Mozambique attractive for investment, but incentives are lacking

16 April 2007

Lisbon, Portugal, 16 April – Mozambique has important opportunities for investment and generous tax and customs incentives, but is restricting exceptional support to large projects and as yet has no agency to promote investment that is as active as it needs, according to the latest report by the Portuguese Industrial Association, AIP.

The report was published ahead of the third meeting between Chinese businesspeople with representatives from the Community of Portuguese-speaking countries (CPLP), to be held in Maputo this week, and emphasized that there were still important opportunities in Mozambique.

“Mozambique offers a set of attractions to potential foreign investors and opportunities derived from a relatively recent transition process to a market economy,” said the “Gateway to Mozambique,” report published at the end of last year.

Amongst the main attractions offered by Mozambique are, the AIP said, the low cost of electricity and the availability of natural resources, particularly for the mining and power generation industries.

The report cited the “SADC Trade: Challenges and Opportunities of the Regional Countries,” report, drawn up by Albert Mafusire, in which Mozambique is ranked amongst the group of “highly competitive” countries, for the food and livestock sectors, oil and derivatives, machinery and transport equipment, goods and transactions, amongst others.

As well as this, the study said, “investors have a number of interesting tax and customs incentives under the terms of legislation covering duty free industrial areas (ZFI),” which turned out to be decisive, for example, in the project for the Mozal aluminium factory, an investment of US$2.1 billion by multinational company BHP Biliton and its partners.

The report pointed out the main benefits offered to ZFI operators, including exemption form payment of customs taxes on importing construction materials and other goods for their businesses.

Importing goods for mining activities is also exempt from customs taxes and domestic purchases are free from payment of value added tax (VAT) and corporate taxation.

Other benefits for operators and companies are a 60-percent reduction in corporate tax and exemption from payment of VAT on buying and using real estate.

“However,” the AIP report noted, “since 2002 that the Government, under the advice of the World Bank, has been restricting the concession of exceptional tax and customs breaks, such as those offered to the mega-projects,” of Mozal and Sasol etc.

The flow of investment to the country has grown, covering areas from the financial sector to transport and industry, but it has been focusing on “mega-projects” particularly Mozal (US$2.1 billion) and the gas pipeline to South Africa (US$600 million).

However, the Center for Investment Promotion (CPI), the Mozambican agency for attracting investment, “still has a long way to go” in centralizing its relationship with businesspeople, the report said.

“Although the services offered [by the CPI] are good quality, they lack extension and diversification,” at a time when the agencies operating methods are still being developed, with the support of the World Bank.

According to the latest World Investment Report, from the United Nations (UN), Mozambique was the third-biggest African receiver of foreign investment, an average of US$242 million in the period between 2000 and 2004.

Today, amongst the main projects being proposed are the expansion of the capacity of the Cahora Bassa dam (an investment valued at US$1 billion) and the construction of the Mpanda Ncua dam, on the Zambeze river.

The Mpanda Ncua dam, the report noted, “is considered fundamental for carrying out several other investment projects, as well as for increasing the volume of power exported to South Africa.”

Another large project that is expected is the development of coal mines at Moatize, valued at US$1.5 billion, including transport infrastructures.

Mozambique is due to host the third meeting of businesspeople from China and from the Community of Portuguese-speaking countries (CPLP), from April 18 to 20.

Of the 500 or so, businesses expected to attend, 253 are Mozambican, 40 are from China and 24 are Portuguese. (macauhub)