Insight: Local content law in Mozambique

The Mozambican economy has been growing considerably on the last years, particularly the mining industry. As such, and to promote Mozambican economic agents, the Mozambican Parliament intends to foster the production and use of Mozambican goods and services with the consequent growth and evolution of Mozambican companies and improvement of the population`s living conditions, through the creation of a new Local Content Law (which is yet to be passed).

 

Local Content is the portion of local production factors which were used in producing goods or providing services, as well as the participation of Mozambican citizens in the share capital of companies. Local Content Goods are goods with a minimum of 10% of Local Content; for each sector, dynamic minimum percentages may be set within a time frame of 7 to 10 years. Local Content Services are services provided by Mozambican citizens, or legal entities incorporated under Mozambican Law, that operate in Mozambican territory.

Local Participation

Local Participation is the subscription, up to 15%, of the share capital of:

• Enterprises, through companies, to be created, between foreign and Mozambican citizens or legal entities.
• Joint Ventures, to be created between Mozambican citizens or legal entities and the companies contracted by the concessionaires.

The minimum percentage of Local Participation is not transferable to foreign persons or companies.

Monitoring and Certification

The monitoring and management of the LCDL will be carried out by a public entity to be created. This public entity would likewise be responsible for keeping a data base on the Certified Mozambican suppliers. Goods and services of Local Content are subject to certification, to be issued by a public entity. The natural persons or companies will be deemed as “Local suppliers” by presenting the correspondent certificate.

This public entity is also responsible for establishing the percentage of Local Content, in accordance with the criteria and procedures to be set by the Mozambican Government.

Contracts

Goods or services to be purchased shall present the correspondent Local Content Certificate. The purchasing entity shall give preference to those goods or services with the highest local production factors. Suppliers may form associations to provide goods or services, provided that the requirements set by the purchasing entity are met.

Mozambican citizens or companies that intend to subcontract other entities to provide for goods or services, shall present a request for that effect. The subcontractor shall also be a certified supplier and is subject to the provision of the LCDL and its regulations.

Import of goods and services

In the event the goods or services required by the purchasing entity are not available in Mozambican territory, such goods or services may be purchased in foreign territory, provided that previous authorization is granted.

Local Content Plan

Enterprises that operate in Mozambican territory shall present to the relevant authorities, on an annual basis, a Local Content Plan, with the actions and strategies to be developed in the following year. Furthermore, contracting enterprises shall also elaborate a Long-Term Plan for a period of 5 years.

The enterprises shall submit, on an annual basis, to the relevant authorities, a report with a detailed evaluation of the performance of the Local Content Plan.

Transfer of Technology Plan

The foreign natural persons or companies shall also elaborate a plan for transfer of technology, experience, technical knowledge and skills to the Mozambican natural persons or companies to which they are associated with.

Sanctions

The violation of the rules of the LCDL may be sanctioned by the application of fines or suspension of the supplier for a period of 2 years. Subcontractors are jointly liable for the lack of compliance with the LCDL.

Other legal dispositions currently in force in Mozambique

Although the LCDL is not currently in effect in Mozambique, there are already a number of legal dispositions in force with local content provisions, especially in the Petroleum and Mining sectors.

Petroleum Sector
The Mozambican Petroleum Law and the Mega Project Law have several local content dispositions, such as:

• Mandatory registration of oil and gas companies, on the Mozambique Stock Exchange.
• When the public interest so requires, holders of oil or gas exploration rights shall give preference to the Mozambican Government in the acquisition of petroleum produced in the concession area.
• Concessionaires are required to obtain Mozambican participation in their share capital, in an amount between 5% to 20%, via the stock exchange and on commercial terms.

Mining Sector
The mining sector is regulated by the Mining Law and the Mining Law Regulation. Both these diplomas mention some local content dispositions, such as:

• The acquisition of goods and services in the minimum amount of 15,000,000 MT (which roughly corresponds to 900,000.00 USD), must be executed through public tender.
• Titleholders and contractors must give preference to Mozambican goods and services whenever available, and when its price is no more than 10% higher to the prices of the imported goods available.
• Concessionaires are required to obtain Mozambican participation in their share capital, in an amount between 5% to 20%, via the stock exchange and on commercial terms.

Duarte Marques da Cruz