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Sub-Saharan Africa

Mozambique risk report

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Companies looking to operate in Mozambique face a very high risk of corruption in most sectors. Forms of corruption range from petty bribes to deeply entrenched clientelistic and patronage systems, and donor countries have shown dissatisfaction over the country's anti-corruption efforts. Corruption is particularly prominent in public procurement and the tax and customs administrations. Even though a relatively well-established legal framework is in place, many loopholes exist. For instance, the Anti-Corruption Law does not cover all forms of corruption (e.g., embezzlement is not covered). The judiciary is generally considered corrupt and is subject to political influence, impeding the effective enforcement of the law. Gifts and facilitation payments are common when dealing with officials.

Judicial system Very high risk

The judicial system carries a high corruption risk. Bribes and irregular payments are often exchanged in return for favorable court decisions (GCR 2015-2016). The underpayment of judges has reportedly contributed to the high levels of bribery (BTI 2016). The judiciary is also marred by political interference and is completely under the control of the ruling party, the Mozambique Liberation Front (Frelimo), and thus, cannot provide companies or citizens with adequate legal remedies (BTI 2016; ICS 2015). The judiciary is understaffed and lacks training (HRR 2015). Positions are allocated based on affiliations with the ruling party (BTI 2016). Accordingly, more than two-thirds of households perceive the judiciary to be corrupt (GCB 2013).

Businesses report the judiciary lacks efficiency when it comes to settling disputes and challenging government regulations (GCR 2015-2016). There is no discernible pattern concerning commercial dispute resolutions, which are settled privately or not at all (ICS 2016). Rulings issued by foreign courts are usually recognized and upheld by the Mozambican Supreme Court (ICS 2016). Enforcing contracts is a very lengthy process, averaging 950 days at a cost of 119% of the claim (DB 2016). Mozambique has ratified the International Centre for Settlement of Investment Disputes (ICSID) and has acceded to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police Very high risk

Corruption permeates the ranks of the police, resulting in a high risk of corruption. A combination of factors has contributed to a corrupt environment within the police force (including limited resources and capacities, low wages, poor training, and a general culture of tolerance of corruption) (OSAC 2015). Thus, officers are susceptible to bribery; even small bribes can make allegations disappear (OSAC 2015). Furthermore, some police tip off criminals to police operations due to corruption (ICS 2015). Extortion is also a practice officers often engage in with impunity (HRR 2015). Authorities have no effective mechanisms in place to investigate police corruption (HRR 2015). Accordingly, businesses do not find the police to be reliable in enforcing law and order (GCR 2015-2016). Further, the quality of police services declines the further away from the capital one gets (OSAC 2015). Approximately 20% of citizens report recently paying a bribe to police (Afrobarometer, Nov. 2015).

Public services Very high risk

Corruption in the public services presents businesses with high risks. The public administration lacks transparency, and recruitment in the public service sector largely depends on political affiliations (BTI 2016). Bribes and irregular payments are often exchanged when applying for public utilities (GCR 2015-2016). Regulations are selectively enforced if at all, and businesses have experienced officials threatening to enforce antiquated regulations as a means to extort favors or bribes (ICS 2016). Investing in Mozambique incurs dealing with a myriad of requirements for permits, approvals, and clearances (ICS 2016). Nonetheless, starting a business is less costly and less time-consuming than regional averages (DB 2016). The government's Investment Promotion Center (CPI) assists local and foreign investors in obtaining permits and licenses, yet large companies often receive more support in the registration process (ICS 2016).

The Portal of the Government (Portal do Governo de Moçambique, in Portuguese) offers information on licensing requirements as well as various registration forms.

Land administration Very high risk

The land administration presents businesses with high corruption risks. Land is exclusively owned by the state, and the protection of land rights is seriously hampered by factors like corruption and government inefficiency (ICS 2015; BTI 2014). Corruption among public officials and the institutional weakness of local government paved the way for frequent illegal land-grabbing in Mozambique, particularly in poor communities (Friends of the Earth International, Jun. 2013). The illegal land-grabbing primarily concerns investors in the agribusiness, tourism and mining sectors (Friends of the Earth International, Jun. 2013).

Tax administration Very high risk

The tax administration is a high-risk sector. Bribes and irregular payments are often exchanged when meeting with tax officials (GCR 2015-2016). Furthermore, officials enjoy wide discretionary power and are known to enforce laws unfairly (U4 2012). Around two-thirds of citizens believe the tax administration suffers from corruption (Afrobarometer, Mar. 2014). Nevertheless, paying taxes in Mozambique is less costly and less time-consuming than the regional averages, and the government has introduced an online system for filing social security contributions (DB 2016).

Customs administration Very high risk

The Mozambican customs administration presents businesses with a high risk of corruption. The border administration lacks transparency, and irregular payments and bribes are often exchanged when dealing with customs officials (GETR 2014). Corruption is more pervasive when dealing with imports than with exports (GETR 2014). Bribery is exchanged in more than half of all cargo movements through Mozambique's capital, Maputo (World Bank, 2012). Accordingly, businesses report that Mozambique's customs procedures are burdensome (GCR 2015-2016).

The Ministry of Industry and Trade (Ministério da Indústria e Comércio, in Portuguese) offers information on customs and tax procedures.

Public procurement Very high risk

Public procurement is a high-risk sector. Companies perceive favoritism towards well-connected firms to be widespread among procurement officials and report that funds are often diverted to companies or individuals due to corruption (GCR 2015-2016). Patronage networks are entrenched, and the ruling elites enjoy a favorable position concerning government contracts; accordingly, the Frelimo elite interest groups and their privately owned companies are the gatekeepers of foreign investment and have profited from the booming economy (BTI 2016). Massively inflated public contracts are reportedly common as a result of widespread government corruption (Africa Confidential, May 2016). Procurement laws are not adequately enforced, creating vast opportunities for corruption; some important contracts have been signed without any bids being published (GI 2016). Additionally, a culture of secrecy permeates the sector, thus making it even more difficult for the public to obtain information (GI 2016).

Even though companies found guilty of corruption are legally debarred from participating in future tenders, enforcement is lacking (GI 2016). There is overwhelming evidence implicating companies in corruption, yet none have been prosecuted or prohibited from participating in bids and no registry of blacklisted companies is available (GI 2016).

In one case, the multimillion USD project of switching analog televisions to digital ones in Mozambique was awarded to the Chinese firm Startimes, whose CEO is the daughter of former president Armando Guebuza (GI 2016). The contract was awarded without a tender (GI 2016). In a case that illustrates the inflation of contract prices, the building of the Bank of Mozambique in Maputo, estimated to cost USD 90 million, ended up retrieving USD 300 million from public coffers (African Confidential, May 2016). State-owned companies are the main beneficiaries of contracts that are not competitively tendered (ICS 2016).

Companies are recommended to use a specialized public procurement due diligence tool to mitigate corruption risks in this sector. View the Portal of Public Contracts (in Portuguese) for more information about contracting in Mozambique.

Natural resources Very high risk

Businesses investing in the extractive industries must contend with a high risk of corruption. Environmental regulations often are disregarded or enforced inconsistently to generate revenues from fines (ICS 2015). In 2013, almost half of the timber exported from Mozambique's forests to Chinese companies was harvested illegally (EIA 2013). The illegal logging is due to widespread corruption and poor governance (EIA 2013). Evidence shows that bribery and fraud among public officials and timber agents have facilitated illegal logging; high-level "friendships" between the public officials and the timber agents help the agents to avoid regulations and to illegally obtain logging permits (EIA 2013).

In 2012, the Extractive Industries Transparency Initiative Mozambique gained compliant status with the EITI.

Legislation

Mozambique has a legal anti-corruption framework in place but struggles with its effective implementation. Most high-level political and economic elites are often immune from prosecution (HRR 2015). The Anti-Corruption Law criminalizes extortion, kickbacks, attempted corruption, as well as active and passive bribery in the public sector. However, the Law does not cover other forms of corruption such as embezzlement (BTI 2016). Money laundering and tax fraud are criminalized under the Money Laundering Law. The Witness and Protection Act allows for the protection of whistleblowers and introduces a witness protection program that also provides for a new identity and relocation for witnesses. According to the law on asset disclosure, it is compulsory for all government members, as well as their spouses and legal dependents, to disclose their assets, and any breach would engender fines. Appointed and elected officials, high-ranking civil servants, their spouses and legal dependents are all subject to financial disclosure laws; however, compliance is very limited and information on declarations is not made public (HRR 2015).

Mozambique has ratified both the United Nations Convention against Corruption (UNCAC) and the African Union Convention on Preventing and Combating Corruption.

Civil society

The law guarantees freedoms of speech and press in Mozambique, and the government generally respects these rights (HRR 2015). The country's press law only addresses print outlets, leaving community radio, newspaper journalists and bloggers to enjoy less protection (FotP 2015). Instances of harassment, attacks and the intimidation of journalists have decreased during 2014, but journalists often self-censor, primarily due to libel and defamation laws (FotP 2015). Three out of ten citizens report that the media abuses its freedom by misinforming the public and believe the press is ineffective as a watchdog of the government (Afrobarometer, Apr. 2015). Public access to government information is guaranteed by law but is not possible in practice (HRR 2015). The government does not restrict internet use, although opposition leaders have alleged that government intelligence agents monitor e-mails (HRR 2015). The country's press environment is considered "partly free" (FotP 2015).

The law provides for freedom of assembly in Mozambique; however, the government restricts this right in practice (HRR 2015). The structure of the one-party state has limited the development of civil society organizations, and the few that do exist are either satellites of the party or were created from the erstwhile socialist organizations (BTI 2016). Civil society is not perceived as an influential actor in Mozambique (BTI 2016).

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