11 June 2012

Mozambique: Private Sector Urges Govt to Speed Up Reforms

Maputo — Mozambican business community, represented by the Confederation of Business Associations (CTA), has called for the rapid introduction of reforms aimed at improving the country's business environment.

The call was made on Friday in Maputo at a meeting that brought together senior officials from the Mozambican government and the country's business community. The meeting sought to establish this year's priorities for the private sector.

The CTA believes that it has already identified a number of issues requiring immediate reforms to improve the business environment, streamline the domestic market, and lead to higher growth of the manufacturing sector.

The main demand was for the private sector to be able to participate in projects being implemented across the country.

In particular, the CTA claimed that the government has been promoting investment in renewable energy and natural gas, whilst at the same time marginalising domestic companies.

The CTA stated in its 2012 report to the government that "this is due to the lack of concrete, transparent and timely information about the implementation of existing projects to enable local business people to participate in public tenders".

The CTA proposed that the country's Energy Fund (FUNAE) disclose existing opportunities and create a framework for the participation Mozambican companies in projects under its competence. It argued that this would help local companies through increased revenues and the transfer of technology and know-how from foreign companies operating in the country.

"We ask the government to reform the country's policies on renewable energy to help domestic companies to better plan and develop their activities. To that end, we are willing to undertake a joint study, if necessary, to identify the existing business opportunities in the area of renewable energies and natural gas", stated the CTA.

It called for similar changes in the information technology and communication sector. According to the CTA, domestic companies have been excluded from tenders launched by government institutions to supply computer equipment and services, even when there are local companies with the capacity and knowledge to meet the requirements.

"It is in this context that we demand preference for Mozambican companies with at least 51 per cent of their capital owned by nationals, as a way of ensuring their growth", said the CTA.

The CTA also complained about the lack of implementation of Value Added Tax (VAT) exemption for costs associated with the agricultural industry. The tax regime provides for VAT exemption, but it is yet to be fully implemented.

"By the time that agricultural goods get to the processing industry, they are expensive due to the number of times VAT has been charged along the chain", lamented the CTA.

The business community also complained that tax exemptions on diesel for the agricultural sector are yet to benefit all, particularly small and medium sized farmers.

Road tax for exports is also another concern of the business community, which it argued increases cost and damages the competitiveness of fruit and vegetable exports.

This concern was earlier presented to the Government, which approved a decree cutting road tax by 50 per cent.

However, the private sector argued that rather than just receiving cuts in the road tax, fruit and vegetables exports should be fully exempt as the country lacks adequate trucks.

The tax is about 100 US dollars per truckload, which according to the CTA, is passed on to Mozambican farmers, therefore reducing the competitiveness of Mozambique's exports.

"Fruits and vegetables exports are subject to this tax because they are using South African trucks, due to the fact that there are no refrigerated trucks suitable for these products, which should be kept under refrigeration at eight degrees Celsius", argued the CTA.

As for the construction industry, the CTA proposed a revision of a ministerial regulation to require public works contractors to subcontract to small and medium scale companies owned by Mozambicans.

"With this instrument, small and medium scale companies would have access to contracts through outsourcing", the document added.

"In practice, most small and medium sized companies fail to participate in these contracts because the law is unclear regarding the inclusion of local small and medium sized companies", said the report.

The report also complained about the cost of the non-intrusive inspection of goods, using electronic scanners installed in Mozambican ports.

The private sector argued that scanners reduce the competitiveness of domestic products and inflate import costs, which are then passed to the consumer.

CTA argued that in South Africa, "the government covers the costs for running scanners and other equipment, such as computers, used by government officials. Naturally, the resulting efficiency brought about by the use of this equipment covers the running costs of the scanners".

Hence, the CTA proposed that the Mozambican government review the legislation on the implementation of non-intrusive inspection, based on the best practices of international trade and tariffs.

In its report, the CTA praised the government for approving an anti-corruption legislative package which has been sent to the Mozambican parliament, the Assembly of the Republic.

"This proves that the Government realizes the importance of this legislation in improving the business environment, as well as improving the country's performance in the ranking of "Doing Business", since the law allows for more transparency in the fight against corruption. We applaud the efforts of the Council of Ministers (Cabinet) and urge parliament to speed up the passing of the legislative package in question', urged the CTA.

Speaking on behalf of the government, Prime-minister, Aires Ali, acknowledged the concerns and proposals of the private sector, but stressed that short-term reforms will not solve the problem, as there is a need to introduce deep structural reforms.

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