Doing Business in Mozambique - one of the fastest growing countries in Africa

Transcription

1 Doing Business in Mozambique - one of the fastest growing countries in Africa Vitor Marques da Cruz MCA Advocates Vivien Yang Simmons & Simmons 16 April 2015

2 OVERVIEW Mozambique s Business Environment Opportunities in Key Sectors Recent development in the Oil and Gas Industry Investment Protections and Incentives Other relevant Investment Laws and Regulations Q&A 1 / B_LIVE_EMEA1: v2

3 Business Environment

4 Overview of the Mozambique s Business Environment Mozambique is an East African country with a successful story. In the 19 years since the end of a long and devastating civil war, the country has enjoyed impressive economic growth, supported by solid macroeconomics policies and international assistance. Today, Mozambique has abundant and unexploited mineral wealth, particularly in coal, gas, and oil. Land area: 799,380 km2 Population: 20.5 million (2007, census) Recent elections (October 2014) confirmed the political stability of the country New Government 3 / B_LIVE_EMEA1: v2

5 Opportunities in Key Sectors

6 Key Sectors Fishing and Agriculture Tourism Natural Resources Energy Generation Public Infrastructure 5 / B_LIVE_EMEA1: v2

7 Current Status of Key Sectors Fishing and Agriculture Agriculture is the major employer in Mozambique s economy. The sector sustains around 80% of the economically active population and accounts for over 20% of the country s overall GDP. The sector is dominated by small scale farmers involved in cereal, sugar, tobacco, cashew and cotton cultivation, amongst others. Fishing sector has been developing due to the presence of local and foreign companies and has seen a strong growth and strong presence in European and Asian markets with respect to prawns and various other sea products. The country has a coast line of 2,700 km on the Indian Ocean, combined with natural conditions that are favorable. 6 / B_LIVE_EMEA1: v2

8 Current Status of Key Sectors Tourism Tourism in Mozambique plays an increasingly important role on the economic agenda as well as in national politics. This sector has been growing steadily in recent years in light of the public investments in infrastructure, allowing access to previously inaccessible locations. The country offers investment opportunities in national parks and beach tourism. Natural Resources There are major investment opportunities for the exploration, extraction, processing and utilization of various types of resources. The most important are oil and gas, coal, gold, titanium, ilmenite, zircon, rutile, tantalite, marble and precious stones. There has been major natural gas discoveries in Mozambique since 2010, and the resulting LNG projects may make Mozambique the third largest LNG producer in the world (after Qatar and Australia) by Mozambique is also likely to become one of the 10 largest coal exporters globally by / B_LIVE_EMEA1: v2

9 Current Status of Key Sectors Energy Generation Mozambique is a country with vast energy resources, ranging from fossil fuels (predominantly natural gas and coal) to renewable (solar, hydro, wind, geothermal and tidal power); however, the exploration of these resources for domestic use is limited at present and most of Mozambique s primary energy consumption is met by traditional biofuels such as wood, charcoal and agro/animal waste. Following the significant discovery of natural gas, rehabilitation and construction of new hydroelectric dams and the start of the exploitation and development of alternative and renewable energies such as solar, wind, and bio-fuels (bio-ethanol, biodiesel and biogas), the country has expanded its energy generation capacity. Considering the liberalization of the energy generation sector, this one represents a major investment and growth opportunity. 8 / B_LIVE_EMEA1: v2

10 Current Status of Key Sectors Public Infrastructure According to IMF sources, the investment spending on infrastructure is currently 16% of GDP, with around 5% coming from government sources. The Government of Mozambique, in partnership with the private sector, has been investing in the development of public infrastructure, such as roads, bridges, telecommunications and energy. Consequently, various business opportunities exist in these sectors. 9 / B_LIVE_EMEA1: v2

11 Recent development in the Oil and Gas Industry

12 Overview of the Oil and Gas Industry Current status of the LNG projects Recent development of laws to support the industry development 11 / B_LIVE_EMEA1: v2

13 Current Status of LNG Projects There have been several major discoveries in Mozambique's Rovuma Basin since Area 1 (operated by Anadarko) and Area 4 (operated by ENI) are estimated to have between 120 and 150 trillion cubic fee of gas reserves collectively. Concessionaires of these two blocks are planning a joint onshore LNG project of 20 mta; in addition, an FLNG project is being planned by Area 4 Concessionaires. Heads of agreements for marketing of LNG from these LNG Projects have been signed with Asian buyers Mozambique may become the 3 rd largest exporter of LNG by Current obstacles Lack of legal and physical infrastructure Delayed FID Unskilled workforce Political uncertainties 12 / B_LIVE_EMEA1: v2

14 Legal framework of the oil and gas industry The Ministry of Mineral Resources (MIREM) is the main governmental authority overseeing the petroleum activities; it is assisted by INP (National Petroleum Institute). Oil and gas resources are property of the State, right to E&P of oil and gas resources is granted by Exploration and Production Concession Agreement (EPCC) signed with the State; other types of concession contracts exist for other purposes Major laws Petroleum Law (21/2014) Decree Law (2/2014) Petroleum Tax Law (27/2014) Law on Public-Private Partnerships, Large Scale Projects, and Business Concessions (2011) Environmental Regulations for Petroleum Operations (56/2010) Fiscal Incentives Law (13/2007) Fiscal Law for Petroleum Activities (2/2007) Regulation of Petroleum Operations Decree (24/2004) 13 / B_LIVE_EMEA1: v2

15 Recent development of law New Petroleum Law and Decree law No. 2/2014 New Petroelum Law was approved in August 2014 governing petroleum activities in Mozambique Decree Law No. 2/2014 was passed in November 2014 to govern activities in Areas 1 and 4 in Rovuma Basin, applying to Concessionaires, SPVs, persons who enter into contracts with Concessionaires or SPVs relating to the development of Offshore Areas 1 and 4, and subcontractors Key provisions of the Petroleum Law and Decree Law 14 / B_LIVE_EMEA1: v2

16 Investment Protections and Incentives

17 Treaty Protections Investment Promotion Agreements Double Taxation Treaties EBA Initiative 16 / B_LIVE_EMEA1: v2

18 Treaty Protections Investment Promotion Agreements Algeria, Belgium, China, Cuba, Denmark, Egypt, Finland, France, Germany, India, Indonesia, Italy, Mauritius, the Netherlands, Portugal, South Africa, Sweden, Switzerland, the United Kingdom, the United States of America, Vietnam and Zimbabwe. Double Taxation Treaties Botswana, India, Italy, Macau, Mauritius, Portugal, the United Arab Emirates, Qatar, South Africa and Vietnam. EBA Initiative Mozambique benefits from the non-reciprocal duty-free access to the EU Market under the EBA initiative (everything-but-arms) for developing countries. 17 / B_LIVE_EMEA1: v2

19 Investment Incentives Subject to some specific conditions defined by CPI (which will depend on the value, location and the sector of activity of the project), the general incentives can be described as follows: Exemptions from import duties and VAT for capital goods; Tax credits for corporate income tax; Income tax credit for some investments; Expenditure considered to be costs for income tax purposes; Accelerated depreciation of the fixed assets (e.g. equipment, machinery). There are also sector-specific incentives. 18 / B_LIVE_EMEA1: v2

20 Other Relevant Investment Laws and Regulations

21 CPI and its Role The CPI ( Centro de Promoção ao Investimento ) is the public investment authority in Mozambique and their function is to assist the national and foreign investors. CPI provides assistance to investors in the approval and implementation of investment projects, namely concerning the concession of tax and customs benefits. It also provides support with the business licensing, entrance visas, work and residence permits, customs exemption authorizations and licensing of land. 20 / B_LIVE_EMEA1: v2

22 Investment Procedure The project approval before the CPI can be summarized as follows: 1) The submission of the business plan and the CPI s application form (3 copies with ID documentation, articles of association, company profile, maps with financial and technical elements, and other relevant documentation for the investment); 2) The CPI, together with the local and central authorities, coordinates the project approval and starts the negotiation with the investors on the authorization s terms; 3) Once CPI obtains an agreement with the investors about the terms of the authorization, the project will be submitted for approval by the central authorities (Minister of the area involved or the Provincial Governor). 4) Investment Procedure for upstream oil and gas assets to be subject to the same system but with the need of special permits from other Ministries. 21 / B_LIVE_EMEA1: v2

23 Exchange Control The foreign exchange transactions carried out in Mozambican territory or between residents and non-residents are regulated by the exchange control law and respective regulations (the Forex Laws ). Under the Forex Laws, the corporate residents are: Private companies with head office in Mozambique; Agencies, branches and commercial representations of non-resident private corporate entities, duly registered in Mozambique; and Public entities. All forex transactions are subject to registration (the current transactions and the capital transactions) but not all of them are subject to approval from the Bank of Mozambique. 22 / B_LIVE_EMEA1: v2

24 Taxation The Mozambican tax system integrates national and municipal taxes. There are corporate and personal, direct and indirect taxes, namely direct taxation on income and wealth and indirect taxation on expenditure (VAT, ICE and customs duties). The Tax Authorities are entitled to perform audits, review the taxpayers position and issue additional assessments within a 5-year period counted from the fact that triggered the taxation. Statute of limitation for outstanding tax debts is 15 years. Corporate Income Tax (IRPC) is charged in respect of income generated, during the taxation period, at a rate of 32%. Capital Gain Tax to be charged as IRPC; Law number 19/2013. Personal Income Tax (IRPC) is charged in respect of the global worldwide annual value of income, received by individuals who are residents in Mozambique and by those not residing in the country but receiving income from it. The tax is charged progressively and the maximum rate is 32%. 23 / B_LIVE_EMEA1: v2

25 Taxation (Cont d) Value Added Tax (IVA) is applicable on the sale of goods and provision of services in Mozambique, as well as in connection with the import of goods. The applicable rate is 17%. Specific Consumptions Tax (ICE) is charged in connection with certain locally produced or imported goods at: 2.5% for raw materials 5% for capital goods 7.5% for intermediary goods 20% for consumption goods As a result of the trade protocol of "SADC" (Southern Africa Development Community), various products from the SADC region countries benefit from exemptions from custom duties. Other taxes exist, namely over transfer and detention of property and there are certain sector specific taxes. 24 / B_LIVE_EMEA1: v2

26 Other Notable Issues Financial market and instruments Social security Land use Visas 25 / B_LIVE_EMEA1: v2

27 Questions? Please join our next African webinar on Competition/COMESA in Africa: Wednesday 6 th May 09-09:45am BST To register please contact Rachel Morley