Agriculture

Background

The Government of Mozambique has concentrated its efforts on the development of the country's agricultural capacity for several years since the end of colonial rule. It views this focus as one of the central tenets of an independent, self-sustaining economy, free from hunger.

To this end it has faciliated the development of the agriculture industry in both the private and public sector. In the years following the first democratic elections, a liberalizing economy opened new opportunities for private investment. At the same time, the Government partnered with donor and research organizations in order to find the best means boosting local produce, with minimum capital investment.

Mozambique is geographically home to several climatic zones which affect the viability and capacity of agriculture. High levels of soil fertility and good rain is found in the northern and central regions where production normally generates a surplus. The southern region is considered dry and less feasible. However, a broad range of products can still be developed such as sugar, cotton and maize which have been the traditional staple as well as new products such as bio-fuels, soya production and forestry.

Development Challenges

In spite of the latent opportunities present, Mozambique continues to suffer from low levels of justifiable activity in this industry. In the last two decades, agriculture continues to be dominated by small-scale subsistence farming. The most likely cause for this is structural and policy weaknesses which are observed through:

Weaknesses in the data collection and dissemination purport to investment levels with a growth trend, however these may refer to authorized-only investments as opposed to actual investments which are resulting in genuine and measurable output

Unacceptable levels of bureaucratic interference which impede the proper functioning of laws and their enforcement regimes

The scarcity of dispute resolution mechanisms which complicate transparency, justice and human rights in particular to small-scale farmers

Poor regulations on land allocation and management which reduce incentives to invest by foreign entities

Difficult tax legislation which hinders the outflow of capital and foreign investment

Lack of information provided to farmers and producers for marketing opportunities creates barriers to sales

Tax Insights

By way of comparison to other industries in Mozambique, agriculture is suitably better positioned for attracting investments and should do well. In practice the following factors, both favorable and unfavorable exist:

Agricultural enterprises have a tax rate of 2% and in some cases 0%, while the tax rate for other industries is generally 32%

Agricultural enterprises have a tax rate of 2% and in some cases 0%, while the tax rate for other industries is generally 32%

Tax exemptions are applicable if investments are made in specially created economic zone

Audit Opportunities