Supporting the Policy Environment for Economic Development

Business Environment Assessment

A national survey of Mozambique’s business environment was undertaken between June 8 and August 27, 2004. The survey covered 99 companies in 7 of the country’s 10 provinces—19 in the northern region, 13 in the center, and 67 in the south. Seventeen of the companies in the south were multiregional.

The survey covered 14 areas often considered to be problematic:

  • Access to land
  • Company registration
  • Licensing
  • State payment of debt
  • Labor
  • Dispute resolution
  • Construction and works licensing
  • Immigration
  • Environmental licensing
  • Import and export processes
  • Taxes (personal income, company income, VAT)
  • Distressed companies
  • Access to credit
  • General development of the business environment over the last 5 years.

Opinions on infrastructure, power, transport, and other matters affecting development were also gathered. At the time of the survey the consequences of recent alterations in commercial and industrial licensing, as well as changes in the tourism law, had not yet made themselves felt on the ground. It is hoped that these changes will simplify processes and facilitate business.

While most respondents agreed that significant improvements had taken place in Mozambique’s business environment over the last five years—with the exception of some areas that became more problematic—expectations had not been met. Thus, perceptions of the quality of Mozambique’s business environment lag far behind those of its international competitors, as well its most direct competitors in the region. Data collected for the World Bank’s “Doing Business” survey clearly illustrates this feeling within the Mozambican business community.

Interviewees were reluctant to acknowledge in writing to making illicit payments despite the survey’s anonymity and guaranteed confidentiality. While the majority admitted to making such payments to obtain advantage or information, they systematically requested “don’t write that down, I didn’t say anything.” Most admitted fear of reprisals.

An overview of information obtained through the survey also reveals problems provoked by centralization. Opinions on quality, delays, and costs of service deteriorated in direct relation to the distance between the area where the service is provided and the Capital. One can conclude, therefore, that extraordinary increases in costs and delays are the result not only of complex and demanding regulations (e.g., elaborate processes, collections of documents, non-transparent decision-making), but also of having to convey documents from one place to another. This results in most cases from the lack of professional training of those involved as well as from a complete lack of understanding of what constitutes professional dignity and public service. Systematic and aggressive training will be vital to reversing this situation.

To show the legal complexity of business environment processes, summaries of the procedures, costs, and legislation associated with land access, company registration, licensing of commercial, industrial, hotel/tourism activities, work, INSS, migration, ambient and external commerce are presented in Appendixes B through K. These summaries reveal how lengthy, winding, and complex the procedures are and how much they cost. One can also conclude, however, that licensing processes constitute a significant barrier to investment. It is recommended that the private sector, through the CTA, its representative organization, concentrate on negotiating with the Government a revision of all existing licensing regulations to simplify, rationalize, and harmonize them. This would entail dedicating a public-private sector “task force,” provided with the necessary technical support and guided by clear deadlines, to execute this task. Table S-1 summarizes process requirements; Table S-2 synthesizes observations about processes.

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