Tuesday, 22 Oct 2013
Man reading newspaper
Overseas Business Risk - Mozambique
Political and Economic
UK bilateral trade with Mozambique is relatively modest but growing (UK exports reached £139M in 2012). The Mozambican economy has been growing rapidly (averaging more than 8% pa over the past 17 years) and that high growth rate is expected to continue over the coming decade as the country begins to develop its vast gas and coal reserves. There are significant high value business opportunities to pursue in the oil & gas, mining, power and infrastructure sectors.
The increasing importance of bilateral commercial activity was underscored during President Guebuza’s visit to the UK in May 2012, and in October 2012 Lord Marland led a UK trade delegation to Mozambique. In June 2013 the Aberdeen & Grampian Chamber of Commerce organized an Energy Trade mission to Mozambique and in July President Guebuza was in Aberdeen to attend a conference on the development of the emerging oil and gas industry in Mozambique.
Mozambique’s Tete Province contains one of the largest known unexploited coking coal reserves in the world. UK-listed firms like Rio Tinto, ENRC, Ncondezi and Beacon Hill are all developing coal assets in Tete. President Guebuza inaugurated Rio Tinto’s Benga mine in May 2012. Coal exports on a limited scale began at the end of 2011, but transport bottlenecks need to be resolved. This requires very significant investments in port and rail infrastructure, which are partially underway.
Huge gas reserves are being discovered in Mozambique’s off-shore Rovuma Basin. Current estimates of 150-180 trillion cubic feet in exploration blocks led by US company Anadarko and Italy’s ENI have put Mozambique in the world Top 20 of gas reserves, and may increase further. Petronas of Malaysia and Norway’s Statoil (in partnership with the UK’s Tullow Oil) have carried out appraisal drilling in nearby exploration blocks, but have so far failed to find hydrocarbons in commercial quantities. Anadarko and ENI have plans to jointly develop a major LNG facility in the far north of the country while Petronas and Statoil
Mozambique ranks 146 out of 185 economies in the World Bank 2013 Doing Business Index and 137 out of 148 economies in the 2013/14 Global Competitiveness Index. Operating in Mozambique can be frustrating. Major challenges include lack of qualified personnel and lack of physical infrastructure (including poor road and railway infrastructure and limited access to potable water, sanitation and electricity outside of the main urban areas – only 18% of the population has access to electricity). Other constraints include low levels of transparency, government bureaucracy and over-regulation, labour market inflexibility, and lack of access to finance.
Person at laptop
Mozambique shares borders with South Africa, Swaziland, Zimbabwe, Zambia, Malawi and Tanzania. Mozambique is a regional success story. In the two decades since the end of a long and devastating civil war, Mozambique has enjoyed peace, stability and impressive economic growth, underpinned by sound macroeconomic policies and significant amounts of foreign aid.
Mozambique remains very poor, with over half the c23 million population living below the poverty line. In the UN Human Development Index the country ranks 184 out of 187.The UK is one of the largest bilateral donors, with DFID providing about £75 million per annum, the majority of which is in the form of budget support. DFID’s sectoral support programmes are improving standards in health and education, and DFID is increasingly looking to work with the private sector to promote wealth creation.
Mozambique has enjoyed prolonged political stability since the 1990 peace accords. The governing party, FRELIMO, headed since 2004 by President Armando Guebuza, has been in power since independence from Portugal. It achieved a landslide victory at the 2009 elections gaining a two-thirds parliamentary majority. Opposition parties (principally Renamo and MDM) are comparatively weak. Maputo experienced some rioting in February 2008 and September 2010, on both occasions sparked by rising prices (transport and food). Mozambique is a (Portuguese-speaking) member of the Commonwealth since 1995.
Sources of Information
Centre for Investment Promotion (CPI). It is a government body that identifies investment opportunities and works with potential investors. It can also advise on a range of legal issues (eg: tax exemption, property rights etc). Website: www.cpi.co.mz.
Institute for Export Promotion (IPEX). Government export agency that plays a role similar to that of UKTI. Website: www.ipex.gov.mz
ACIS (Associação de Comércio e Indústria) is a Mozambican business association representing over 260 companies throughout Mozambique. Its membership includes companies from major sectors of the Mozambican economy including mining, hydrocarbons, agriculture, transport and logistics, telecoms, forestry, FMCGs, retail, manufacturing and services. Website: www.acismoz.com
More information on political risk, including political demonstrations, is available in the FCO Travel Advice
The UK Government continues to monitor the human rights situation in Mozambique closely. Mozambique has signed and ratified 18 International Labour Organisation Conventions. T he Mozambican Labour Ministry takes a keen interest in labour disputes and can come down hard on companies that do not comply with local labour law. Land is a sensitive issue and there has been some recent controversy surrounding a Brazilian company’s handling of resettling affected communities in Tete province. Trades Unions are legal
Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.
In 2012, Mozambique was ranked 123 out of 176 countries in Transparency International’s corruption perceptions index. The Government of Mozambique has taken steps to tackle corruption, but concerns have been raised about the speed and effectiveness of implementation. Bribe-seeking by public officials (eg customs officials and traffic police) is common, as is the trafficking of influence.
Visit the Business Anti-Corruption portalpage providing advice and guidance about corruption in Mozambique and some basic effective procedures you can establish to protect your company from them.
Read the information provided on our Bribery and corruption page.
Protective Security Advice
The Centre for the Protection of National Infrastructure also provides protective security advice to businesses
The security situation is not alarming, although violent crime has increased in major cities, according to Mozambican police authorities.
Read the information provided on our Protective security advice page
Organised crime exists in Mozambique and there are concerns about narcotics traffickers using Mozambique as a transit route for drugs.
Read the information provided on our Organised crime page.
More information is available on overseas business risk in a range of markets.