Mozambique Country outlook - Banco BPI
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Country outlook Mozambique
Mozambique
Closing date of this issue: December 2019
Form of Government: Semipresidentialist republic
Mozambique Capital: Maputo
Official language: Portuguese
Population: 29 million inhabitants (2018)
Currency: Mozambican metical (MZN)
Exchange rate: 1 EUR = 70.61 MZN (29/11/2019)
1 USD = 64.08 MZN (29/11/2019)
GDP: $14 billion (0.0% of world GDP)
GDP per capita: $475 ($1,291 purchasing power parity)
Ease of doing business: 138 in the world out of 190 according
to the World Bank (Doing Business)
Religion: Catholic: 27%
Country Outlook is a publication that is produced jointly by CaixaBank Research and BPI Research (UEEF) and it contains information and opinions from sources that we consider to be reliable. This
document is for information purposes only, so CaixaBank and BPI are not liable in any way for any use that may be made of it. The opinions and estimates are provided by CaixaBank Research and BPI and
may be changed without prior notice.
BPI RESEARCH DECEMBER 2019 2PIB. Variación interanual (%)
IPC. Variación interanual (%)
Mozambique
Economic GDP. Year-on-year change (%) CPI. Year-on-year change (%)
Forecast
forecast 8 Forecast
25
6 20
4.5
4.2 15
4
2.1 10
2 2.7 4.6 4.5
5
0 0
Average 2015 2016 2017 2018 2019 2020 2021 Average 2015 2016 2017 2018 2019 2020 2021
2010-14 2010-14
• Mozambique’s economy decelerated in 2019, • Inflation remained low in 2019 after falling
on the back of the adverse effects caused by significantly in previous years from 19.9% in
two cyclones, damaging infrastructures, ports 2016 to 3.9% in 2018. The stabilised inflation
(Beiras’s port, for instance) and agriculture in 2019 was mostly due to a restictive
proceeds. The outlook is more positive for monetary policy which neutralised the
2020-21 with the economy expected to impact of the adverse supply shock from the
8
accelerate somewhat. This recovery should be cyclones on food availability and prices.
supported by the reconstruction efforts, the6 As food prices continue stabilising in 2020,
recuperation in agriculture and the more inflation should remain subdued but rebound
accomodative monetary policy. Additionally,4 modestly that year with a recovery of
the ongoing investment effort in the gas economic activity.
industry, with the construction of export2 Saldo fiscal (% PIB)
facilities and auxiliary services, should also0
stimulate activity.
Economic Benchmark interest rate (%)
policy and exchange rate (MZN/USD) Fiscal balance (% GDP)
Forecast
25 80 Forecast
0
64.9 67.0
62.5
20
60 -2
15
16.5
15.0 40 -4
13.5 -3.7
10
-4.8
20 -6
5
-6.5
0 0 -8
Average Average 2015 2016 2017 2018 2019 2020 2021 Average 2015 2016 2017 2018 2019 2020 2021
2010-14 2010-14 2010-14
Benchmark interest rate (left scale)
Exchange rate (right scale)
Current account (% GDP) Public debt (% GDP)
Forecast 80
Forecast
0 140
120 60 108.8 106.8 107.2
-20
100
-30.5
I
80 40
-40 25
60
-63.8 20
-60 20 40
-60.5
20
15 0
-80 0
Average 2015 2016 2017 2018 2019 2020 2021 Average 2015 2016 2017 2018 2019 2020 2021
10
2010-14 2010-14
• After years of tighter monetary conditions, 5we • On the fiscal side, the authorities committed to
expect a gradual easing of monetary policy with
0 reduce the distressed public debt level. Although
the objective of supporting the economic activity this suggests tighter controls on spending, the
over 2019/2021. This accommodative monetary reconstruction effort after the two cyclones of
140
policy stance will be very cautious as well- 2019 will probably put some pressure on the
120
anchored inflation expectations are fully public accounts of 2020. Concerning the bad- 100
0
confirmed. Also, the Bank of Mozambique will debt issues, last September, Government 80
be sensitive to flows related to international
-20 reached an agreement with the majority of 60
trade and FDI. creditors (99.5% of the 727 million dollars 40
-40 Eurobond), which should improve the country’s 20
credibility and help regain access to the 0
-60
international markets. This restructuring
-80 involves a change of the 727 mUSD issue for 900
mUSD bond, maturing by 2031, with principal
repayments starting in 2028 and an initial 5%
interest rate (until 2023) and 9% after that.
BPI RESEARCH DECEMBER 2019 3Mozambique
Financial Private credit (% GDP) Gross external debt (% GDP)
conditions 40
Forecast
140
Forecast
120 130.4
30 114.8
100
23.1 104.4
22.0 21.7 80
20
60
10 40
20
0 0
Average 2015 2016 2017 2018 2019 2020 2021 Average 2015 2016 2017 2018 2019 2020 2021
2010-14 2010-14
• After a period of instability which led to the • Mozambique registers a high current account
liquidation of two Mozambican banks, banks deficit, mainly due to gas-related megaprojects,
remain on average more liquid, well- which have brought in major imports. In the
capitalized and profitable. Even though medium-term,
40 the deficit should deteriorate 14
instability has reduced significantly and the even more, in line with the investment effort 12
Bank of Mozambique has taken measures to prior
30 to the initial production of gas-related 10
tackle vulnerabilities, the banking’s high projects (expected to start in 2022-23). In the 8
20
exposure to the public sector, weak economic long-term, on the other hand, the country’s 6
growth and high interest rates constitute external
10 position should improve significantly 4
major macro-financial vulnerabilities. once the projects become operational and 2
0
exports increase.
Political •
The Frelimo Party (led by Filipe Nyusi) has Eleições voted against the acceptance of the
situation governed the country since it held its first results (nine in favour).
democratic elections in 1994. Following years • Another worrying development is the presence
of tension, there has been a ceasefire with the of armed attacks allegedly led by a fraction of
rebels from the main opposition party Renamo’s party (“Junta Militar da Renamo”)
(Renamo) since January of 2017. The country’s as they could put the peace agreement under
political stability remains nonetheless fragile. strain. Finally, the Islamic insurgency in the
Frelimo won the last elections (held on October North of the country makes this complex
15th), but there are doubts about the process, political situation trickier.
as eight members of Comissão Nacional de
Long-term GDP growth (%) Population (milions of inhabitants)
outlook 6.4 50
6.2 40
39.1
6.0
6.0 5.9 29.6
30
5.8
20
5.6
5.4 10
5.2 0
Average 2009-18 Average 2019-28 2018 2028
•
The outlook for medium-term economic • It is also important to bear in mind the
growth is more favourable than in the short downside risks of this scenario. These include
run, but is conditioned by the expected start the inability to finance reconstruction needs in
of gas extraction and transformation (several the short-term, the political and security
LNG projects in the pipeline) and the uncertainty and the resulting loss of investor
consolidation of a still fragile political confidence, which would delay the scheduled
situation. With respect to the first factor, major gas projects. On top of this, lower
major gas reserves were discovered in the commodity prices in the international markets
country in 2010, which could potentially make and security concerns in the North of the
Mozambique the third largest producer in country could also postpone some of these
Africa. In this context, fiscal and external LNG projects. Finally, low standards of living of
accounts should be able to rebalance in the much of its population and political tensions
long-term, when gas projects start operating between the Frelimo and Renamo also
and the economy starts growing at double- threaten political stability.
digit levels.
BPI RESEARCH DECEMBER 2019 4Mozambique
Country Last OECD credit risk rating
Rating Outlook
risk changed
(from 0 to 7, with 0 being the best)
CCC+ 22/11/19 −
Caa2 20/09/19 Stable 7
7
CCC 07/11/19 −
Indicates that the country has an “investment grade”.
Indicates that the country does not have an “investment grade”.
Risks SHORT-TERM LONG-TERM
• Decreased investor confidence - + • Strong dependence on
- +
• Stress on the banking sector - + the energy sector
+ • Supply bottlenecks - +
• Political uncertainty -
• Security concerns, especially • Poverty and social discontent - +
in the North - +
• Natural disasters - +
Business STRENGTHS WEAKNESSES
environment • Natural resources. • High level of corruption.
• Large size of the country. • Insecurity.
• Infrastructure deficit.
Main sectors • Agriculture and mining industry (coal). •
The gas industry will be a key player in the
future.
Main trading Exports
Exports Imports
Imports
partners %%of of total
total exports
exports %% of of
total
total
imports
imports
India
India 27.527.5 United
United
Arab
Arab
Emirates
Emirates 26.126.1
Netherlands
Netherlands 21.121.1 China
China 11.811.8
South
South
Africa
Africa 17.217.2 Netherlands
Netherlands 7.6 7.6
China
China 5.8 5.8 South
South
Africa
Africa 7.6 7.6
Singapore
Singapore 2.2 2.2 India
India 7.2 7.2
0 0 5 5 10 10 15 15 20 20 25 25 30 30 0 0 5 5 10 10 15 15 20 20 25 25 30 30
Fiscal
Fiscal
balance
balance
(%(%
GDP)
GDP)
0 0 5 5 10 10 15 15 20 20 25 25 30 30
0 0 5 5 10 10 15 15 20 20 25 25 30 30
Source: CaixaBank Research, based on data from Bloomberg, IMF, OECD, Oxford Economics and Thomson Reuters Datastream.
BPI RESEARCH DECEMBER 2019 5Mozambique
Taxation In Mozambique, the tax base is applied to the the total to be paid) as well as credits and rebates
income of resident businesses, individuals and on the IRPC rate and taxable base.
entities created anywhere in the world, while The Imposto sobre o Valor Acrescentado (VAT)
non-residents are taxed only on income from taxes consumption in the country and has been in
Mozambique sources. A company is considered to effect since 1999. It is applied both to products
be a resident in Mozambique if its legal or manufactured locally and to imports, with a flat
operational headquarters are in the country. rate of 17% on the transactions of companies
Tax administration and collection is centralised. with gross annual sales exceeding 750,000
Individuals’ personal income is subject to the meticais. There are exemptions for a set of basic
Imposto sobre o Rendimento das Pessoas products (corn flour, rice, medicine, goods for the
Singulares, or IRPS, on income that residents health and education sectors, agricultural
obtain both inside and outside of Mozambique, supplies), exports, financial services and other
and on income that non-residents obtain in the goods considered fundamental to the
country. Residents are considered to be people development of trade and rural industries. Also
who reside in the country more than 180 days a exempt are goods (in general capital goods or
year, and people who own properties that would equipment) imported to be used for certain
allow a presumption of their intention to reside activities like mining and oil and gas exploration.
there permanently, even if they currently reside There is also a Imposto sobre Consumos Específicos
there less than 180 days a year. (ICE), which taxes the consumption of what are
Tax rates range from a minimum of 10% to a considered to be luxury products, with rates
maximum of 32%. The corporate tax (Imposto ranging from 20% to 75%.
sobre o Rendimento das Pessoas Colectivas or The inheritance tax is applied to pass-throughs of
IRPC) is applied to the profits of companies with both moveable and unmoveable properties, with
annual turnover of over 2.5 M meticais, at a 32% rates ranging between 2% and 10%. The tax on
flat rate. Companies with turnover of under 2.5 property transfers (SISA) applies to transfers of
M meticais are subject to the Imposto Simplificado property titles or similar real estate rights. The
para Pequenos Contribuintes, or ISPC, with a flat general rate is 2%. Mozambique law does not
rate of 3% on the gross annual sales volume. The include any tax on assets.
fiscal year coincides with the calendar year, but it There are other local taxes: Imposto Pessoal Local,
is possible to request taxes to be calculated for a Imposto Pessoal Autárquico (IPA), Imposto Predial
different period. The Codigo de Beneficios Fiscais Autárquico (IPRA) and Taxa por Actividade
(CBF) contains different tax credits (reductions in Económicas (TAE).
Investment Foreign investment receives equal treatment, report and any other document illustrating
and is subject to the same burdens and their business activity; and
incentives as domestic companies. • Draft of the company’s deed of incorporation.
Investment proposals submitted to the The CPI will draw up the terms of the
Investment Promotion Centre (CPI) must authorisation, including the form of business
describe the value of the investment and the to be taken, the import and export scheme,
activity so that the CPI can assess its viability number of local employees and training
and impact on the national economy. Proposals programmes that must be implemented, tax
must be accompanied by: incentives to be granted, and other conditions.
• Identification of each investor, including The main investment opportunities are in the
bank references; agri-food industry, fishing and aquaculture,
• For each corporate investor, documentation infrastructure, energy and tourism.
including their certificate of incorporation,
Establishment LOCAL COMPANY
The Mozambique Commercial Code regulates An S.A. must have at least three partners, who can
and defines the type of commercial companies be Mozambicans or foreigners, individuals or
that can be formed in Mozambique, with the companies. There is no minimum capital but the
most common being the sociedade por quotas amount must be in line with the company’s
or S.Q. (limited company) and the sociedade objective and must always be expressed in meticais.
anónima or S.A. (joint stock company). The capital is divided into shares, which can be to
An S.Q. must have between 2 and 30 members. the bearer, nominal or registered. An S.A. may only
If just one person owns the registered capital, be created when all the capital stock has been
these companies are called unipessoal (sole divided among the partners, and at least 25% has
proprietorship) and that term must be included been paid. The liability of S.A. partners to third
in the company name. The minimum capital parties is limited to the amount of their shares.
required for incorporation is 20 M meticais Creating a company requires the name and
and the value of each quota must be a multiple purpose of the company to be approved by the
of 100 and not less than 500,000 meticais. Conservatória do Registo de Entidades Legais
Quotas are always nominal and members are (CREL) and the capital stock deposited in a bank
not liable to the company’s creditors, only to in Mozambique, which will issue a receipt for
the company itself. the deposit.
BPI RESEARCH DECEMBER 2019 6Mozambique
Establishment Companies can incorporate through a private The company must register in the CREL no more
(continuation) document signed by the partners, with the than 90 days from the date of its incorporation
signatures duly certified by a notary or attorney, and request publication in the official state
though a deed of incorporation is required for gazette (Boletim da República). Subsequently,
more formal proceedings. The company’s board they must register with the local tax office
of directors must be appointed and the statutes corresponding to the company’s registered
established during the company’s incorporation address for paying taxes, obtaining the business
process, and must include, among other items, license from the Ministry of Trade and the
the full names of the founding members, the statement of start of business activities.
purpose of the company, and the amount held
in capital stock.
Alliances FREE TRADE ZONE
strategic The government promoted two types of (IFTZ), which benefit from fiscal (IRPC reduction)
industrial organisations: Special Economic and non-fiscal advantages.
Zones (SEZ) and Industrial Free Trade Zones
JOINT VENTURE
Joint ventures, associations between two or more to contribute a series of resources to carry out
legal persons who share resources, know-how, the project. In this case, the joint venture does
interests and responsibilities to develop a project, not have its own legal standing independently
can come in two forms: from the legal persons who form it.
1. Foreign company that associates with a However, it should be remembered that without
Mozambique company to create a third any controls on foreign capital, there is free
company which both purchase shares in, which repatriation of capital, dividends and profits.
is responsible for carrying out the project.
2. Foreign company and Mozambique company
that sign a contract under which each commits
Customs FREE TRADE AGREEMENTS
conditions Mozambique is part of the Southern African in the EU under the Cotonou Agreement. As a
Development Community (SADC) which is member of the SADC block of countries,
currently implementing the commercial Mozambique is currently negotiating an
protocol for its member states to remove trade economic association agreement with the EU.
tariffs on certain goods. If fully applied among Other bilateral trade agreements:
the 15 member states, the protocol would give • Preferential trade agreement with Malawi, in
Mozambique products free access to a market force since December of 2005, allowing free
of more than 253 million people with a GDP of trade of goods originating in both countries,
563,000 million dollars. excluding certain products.
Some Mozambique products currently enjoy
reduced tariffs or qualify for duty-free treatment
FREE TRADE ZONE
Special Economic Zones (SEZ) Industrial Free Trade Zones (IFTZ)
Exemption from the corporate tax in the first Exemption from the corporate tax in the first
three fiscal years, 50% reduction from the 10 fiscal years with a 50% reduction from the
fourth to the 10th fiscal year, and 25% reduction 11th to the 15th fiscal year, and a 25% reduction
from the 11th to the 15th fiscal year. for the rest of the life cycle of the project.
GENERALISED SYSTEM OF PREFERENCES (GSP)
Under the Generalised System of Preferences Mozambique, even those made with fabric from
(GSP) and the African Growth and Opportunity third countries, get duty-free access to the U.S.
Act (AGOA), a large number of Mozambique market, without any reciprocal preferential
products have duty-free access to the US. Thanks treatment for U.S. products.
to the AGOA Act, textiles manufactured in
BPI RESEARCH DECEMBER 2019 7Mozambique
Negotiations BUSINESS CULTURE
and protocol Punctuality and discretion are appreciated. Recognise, respect and know how to work with
The concept of win-win works well in business hierarchies and understand the levels where
dealings. Mozambicans are good negotiators decisions are made.
and are somewhat opaque, making it more Avoid making benchmark comparisons with
difficult to guess what they are thinking. It is other markets (especially Angola). They are
necessary to pay attention to gestures. markets with different cultures and Mozambicans
Mozambicans are polite, very friendly and kind, do not like being confused with other peoples.
but are formal in their treatment of others, Avoid any attitude or comments on the local
especially in early contacts. reality (political or social) that could incite
Knowing the right person is important, but the arrogance or paternalism. Avoid postures that
right people are often not those we meet. minimise the other side, like for instance saying
Networking is easy (the market is small), but “we are here to help Mozambique (or the
doors do not open right away. Mozambicans)”.
Top fairs • International farming, trade and industry fair • MMEC
• Mozambuild • MozTech
• Intermodal Africa • FACIM
Websites • Mozambique Government Portal: www.portaldogoverno.gov.mz
of interest • AT - Mozambique Tax Authority: www.at.gov.mz
• Confederation of Mozambique Business Associations (CTA): http://www.cta.org.mz
• Mozambique Chamber of Commerce: www.ccmoz.org.mz
• FDA - Agriculture Development Fund: www.fda.gov.mz
• IPEME - Institute for the Promotion of Small and Medium Businesses: www.ipeme.gov.mz
Payment MEANS OF COLLECTION
and charging The U.S. dollar, the euro and the South African transactions. Foreign currency authorisation
methods rand are common trading currencies. Payments must be requested from the Bank of
in foreign currency are accepted by most of the Mozambique.
companies and commercial establishments. Loans in foreign currency are only available to
Currency exchanges are available for importers exporters and some approved projects that
and exporters to finance current account benefit the country.
MEANS OF PAYMENT
Mozambique importers must justify their the most common payment methods including
payments to the Bank of Mozambique and confirmed documentary credit, advances,
obtain authorisation to make payments abroad. documented remittances, etc. Standard &
This is common practice, but it can be lengthy Poor’s y Fitch issue credit ratings for the
and cause importers to take longer to process Government of Mozambique and have recently
payments. lowered them.
Currency outflows are regulated by the central
bank. Mozambique’s financial system includes
EXCHANGE RATE INSURANCE
Mozambique’s local currency (metical) was insure international transactions with exchange
sharply devalued in 2016, causing the Central rate insurance that covers this type of risk in
Bank to raise interest rates and making it more countries like this one, where the monetary
difficult to import goods. The metical began to policy tends to be heavily influenced by the
stabilise In early 2017, but it is advisable to Government.
BPI RESEARCH DECEMBER 2019 8You can also read
