Mozambique Private Investment Law 2023
The Private Investment Law (Law No. 8/2023), effective from September 7, 2023, replaces the outdated Law No. 3/93 to modernize Mozambique's investment framework, aligning with the country's economic goals and global standards. It aims to enhance the business environment, attract foreign direct investment (FDI), and support Mozambique's projected 2.5% GDP growth in 2025, with US$5 billion in FDI approvals in the first half of 2025.
The Private Investment Law is highly relevant for foreign investors in Mozambique's dynamic market, ranked 4th in Africa for FDI inflows (UNCTAD 2024). Its key implications include:
- Attractive Incentives: Offers tax holidays (5-10 years), customs exemptions, and accelerated depreciation, especially in SEZs/IFZs or for large projects (>MZN 12.5 billion/~US$200,000). These reduce costs in high-growth sectors like natural gas, agriculture, and renewables.
- Robust Protections: Guarantees property rights, profit repatriation, and protection against unfair expropriation, with fair compensation transferable abroad. Double taxation agreements (e.g., with Portugal, South Africa) further enhance appeal.
- Compliance Requirements: Mandatory APIEX approval for incentivized projects integrates with the Commercial Code's beneficial ownership rules (Decree-Law No. 1/2024), ensuring AML/CTF compliance. Social responsibility duties (e.g., local hiring, infrastructure) align with the pending 2025 Local Content Law, critical for extractive industries.
- Streamlined Processes: The authorization regime and E-BAU platform reduce registration timelines (10-30 days), though Boletim da República publication delays (up to 90 days) require planning. APIEX coordination simplifies compliance.
- Challenges: Portuguese-only documentation, sector-specific restrictions (e.g., mining), and social responsibility obligations necessitate local legal support (e.g., SAL & Caldeira) and APIEX guidance (www.apiex.gov.mz). Non-compliance risks sanctions like incentive loss.
- Strategic Opportunities: The law supports Mozambique's FDI surge by signaling investment windows (e.g., PPPs, SEZs) and ensuring dispute resolution options (courts, arbitration), enhancing investor confidence.
Key Topics
General Provisions (Chapter I)
Purpose and Scope (Articles 1-2): Establishes the legal framework for private investments eligible for tax and non-tax incentives, covering domestic and foreign investments, public-private partnerships (PPPs), large-scale projects, and business concessions. It excludes public investments, non-profit ventures, and specific sectors like oil, gas, and mining (governed by separate laws), though processing, sale, and transport activities may fall under this law if not regulated elsewhere.
Definitions (Article 3): Provides a glossary defining terms like "investment," "foreign capital," "exportable profit," and "special economic zone" to ensure clarity and consistency.
Investment Policy (Chapter II)
General Principles (Article 4): Emphasizes equal treatment for national and foreign investors, respect for property rights, adherence to market economy principles, competition, ethics, and free movement of capital and goods, in line with international law.
Objectives (Article 5): Aims to create jobs, enhance worker skills, promote sustainability (economic, environmental, social), boost exports, reduce imports, introduce innovative technologies, develop infrastructure, support local businesses, and protect natural resources.
Guarantees, Rights, and Duties of Investors (Chapter III)
Guarantees (Articles 6-11): Ensures fair, non-discriminatory treatment, protection of property (including intellectual and land rights), and safeguards against expropriation unless for public interest with prompt, fair compensation (market value plus interest). Allows fund transfers abroad (profits, royalties, loan repayments) under foreign exchange rules, with Bank of Mozambique oversight. Guarantees freedom of company management and license stability.
Duties (Article 12): Requires compliance with tax, environmental, labor, accounting, and insurance laws, plus respect for local customs and social responsibility policies.
Social Responsibility (Article 13): Mandates contributions to environmental protection, gender equality, education, health, infrastructure (e.g., schools, roads), local hiring, and support for small Mozambican enterprises, especially for large projects.
Investment Operations (Chapter IV)
Types and Forms (Articles 14-17): Covers national, foreign, or mixed investments, either direct (e.g., cash, equipment, land rights, technology transfers) or indirect (e.g., loans, franchises, technical assistance). Allows flexibility in investment forms, provided they are quantifiable in monetary terms.
Freedom to Invest (Article 18): Permits investment in most sectors, except those reserved for the State (e.g., defense) or restricted by nationality under specific laws.
Incentives (Article 19): Grants irrevocable tax and customs benefits (e.g., holidays, exemptions) per the Code of Fiscal Benefits for compliant projects, particularly in special economic zones (SEZs) or industrial free zones (IFZs), with 10-year corporate tax exemptions for IFZs.
Development Poles (Article 20): Establishes SEZs, IFZs, industrial parks, and rapid development zones with special tax, customs, labor, and foreign exchange regimes to boost regional growth.
Procedures (Chapter V)
Administrative Principles (Article 21): Governed by transparency and public administration rules, with a shift toward electronic platforms (e.g., E-BAU) for efficiency.
Investment Regimes (Article 22): Offers a mere registration regime for smaller projects and an authorization regime for large-scale projects (>MZN 12.5 billion/~US$200,000), PPPs, or those impacting environment, safety, or public health (e.g., >10,000 hectares of land). APIEX coordinates processes.
Decision-Making (Article 23): Requires justified decisions, investor input within 10 days, and final decisions within 5 days.
Assignment of Rights (Article 24): Allows transfer of investment rights with APIEX approval, ensuring tax compliance for capital gains.
Dispute Resolution (Chapter VI)
Mechanisms (Articles 25-26): Guarantees access to national courts, amicable negotiations, or out-of-court methods (e.g., arbitration, mediation). International treaties may provide additional protections.
Offences and Sanctions (Chapter VII)
Infractions (Article 27): Includes non-compliance with project terms, unauthorized activities, false statements, or failure to implement projects on time.
Sanctions (Article 28): Ranges from warnings to loss of incentives or project cancellation, with investor hearings ensured.
Transitory and Final Provisions (Chapter VIII)
Regulations (Article 29): Council of Ministers to issue regulations within 120 days (by October 2023). Existing rules apply until new ones are enacted.
Transitional Rules (Article 30): Projects under the old 1993 law remain governed by it until transitioned.
Repeal (Article 31): Revokes Law No. 3/93 and conflicting legislation.
Entry into Force (Article 32): Effective 90 days after publication (September 7, 2023).
The new Law No. 08/2023, which governs investments in Mozambique, came into effect on September 8, 2023, reflecting a significant update to the previous law that had been in force for nearly 30 years. This new legislation aims to create a more favorable environment for both national and foreign investments by offering various guarantees and tax incentives, while simultaneously addressing the need for clarity in land use rights and investment processes.
Expanded Scope of the Law
The new Investment Law broadens its applicability beyond domestic and foreign investments to include public-private partnerships, major projects, and concessions. It specifically targets sectors such as oil, gas, and mineral extraction, as well as public investments financed through state budgetary allocations. This adjustment highlights a commitment to facilitating investment in critical areas crucial to national development.
Eligibility and Investment Types
This law classifies investments according to their origin (national, foreign, or mixed) and type (direct or indirect). Significant changes include the generalization of the Direito de Uso e Aproveitamento da Terra (DUAT), allowing direct investors greater access to land use rights. The law also emphasizes incorporating technologies and know-how that can be financially evaluated, thus incentivizing foreign tech transfer alongside capital investment.
For foreign companies, registration in Mozambique is mandatory to access DUAT rights. Notably, the inclusion of mixed investment options combines both domestic and foreign direct or indirect investments, making the landscape more flexible for incoming capital.
Investor Guarantees
The law outlines several vital guarantees for investors, ensuring equal treatment and non-discrimination among both national and foreign business entities. Key principles include the protection of property rights, free market competition, and security for investments. Additionally, it provides freedom for companies to manage their operations, retain existing licenses, and import necessary goods for project execution without hindrance from internal market rules.
Responsibilities of Investors
The new legislative framework introduces obligations for investors, such as their duty to contribute to social responsibility policies in the areas where they operate. This initiative reflects a growing emphasis on corporate social responsibility and community engagement in investment practices.
Sanctions and Compliance
The law establishes a regulatory framework for addressing violations of imperatives with corresponding penalties. This aspect points towards a more structured approach to enforcement, aiming to ensure compliance among all stakeholders involved in the investment landscape.
Tax Incentives and Special Zones
Investors are still eligible for various tax incentives under this new law, as outlined in the Tax Benefits Code. The legislation also facilitates the creation of industrial parks, special economic zones, and free trade zones, where specific favorable tax, customs, labor, and currency regimes may be applied.
Pending Regulations
The effective implementation of Law No. 08/2023 requires further regulation, anticipated to be finalized within 120 days post-publication. Until these new regulations are enacted, the existing rules from the previous investment law will remain in effect. This transitional period is crucial for ensuring that investors have clarity and certainty as they navigate the changing political and economic landscape.
Transitioning Projects
Projects submitted for approval before the law came into force and not yet decided upon will remain subject to the previous law's provisions. This clause ensures that investors have a clear understanding of how ongoing applications will be treated under the new framework.
Dispute Resolution Mechanisms
The new law offers investors the right to defend their interests through national courts and international entities. Additionally, alternative dispute resolution options like conciliation, mediation, and arbitration are encouraged, providing investors with multiple avenues for resolving disputes. The law enables investors to choose their preferred international institutions without limitation, fostering more adaptive and flexible dispute management.
In summary, Law No. 08/2023 represents a significant step towards enhancing the investment climate in Mozambique. It aims to balance state interests with the needs of investors while ensuring broader engagement with local communities. For potential investors, this new framework presents an opportunity to engage in Mozambique's evolving market while navigating the established legal landscape more effectively.