
Name:		Republic of Mozambique
Independence:		25 June 1975
Head of State:		Joaquim Alberto Chissano
Political System:		Multiparty (1990 Constitution)
National Assembly:		250 seats (general elections 1994 )
Location		Mozambique has a strategic location along the eastern coast of Southern Africa, and, is the gateway to 6 hinterland countries
Area:		799 390 km² (13 000 km² of inland waters)
Population:		15 740 000 (1997 Census)
Climate:		From sub tropical to tropical (south to north)
Capital:		Maputo City (status of a province)
Provinces:		Cabo Delgado, Niassa, Nampula, Tete, Zambezia, Manica, Sofala, Inhambane, Gaza, Maputo
Languages:		Portuguese (official) 13 main national languages (Emakhuwa, Xitsonga, Ciyao, Cisena, Cishona, Echuwabo, Cinyanja, Xironga, Shimaconde, Cinyungue, Cicopi, Bitonga, Kiswahili) English (taught in secondary school)
Religions:		African traditional, Christian (Roman Catholic and Protestant), Moslem, Hindu
Natural resources:		Hydroelectric energy, gas, coal, minerals, timber, farming land
Main exports:		Prawns, cotton, cashew, sugar, tea, copra
Currency:		Metical (MT)
Exchange rate:		US$1=12,383 MT (January 1999)
GDP per capita:		US$ 128 (1997)
GDP growth:		8% (1997)
Inflation rate:		5.9% (1997)

In 1987 the Mozambican government launched an Economic and Social Rehabilitation Programme (PRES), resulting in fundamental reforms of the system and the implantation of a market economy. The basic goal is to achieve financial stability at national and international level, and to reactivate the economy in a sustainable form.

The role of the State in the economy has thus been gradually reduced, and more space created for the intervention of private economic agents. The aim is to dynamise the economy while simultaneously enabling the state to concentrate its resources on supplying basic goods and services and implementing strategic development programmes.

In the context of the reform programme, policies aimed at reducing inflation and macro-economic imbalances and restructuring the economy continue.

The ongoing fiscal reform forms part of the environment being created to promote investment. It is intended to enlarge the tax base through growth in Gross Domestic Product, and also to reduce the volume of illegal transactions. A new set of customs tariffs, containing a significant reduction in duties on equipment, was published in 1996.

Monetary policy continues to be restrictive, to help reduce the inflation rate and impose greater rigour and control in public expenditure. The aim of this policy is to channel financial resources to the banking system, and it has enabled credit limits to the private sector to be raised without having to resort to inflationary measures. However, the austerity policy must be combined with the need to ensure economic growth.

One of the government’s main areas of action is the restructuring of state enterprises, in particular through the ongoing privatisation programme.

With regard to sectoral economic policies, priority goes to agriculture, by which the majority of the population lives. In addition to rural extension, particularly geared towards improving post-harvest storage techniques and extending the period of guaranteed domestic food security, a major priority is developing a rural market. The aim is to create the structural and operational bases for expanding an active rural marketing network through infrastructure investment that will make private initiative in the marketing of cereals and other crops viable, thus getting them from the production areas to the consumer markets while at the same time guaranteeing supply of the inputs and consumer goods that peasants need.

Another government priority is the transport and communications sector, given that a further premise for development is the easy movement of people and goods in every corner of the country. Major programmes are under way for road rehabilitation, to link cities, towns, districts and villages and to connect the productive areas with the markets.

The objective in the industry sector is to develop capacities for processing agricultural produce, substituting imports and producing for export.

One initiative that will contribute to the implementation of government policies is the reactivation of an Economic Rehabilitation Support Fund (FARE), which has the task of supporting and stimulating the creation of a national business class through granting credits in concessional conditions for smallscale undertakings in agriculture, fisheries and industry and for rural shops.

The foreign debt is a major constraint on the state’s action, requiring the scarce resources to be channelled to meet international obligations. Contacts with the international community are continuing with a view to debt reduction and more favourable treatment.

1.3. Mozambique Overview

Mozambique is an African success story. Since Mozambique has taken a giant leap on the road to development, it is fast becoming the country of choice for companies wishing to profit from the vast opportunities in southern Africa.

In the latest "Africa Competitiveness Report", Mozambique ranked first in Africa on the optimism index and fourth on the improvement index. This optimism is based on the country's strong economic performance.

With average annual growth of 8% from 1992 to 1998 Mozambique has achieved the highest annual growth rate of any African country. Increased agricultural production and privatised manufacturing industry have driven this growth, with transport and communications rapidly expanding because of rehabilitation of ports, roads and railways.

Mozambique has the most stable currency exchange rate in the southern African region. With an open economy the rate against the dollar depreciated by a mere 2.2% in 1998, large because of Central Bank policy.

Privatisation of 900 state-owned companies since 1989 has changed the face of the economy - raising output, productivity and efficiency levels.

This impressive performance has stimulated a growing consumption of locally-produced goods such as cement, plastic products, tools, food and beverages, which is also encouraging. South African Breweries and Coca-Cola has effectively stifled smuggling of their own products from South African factories by producing the drinks at a competitive price inside Mozambique.

Privatisation has attracted substantial national and foreign investment. Companies from 16 countries have invested in the privatisation programme.

1997 was a watershed year for investment in Mozambique, with the approval of the $1.3 billion Mozal project. An international consortium led by London-based Billiton and including South Africa's Industrial Development company, Mitsubishi of Japan and theMozambican government is building an aluminium smelter near Maputo which will double Mozambique's export earnings.

Other mega-projects in the pipeline include the $2 billion Maputo iron and steel plant and the $660 million iron reduction plant in Beira.

Since 1989 the CPI - Mozambique's Investment Promotion Centre - has approved more than 900 investment projects totaling $3.4 billion from more than 45 countries.

By the year 2000, total approved investment is expected to reach $6 billion. Mozambique trades with more than 40 countries with most significant trading partners being South Africa, Spain, India, the USA, Portugal and Japan.

The International Monetary Fund, the World Bank and other international funders agreed to reduce Mozambique's outstanding debt to $1.2 billion, in net present value terms, by June 1999. There is a vast array of investment opportunities in Mozambique:

Tourism

With a 2500km coastline of sandy beaches and coral reefs, and a tropical climate, Mozambique offers the visitor a wealth of exciting tourism choices. There are modern facilities for diving and deep-sea fishing at many newly-refurbished hotels and island resorts along the coast.

Mineral Resources

European pioneers have been prospecting for wealth under the ground in Mozambique for more than a century. Gold was the big attraction in the early days but now the focus has shifted to a wide range of other resources. Foreign companies including Arco, Ashanti Goldfields, BHP, BP, Caltex, Edlow Resources, Enron, JCI, Mobil, Norbay, Sasol, Scimitar, Shell, Smiter and Total are now prospecting for, or exploiting coal, oil, gas, gold and mineral reserves in conjunction with their Mozambican partners.

Finance

Equity capital from the International Finance Corporation, South Africa, Portugal, Switzerland, Britain, France, Malaysia and Zimbabwe is now represented in banking, leasing, venture capital and insurance companies.

Hopes were high that the Mozambique Stock Exchange would open in 1998. That proved to be over-optimistic and the launch will now be in 1999 with the sale of share in the privatised brewery, Cervejas de Mocambique, which is 60% owned by South African Breweries. In putting so much emphasis on the role of the private sector in investing in and managing infrastructure, Mozambique is a leader in Africa. Energy needs are supplied by the giant Cahora Bassa dam on the Zambezi River. Road and rail link all major cities both within Mozambique and to its neighbours.

Mozambique has a generous range of fiscal incentives to encourage investors as well as providing confidence through its adherence to international conventions. The Investment Promotion Centre is a one-stop shop which assists investors interested in finding projects that suit their needs as well as finding suitable joint venture partners.

International banks and the "Big Five" consulting and auditing firms has already positioned themselves to service the increasing demand for financial and investment services.

The Maputo Development Corridor

The Maputo Development Corridor is considered by the government of Mozambique and South Africa to be the cornerstone of a regional integration strategy. The Corridor consists of major industrial developments together with a US$3 billion toll road, now under construction, and private concessions for Maputo port, terminals and railway lines.

Beira, the second largest city and port serves Zimbabwe, Zambia and the central Mozambican provinces of Sofala, Manica and Tete. Exports produced include citrus fruits, cashew nuts and timber. Major natural resource projects in the region include a US$750 million investment in Moatize coal, as well as gas and oil exploration projects. The Beira Development Corridor incorporates highways, a private concession for the railway lines and a pipeline to the proposed iron reduction plant near Beira.

A special fiscal regime has been created for the Zambezi valley in order to promote investment in infrastructure, industry and services.

Nacala, the deepest port in southern Africa, is the gateway for trade to and from landlocked Malawi. Nacala also serves the Mozambican provinces of Cabo Delgado, Niassa Nampula and Zambezia, which are rich in agricultural and mineral potential. Cash crops include cashew nuts, rice, maize, sunflower, soya, peanuts, cotton, tea and copra.

The potential of the region will be developed using a new power line from Tete to a proposed titanium smelter and phosphate plant, and to the existing cement and agro-industrial factories.

Industrial groups from America, France, Portugal and Malawi have presented proposals for the concession of the port and railway line.

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II. Mozambique’s experience in attracting beneficial IFD

2.1. Mozambique, Investment Gateway to Southern Africa

Maputo City Mozambique is a country on the move, constantly adjusting and streamlining bureaucratic procedures, and firmly committed to restructure its economy to meet the demands of the global economy, there is no doubt that enormous improvements have taken place and will continue. The following have emerged as some of the main factors which have appealed to investors.

Known as the "gateway to Southern Africa", with excellent access to the Southern African regional market, and the shortest road connection to Johannesburg.
A large and dedicated labour force available at highly competitive rates, and who are non-politicised and stable.
Preferential access to EU, SADC, Japan, China and other markets.
The country is one of the lowest cost electrical energy producers in the world.
Macro-Economic stability and a political environment conducive to investment.
Massive rehabilitation programme of port and other infra-structural facilities
No exchange controls on the repatriation of profits
Ability to hold foreign currency accounts
Established Export Processing Zones
Abundant and underutilised natural resources

2.2. Establishing a Business

There are various company structures that can be used, the most common being the Private Limited Liability company (LDA) and Public Limited Company (SARL). The steps for incorporation of a company is as follows:

1. A company's name is reserved and approved by the commercial registration Office.

2. A bank account must be opened in the company's name, and at least 50% of the share capital being deposited for an LDA, but only 10% for a SARL.

3. Elaboration of the articles of the company or statute.

4. The documents of incorporation and registration if the shareholders are collective persons, and minutes of the general meeting to participate in the new company.

5. If the shareholders are individuals, copies of all ID documents should be obtained.

6. The company should be incorporated at the public notary.

7. Registration of the company at the Commercial Registration Office

8. Publication of the company's Articles of Association in the official government gazette.

The Alvará (business license) for exercise of the activities that the company intends to develop is obtained from the respective ministry.

2.3. Investment Procedures

The investment legislation regulating investment activity is described in the Law on Investment in Mozambique of 1993, which established the legal framework for both national and foreign investment. Under the legislation any investment project must be submitted to the Centre for Investment Promotion for approval. The following steps should be carried out:

2.3.1. The main steps for establishing a Company in Mozambique With investment incentives and guarantees

(1) Apply for authorization to carry out the investment from CPI - Investment Promotion Centre

(2) Apply for certification "certidao negativa" from the commercial Registry that confirms that the name of the company is not already in use.

(3) Realize share capital by depositing the minimum share capital in with commercial bank and where appropriate, producing proof of incorporation of assets in kind into the company's capital

(4) Notarize the documents of the formation of the company.

(5) Publish the company's statutes in the official gazette of Mozambique.

(6) Register the company in the Commercial registry.

(7) Register the company in the local Tax office in the district in which the company's registered office is situated or where it carries out its main activities.

(8) Apply for license(alvará) from the relevant Ministry.

2.3.2. Procedures for obtaining investment approval (through cpi)

ACTION

1. Fill up an Application Form in CPI.

2. The following documents must be provided to CPI:

copy of the passport or identification card of each investors;
or if it is a company that will be investing a copy of the certificate of registration of the same
list of equipment to be imported classified as "class K"

3. Location where the project shall be implemented (Land's concession).

Note: CPI can help investors to obtain land for investment purposes

2.3.3. Registration of foreign direct investment (bank of mozambique)

ACTION

(1). In cases where the investment will be realized in freely convertible currency, the following documents must be submitted to the Bank of Mozambique:

Photo copy of the authorization;
Extract of the deposit of the capital from the Commercial Bank.

(2). In cases where the investment will be realized in equipment and other materials the investors must submit the following documents to the Bank of Mozambique:

photo copy of the bulletin of import registration (BRI);
3 copies of the list of equipment exempted from customs duties
invoices;
certificate of inspection of the embarkation of equipment

2.3.4.obtaining land for a project

Submit your investment proposal to CPI, indicating the following:

the location where the applicant intends to implement his/her project
Number of hectares necessary for the development of the project.

Note: Land cannot be brought or sold in Mozambique. Under the Mozambican Constitution (1990) Land Law, land is considered to be an asset belonging to the state. Land can be granted on a concession basis on a 50-year renewable lease to both foreign and Mozambican private investors.

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III The case of Mozal aluminium smelter

3.1.Mega Investments,

The sign of a succesful economy is the number of major projects underway. In this regard Mozambique must currently rank amongst the most active in the world, with a host of potential and realised investments totalling more than $6 billion. This is a strong reflection of the confidence that major multi-nationals hold in the future of the country, and augers well for not only Mozambique but for the entire Southern African region.

The "talk of the town" is the $1,300 million Mozal Aluminium Smelter , which is the largest single project of its kind undertaken in Mozambique. Construction on the plant started in July 1998, and is expected to begin production towards the end of 2000. It will produce 245,000 tons of primary alumium, with the capacity to double production. The main shareholders are Billiton (Gencor), the Industrial Development Corporation (IDC) of South Africa, Mitsubishi and the Mozambican Government. Other funding has been sourced from the IFC and a range of other debt instruments. The establishment of a Free Zone around the Mozal smelter is designed to encourge the establishment of downstream projects, which will be attracted by the combinination of high quality stainless steel, cheap labour, and one of the worlds lowest electricity costs.

There are advanced plans for producing 3.45 million tons per annum of steel slabs by exploiting natural gas from Pande, Iron ore from Phalaborwa and Sishen (both SA) and energy from Eskom. The Maputo Iron and Steel Project (MISP), and the Pande Gas and Pipeline projects have all advanced feasibility studies which are awaiting final decisions. The project should take about 3 years to complete. The MISP will produce and export about $960m of steel slab, using about $100m of gas from Pande. The estimated cost of the MISP investment is $1,600m over 42 months, with the Pande gas costing around $24 million, and the pipeline $402m. All three projects must go forward as a unit.

Utilising gas from Temani and Buzi the Beira Iron Ore Project (BIP) is to be developed by JCI (SA). It will produce iron billets for the export market, and expected investment is estimated to be around $620m, including the construction of a new port terminal. The construction period is expected to be about 3 years.

A massive reserve of coal in the Tete province has caught the interest of Austral Coal (Australia) and JCI (SA), and planning for the Moatize Coal mine is well advanced. Each of the companies have submitted development plans, and are negotiating a joint development programme. Current plans include the production and export of around 7 million tons of coal. initial investment costs will be around $500m, while the overall projected investment might reach $1,300m.

Mozambique has Africa´s greatest renewable energy sources in the form of hydro-electric power. The Cabora Bassa Dam houses the 3^rd largest hydro-electric power plant in the world, and has the capacity to generate 2,000MW of power. Exports of electricity to neighbouring countries (Zimbabwe and SA) is expected to exceed $50m in 1998, growing rapidly through to 2003. The possiblislity of constructing a further hydro-electric power station at Mepanda Uncua on the Zambezi River, is in the conceptual stages, and estimated costs for the dam and power station may run as high as $2000m.

As part of the Maputo Corridor Development, the rehabilitation of the Johannesburg - Maputo toll road is expected to generate significant spin-offs for the region. The project, has been funded by a consortium called the Trans African Concession (TRAC) so will read (TRAC), and will be completed by 2001. The estimated cost of the toll road itself is anticipated to be $300million and is expected to generate projects in Mozambique and South Africa worth $5b over 10 years. The estimated cost of the Mozambican section will be $90m spread over 3 years. A key part of the corridor is the rehabilitation of the port, which will cost about $100m over 15 years.

A production sharing agreement for natural gas from Temani was signed in the middle of 1998. The Mozambican government, Arco (USA), Sasol (SA) and Zarara (UAE) will contribute $12m this year to open the first well, which if successful will lead to an additional $48m being invested to open up a further 5.

Billiton (Gencor) is planning to mine heavy sands in Zambezia province and construct a titania slag smelter in either Nacala or Maputo. The investment is in the order of $500, with expected exports at peak production expected to be in the order of $280m per annum. Initial production could start in 2002 and an expansion is planned for 2005. Kenmare from Ireland, and BHP minerals from Australia are also exploring possibilities to mine heavy sands in Nampula Province. The investment is planned to be about $100 million, and will also start around 2002.

The rehabilitation of the Xinavane Sugar Mill seems to be in progress, with financing from the OPEC fund, BADEA and the Credit Guarentee Insurance Corporation (SA). The government retains 51% of the company, and rehabilitaion will be from 1998-2001. The Mafambisse Mill is not yet privatised , but Tongaat Hulett (SA) has an option on the mill. Rehabilitation on the Maragra Mill has begun, with the bulk of the $45 million investment taking place in 1999.

Iran is interested in rehabilitating the Matola Oil refinery and building a new refinery in Nacala.

A consortium of Portugese, US and Mozambican companies are negotiating with CFM for the private management of port and rail services along the Nacala Corridor. The "Sociedade de Desinvolvimento do Corredor de Nacala" was established in January 1998.

	Number of Projects			Investment Value (USD)
Years	FDI	NDI	TOTAL	FDI	NDI	TOTAL
1993	27	27	31	18,017,220	7,555,679	71,186,453
1994	72	116	130	91,253,491	63,383,928	446,561,302
1995	55	150	166	50,444,333	52,598,193	279,020,273
1996	112	239	270	86,681,375	54,681,182	519,096,275
1997	91	152	184	695,302,575	60,450,231	1,754,318,588
1998	110	153	202	157,755,570	89,937,204	837,834,690
1999	125	183	234	121,955,413	105,701,532	767,392,587
Total	592	1020	1217	1,221,409,977	434,307,949	4,675,410,168
FDI = Foreign Direct Investment, NDI = National Direct Investment ** - Total = FDI + NDI + Loans

3.2. Mozal an outstanding success of regional integration. Abstracts of the opinion of regional leaders about mozal

South African President Thabo Mbeki stressed Mozal as an example of the southern African region working together. At the well attended press conference following the inauguration ceremony, with the presence of more than 50 journalists from all over the world, South African President Thabo Mbeki stressed Mozal as an example of the southern African region working together. "Any notion that any of our countries - and that includes