Guidance

Overseas business risk: Mozambique

Updated 24 July 2023

Political

A long civil war ended in 1992, following a UN-negotiated peace agreement between the ruling Front for the Liberation of Mozambique (FRELIMO) party and rebel Mozambique National Resistance (RENAMO) forces. Between 2012 and 2016, RENAMO’s residual armed forces continued to mount sporadic attacks. However, a cease-fire in late 2016 eventually led to the two sides signing a peace deal in August 2019. On 15 June 2023, a significant milestone in the peace process was achieved with the closure of the final RENAMO guerrilla base. This event marked the culmination of the disarmament and demobilisation phases of the Disarmament, Demobilisation, and Reintegration (DDR) process, signalling a significant step towards peace and stability in Mozambique.

Nevertheless, conflict and instability remains a challenge, particularly in northernmost province of Cabo Delgado, where an insurgency with links to Islamic extremism has caused an estimated 4,500 deaths and displaced nearly one million people. As a result, about four million people are likely to face high levels of food insecurity due to the combined effects of climate shocks and the conflict, which also threatens the economic potential of lucrative Liquefied Natural Gas (LNG) investments in the area. The arrival of regional troops from Rwanda and SADC member states has helped stabilise and reduce the violence perpetrated by the insurgency. For up-to-date information on terrorism threats and security advice, see the FCDO travel advice.

Since the end of the civil war, consecutive elections have taken place peacefully. The last municipal elections occurred in 2018, with FRELIMO winning 44 out of 53 municipalities. The main opposition party, RENAMO won eight municipalities in the central and Northern provinces, while the Movimento Democrático de Moçambique (MDM) retained its stronghold in Beira, a strategic port city. Mozambique’s sixth municipal elections are scheduled for October 2023.

Presidential, legislative, and provincial elections last took place in October 2019, with the next elections scheduled for October 2024. The 2019 elections led to resounding wins for FRELIMO across the country, although Western observers and civil society noted flaws in the electoral process. The Economist Intelligence Unit (2020) notes in its Democracy Index 2019 report that Mozambique has seen some deterioration in indicators covering the electoral process and pluralism, the functioning of Government, political participation, political culture, and civil liberties.

Economics

Recent economic history has been characterised by internal and external shocks. A combination of conflict in Cabo Delgado, devastating cyclones, COVID-19 and internal governance challenges (epitomised in the hidden loan scandal in 2016) have significantly slowed progress. Mozambique is currently sixth bottom on the UN’s Human Development Index with 68% of the population living in extreme poverty. It remains one of the most climate vulnerable countries in the world and its rapid population growth (the third highest in Africa, with 53% of the population under 17) is placing growing strain on public services. High levels of debt and limited fiscal space constrain investment in public services and infrastructure.

Nevertheless, most economic commentators agree that despite these challenges, the outlook is positive, with anticipated LNG production driving projections of double-digit GDP growth by 2026 to 2027. Mozambique has seen a rise in foreign investment in recent years, particularly in the energy sector, following the discovery of vast natural gas reserves in the north. The first export of natural gas took place in late 2022 from the Coral South offshore platform. In addition to gas, coal, and other mineral resources (including rubies and graphite) the country has significant renewable energy potential, large areas of fertile land suitable for commercial agriculture and significant tourism potential. Its strategic geographical location, and access to the coast provides a key export route for neighbouring countries in the Southern Africa region.

An IMF programme was agreed with Mozambique in 2022. See reports from their six-monthly reviews, including latest macroeconomic indicators.

Trade and business

Mozambique and the UK are looking to foster stronger bilateral trade and investment partnerships, particularly in energy, agriculture, and infrastructure. The primary mechanism for cooperation is through the Economic Partnership Agreement (EPA) between the Southern African Customs Union Member States and Mozambique and the UK.

Total trade in goods and services (exports plus imports) between the United Kingdom and Mozambique was £230 million in the four quarters to the end of Q4 2022, an increase of 3.6% or £8 million in current prices from the four quarters to the end of Q4 2021. In 2021, the outward stock of foreign direct investment (FDI) from the UK to Mozambique was £59 million.

The top 5 goods exported from the UK to Mozambique are:

• road vehicles other than cars (capital)
• telecoms & sound equipment (capital)
• general industrial machinery (intermediate)
• specialised machinery (capital)
• cars

The top 5 goods imported to the UK from Mozambique are:

• coal, coke & briquettes
• coffee, tea, and cocoa
• sugar
• aircraft
• vegetables & fruit^{[footnote 1]}

The Mozambique Investment and Export Promotion Agency (APIEX) was established in 2016, and provides some information for businesses wanting to invest in Mozambique, that can help in understanding the legal and regulatory framework, obtaining necessary permits and licenses, and navigating bureaucracy. Collaborating with local partners is highly recommended to help navigate cultural nuances, establish connections, and gain insights into the local market. UK companies should seek professional legal advice should they be considering entering into agreements in Mozambique.

In 2021 the government of Mozambique launched an economic stimulus package (PDF, 7.31MB), which includes twenty reforms aimed at improving the enabling environment for business. Measures included a one percentage point reduction in the VAT rate from 17% to 16%; a VAT exemption for selected imports (in agriculture and electrification); a reduction in the corporate income tax rate from 32% to 10% in the agriculture, aquaculture, and urban transport sectors; a reduction in the clearance rate charged for foreign entities that provide services to national agricultural companies from 20% to 10%; eliminating withholding tax of 20% on interest of external financing for agricultural projects; simplifying capital repatriation procedures and others measures. The Government of Mozambique has also recently introduced a simplified visa regime for UK nationals. For up-to-date information on entry requirements, please see our FCDO travel advice page.

In October 2022 Mozambique was added to the ‘grey-list’ of the Financial Action Task Force (FATF), the international standard setting and monitoring body for anti-money laundering and counter-terrorist financing. The Ministry of Finance has acted promptly in setting up a Task Force to take forward recommendations with the support of development partners, and is making good progress.

The British High Commission Maputo is ready to support UK companies seeking to invest or operate in Mozambique. Please reach out to our team through the contact details below.

Human rights

Mozambique has made considerable progress in establishing democratic institutions and holding regular elections. However, journalists, civil society activists, and opposition party members have raised concerns over restrictions on freedom of expression, including some instances of harassment and intimidation.

In the extractives sector, the Mozambican government has been working towards membership of the Voluntary Principles on Security and Human Rights: a multi-stakeholder initiative that promotes the implementation of a set of principles that guide companies on providing security for their operations while respecting human rights. Around thirty companies are part of the initiative globally, including several in Mozambique. Read more about the Voluntary Principles on Security and Human Rights initiative.

Bribery and corruption

Bribery is illegal. It is an offence for UK nationals and residents, companies or partnerships operating in the UK, wherever incorporated, to bribe anywhere in the world. Further information on the Bribery Act and how to protect your business from bribery and corruption is available on the National Crime Agency website.

In Mozambique, the prevalence of corruption remains a concern, and manifests in various forms, from requests for small payments to high-profile corruption cases that have garnered international attention, including the ‘hidden debt’ scandal in which three state-owned companies took out $2 billion in fraudulent loans without the knowledge of the Mozambican parliament.

The Government of Mozambique has established The Central Office for Combating Corruption (GCCC) to stop corruption crimes. In 2002, an Anti-Corruption Unit (UAC) was created. A civil society organisation called the Public Integrity Centre (CIP) provides additional information promoting transparency, accountability and anti-corruption in Mozambique.

Intellectual Property

National legislation and international agreements govern Mozambique’s protection of intellectual property (IP). The Industrial Property Code (IPC) and the Copyright and Related Rights Law primarily govern IP rights. In addition, Mozambique is a signatory of several international agreements related to intellectual property, including the World Intellectual Property Organization (WIPO), the African Intellectual property organisation (OAPI), and the World Trade Organisation’s TRIPS Agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights).

In recent years in collaboration with Mozambique, Police, Intellectual Property Institute (IPI) has increased anti-piracy campaigns and raids of counterfeit goods in various locations around the country. Consulting with legal professionals or specialised intellectual property firms with expertise in the country’s laws and procedures is recommended.

Terrorism and security

Groups with links to Islamist extremism have carried out attacks in the northern province of Cabo Delgado since late 2017. The attacks have targeted villages, government institutions, and infrastructure. This includes a large-scale attack on Palma in March/April 2021, claimed by the Islamic State. Since mid-2022, groups with links to Islamist extremism have also carried out attacks in some northern districts of Nampula province. The Mozambican Government has been actively working to counter the insurgency and restore regional security, including with the support of Rwandan and Southern African Development Community (SADC) forces. It is advisable to check the FCDO Travel Advice for Mozambique for the latest information on terrorism threats and security advice.

Organised crime

The country is a transit point for drug trafficking networks and the illegal wildlife trade due to its geographical location and long coastline. There have been criminal kidnappings reported in Mozambique, mainly in Maputo. While most victims have been Mozambicans, foreigners have also been targeted. Read our travel advice Safety and Security page for the latest.

Contact

Contact the British High Commission Maputo for further information, and advice on opportunities for doing business in Mozambique.

1. Trade and investment factsheet (PDF, 518 KB) ↩