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Mozambique: Horizon Scanning 2022

Africa Connected: Issue 7

By Eduardo Alberto da Costa Calú

What is the single biggest legislative change on the horizon in the next 18 months?

Mozambique already has the basic legislation required to welcome and safeguard both foreign and national investments. At the moment, despite the setback caused by the COVID-19 pandemic, there are three legal instruments being revised which we hope will be approved in the next 18 months:

  • the Commercial Code
  • the Labour Law
  • the Electricity Law

As per the draft bills that were circulated for public consultation, we believe the approval of the new Electricity Law is the single biggest change in Mozambique’s legal framework, particularly because it will replace legislation that has been in place for more than 20 years.

What impact, in terms of foreign investment (or doing business), will this legislative change have?

The current Electricity Law does not specifically govern the licensing of new and renewable electricity projects, which are slowly being launched in the country. Therefore, renewable projects are subject to the same burdensome requirements applicable to conventional power projects.

Mozambique offers relatively inexpensive renewable energy (hydro, solar and wind) and natural gas sources. There is a huge demand for low-cost energy, for the benefit of consumers in Mozambique and in the southern Africa region.

We expect that a favourable legal framework for new and renewable energy, among other developments, will contribute considerably to an increase in foreign investment and the development of new projects in this sector, including related infrastructure.

What is the current investment appetite in the region? Do you see this changing in 2022?

The current investment appetite is promising since the political and security issues that most of the countries in the region faced have stabilised, and these developing economies are striving to attract more investment. The Southern African Development Community policy framework on trade also facilitates and encourages investment of multinationals in various sectors in the region.

In which sectors do you expect to see increased investment and / or financial movement in the next 18 months?

We expect Mozambique’s GDP to grow significantly in the next 18 months on the back of gas, energy and other extractives investments.

One of Mozambique’s key liquefied natural gas (LNG) projects, the offshore Coral South floating liquefied natural gas (FLNG) project, is progressing at a good pace and is expected to be operational in 2022. We believe the sectors directly or indirectly involved in the supply chain associated with LNG exports will see increased investment over this period.

Where do you see the key areas of growth or opportunity for businesses operating in your country?

Mozambique has a long Indian Ocean coastline of more than 2,500 km, untouched beaches, arable land and a tropical climate. It also has abundant natural resources, and its strategic geographical location and excellent natural ports make it a gateway to global markets, particularly the Middle East and Asia, as well as for various landlocked neighbouring countries.

Although the country has huge offshore gas fields and abundant sources of renewable energy, there are other areas offering opportunities for foreign investment, such as agribusiness, mining, tourism, transport, logistics, infrastructure and telecommunications. We expect to see growth in these areas in the next few years. A number of government efforts, policies and initiatives are being implemented to promote these sectors and attract foreign investment.

What do you expect the general business mood to be in your country in the next 18 months?

Despite the unprecedented times we’re living in, we believe the business mood for the next 18 months is promising for various reasons, including the decrease in armed conflict in the centre and north of Mozambique, as well as the post-pandemic global recovery and the increase in coal, aluminium and fish exports. We expect the start of production on the Coral South FLNG project in Area 4 and the resumption of Total’s Area 1 project in the Rovuma Basin to have a positive impact on the general business environment of the country.