deficit narrowed to 4% of GDP from 5.1% in 2013. Exports from new mines should bolster the current account. The persistent current account deficit also reflects a slower growth in savings compared to investment. Although higher than the regional average, at 20.3% in 2014 the savings rate rose at a much slower pace of about 2% since 2012 compared to the investment rate which had risen by about 37% during the period
Net foreign direct investment slowed to NAD 8.93 billion in 2013 after a peak of NAD 9.52 billion in 2012 due to reduced inflows of reinvested earnings. In the first half of 2014, foreign investment was estimated at NAD 588 million, down from NAD 3 billion during the corresponding period of 2013. South Africa was the main source and destination for Namibia’s foreign investment.
The medium term growth outlook remains positive as external demand improves and new mines start production. GDP is expected to grow by 5.6% in 2015 and 6.4% in 2016. Risks come from any slowdown in global mineral prices particularly for uranium. Keeping on schedule full scale production at the Husab uranium mine, the Tschudi copper mine and B2Gold Corp.’s mine scheduled for 2015 and 2016 and the implementation of port expansion will be key to full economic recovery. A slowdown in trend growth however, threatens long term prospects. Namibia’s five year rolling GDP growth rate decelerated from 6.3% in 2007 to 4% in 2013. To sustain long term growth Namibia needs to undertake broad-based structural reforms to accelerate productivity and promote diversification into high value added non-mineral sectors that could create additional jobs. Fiscal consolidation measures are expected to bolster Namibia’s strong national savings rate helping to gradually ease pressure on the current account balance.
Starting a business, or company, in Mozambique takes approximately 26 days as compared to about 46 days for the Sub-Saharan Africa region. This piece outlines the general technical procedures for starting a company in Mozambique, according to the Doingbusiness.org database by the World Bank. It includes details and requirements to be in good standing with all relevant agencies beyond the company registrar like social security agencies.
Use this as a guide while you complete the process and consult with agents carrying out work on your behalf. Additional notes may be found here.
The steps involved in registering a company [Sociedade por Quotas (LDA) – Closely-Held Limited Liability Company] in Mozambique are:
- Obtain certification of unique name (certidÃ£o de reserva de nome) at the Commercial Registrar Office of Maputo (ConservatÃ³ria do Registo Comercial).
- Open a provisional bank account, deposit minimum capital, and obtain a verification of deposit with a local bank.
- Register with the Commercial Registrar Office of Maputo (ConservatÃ³ria de Registo Comercial); request a commercial registry certificate; publish company statutes in the official gazette (Bolhetim da RepÃºblica).
- Register for taxes and obtain NUIT from RepartiÃ§Ã£o de FinanÃ§as.
- Apply for an operational license (alvarÃ¡) from the Presidente of Conselho Municipality.
- Receive inspection from Ministry of Health and Fire Department and Ministry of Commerce and Industry.
- Declare the beginning of activity at the tax department (RepartiÃ§Ã£o de FinanÃ§as).
- Declare the beginning of activity and register job candidates at the provincial employment center.
- Register workers with the social security system.
- Subscribe to a workmen’s compensation insurance coverage.
|No.||Procedure||Time to Complete||Associated Costs|
| ||1||Obtain certification of uniqueness name (certidão de reserva de nome) at the Conservatória do Registo das Entidades Legais (Legal Entities Registrar)
Agency: Legal Entities Registrar of Maputo
The Registrar Office of Maputo was computerized and name verification can be done in a day.
| ||2||Sign the contract before the notary
Agency: Balcão de Atendimento Único
According to Article 90 of Commercial Code, the Articles of Association is issued by written document signed by all partners before a notary. This can be done at the notary, the one-stop-shop and the public registry (Conservatoria do Registo das Entidades Legais)
| ||3||Open a provisional bank account and pay registration fees
The purpose of the bank account is to deposit the share capital therein. Also, the entrepreneur can make a payment for the registration fees and the official gazette fees.
| ||4||Register with the Legal Entities Registrar of Maputo (Conservatória do Registo das Entidades Legais); request a commercial registry certificate; publish company statutes in the official gazette (Bolhetim da República)
Agency: Balcão de Atendimento Único
To register a company with the Commercial Registrar Office of Maputo, the following costs apply:
- The registration fees vary according to share capital: amounts up to MZN 5 million are taxable at a .2% rate, and amounts over MZN 5 million are taxable at a .1% rate.
This registration is completed, as the Commercial Registrar coordinates the publication of the company statutes in the Official Gazette. The fixed fee for publication of the articles of association is MZN 900 per 25 page- line (MZN 36 per line). Publication can take 3 days to 1 week.
|3 days to 1 week
||see procedure details
| ||5||Register for taxes and obtain NUIT from Repartição de Finanças
Agency: Repartição de Finanças
The company needs to register at the tax department (Repartição de Finanças).
|between 2 to 5 days
| ||6||Apply for a simplified operating license at the One-Stop-Shop of Maputo
Agency: Balcão de Atendimento Único
On February 2, 2012, the Council of Ministers approved the revised Simplified Licensing Regime (Decree 5/2012) that served to simplify even further the licensing of economic activities in Mozambique. As a result a larger number of MSMEs benefit from easier and less costly business start up procedures.
In the places, where the one-stop- Balcão de Atendimento Ùnico (BAUs) is not available, the simplified license can be issued at the Municipality or District Administration offices. The steps for obtaining a license are:
i) Filling in the license application form;
ii) Attach the following documents:
ii) A copy of a valid Identification Document or Passport or Driving License or Professional Registration Card or Voter Registration Card (for Mozambican citizens). A copy of the DIRE or temporary residence permit, with a validity of at least 6 months (for foreign citizens);
iv) A legal entity registration certificate or copy of the publication of the articles of association in the Government Gazette (Boletim da República) and proof of the quality of the applicant, for legal persons;
v) Copy of the proof of issuance of the NUIT (Unique Tax Identification Number).
vi) Information and document review by the relevant authority. If all is correct, the fee is paid and the license is issued. The current license cost is 50% of the minimum wage for the public sector, which is updated every April and effective from June on wards.
Business activities in 9 economic sectors (agriculture, commerce, industry, civil construction, communications, culture, fishing, services and tourism) can benefit from the Simplified Licensing regime. These are fully listed in Decree 5/2012.
| ||7||Declare the beginning of activity at the tax department (Repartição de Finanças)
Agency: Repartição de Finanças
After the tax reform, a new income tax system has replaced the old. Form "Modelo M/01" must be filed to register, under a different taxpayer number, for income tax withholding (imposto sobre o rendimento do trabalho), secção A, and Form 44 is used to register for complementary tax. Since 2002, there is no Imposto sobre Rendimento do Trabalho Secção A. This tax was replaced by Corporate Income Tax ("Imposto sobre o Rendimento das Pessoas Colectivas") and Personal Income Tax ("Imposto sobre o Rendimento das Pessoas Singulares").
For VAT and corporate income tax, the notification of the beginning of business activity must be submitted 15 days before commencement. This notification must be submitted to the tax department of the appropriate fiscal district the form Modelo 6. In addition, this process requires the filing of Modelo 5 (in triplicate) and an authenticated copy of the operating license. The company is assigned unique taxpayer number (número único de identificação tributária) in 15 days, and an individual file for all taxes is opened.
|*||8||Declare the beginning of activity and register job candidates at the provincial employment center
Agency: Provincial Directorate of Labor
To register employees at the provincial employment center, the employer must request work cards within 30 days of the start of employment agreements, submit a schedule of work hours, and declare the employment of national workers in 30 days of the start of their respective employment agreement.
An employer with more than 10 employees must open a file (processo individual) and prepare four copies of a specific form for each worker, listing the name, position, skills, sex, date of birth, identity card number, date of entry, date of last promotion, wage or salary, and number of hours worked each month. These four copies are presented to the Employment Center, which after stamping them keeps three copies and returns one to the employer for public posting. This chart must be updated and approved annually by the Ministry of Labor. Together with this form, the employer must submit the company’s annual holiday’s plan (plano de férias) and each employee’s work card (MZN 5,000 each), which includes identity information and the employee’s signature. Upon stamping, the Employment Center returns them to the company, which distributes them to each worker as an employee identification card.
|between 1-2 days, (simultaneous with previous procedure)
||Each copy of the chart costs 5 MZNs, assuming 10 workers
|*||9||Register workers with the social security system
Agency: Balcão de Atendimento Único
The employer must register the company within 15 days of the start of business activity and register employees within 30 days of the start of their employment agreements. A special form (boletim de identificação de beneficiaries) must be filled out for each employee and submitted to the Instituto Nacional de Segurança Social within 15 days of signing the labor contract, accompanied by an authenticated copy of that employee’s identity card, an authenticated copy of the operational license, and the company’s número único de identificação tributária (nuit). A special form (ficha da empresa) must be filed for each company.
|1 day, (simultaneous with previous procedure )
|*||10||Subscribe a workmen’s compensation insurance coverage
Agency: Insurance company
By Law, companies have to provide their workers with life insurance for risks not covered by social security system. The seguro colectivo is required by article 231 of the Decree 21, 2007 (Lei do Trabalho).
|1 day, (simultaneous with previous procedure )