742 THE Portuguese Overseas Province of Mozambique, on the east coast of the African continent, comprises an area of 303,873 square miles. It has a population of over 6 million Africans and about 125,000 others-70,000 Europeans, 33,000 mixed bloods, 16,000 Indians, 1,500 Chinese, and 4,500 "assimilated" Africans. The Province is bounded on the north by Tanganyika Ter- ritory, on the west by the Federation of Rhodesia and Nyasaland and the Union of South Africa, on the south by the Union of South Africa and the British Protecto- rate of Swaziland, and on the east by the Indian Ocean, with a coastline of approximately 1,500 miles. The Province of Mozambique is about twice the size of The Portuguese constitution provides that Mozambi- que is an extension of Portugal, forming an integral Government Policy on Investment To safeguard the interests of the state and to pro- tect the interests of the major industries of Metropoli- tan Portugal, careful consideration is given by the Government to the proposed establishment of a busi- ness in Mozambique, before granting approval. Once a business organization is authorized, however, the state makes no discrimination between national or foreign- owned businesses. Certain fields of activities are re- served to the state, e.g., communications and trans- Investment in major industries requires the approval of the Portuguese Overseas Ministry. Applications may 1 "Assimilated" Africans are those who are educated, speak Por- tuguese, and who have met other requirements of the Native Af- fairs Board, thus qualifying for a legal status equal to that of be submitted direct to Lisbon or through the Governor General in Lourenco Marques. Care is exercised to avoid the establishment in Mozambique of industries competitive with those already existing in Portugal. However, industries with a ready market in Mozambi- que or those offering large-scale employment opportuni- ties are encouraged. These may be Portuguese or may have foreign capital participation. In recent years, the Mozambique Government has offered certain in- centives for the establishment of industries in Mozam- bique such as reduced duties, or complete exemption from customs duties, income tax exemptions for a limited number of years, and other similar measures. Official Government policy neither encourages nor discourages the investment of foreign capital in Mo- zambique. There is a tendency, however, to guide de- local inhabitants and the Portuguese nation as a whole. Thus any proposed project which might adversely affect the overall Portuguese economy or prove directly competitive to already established industries in the Metropole would receive little encouragement, whether foreign or Portuguese. Although there is no specific law on the subject, Portuguese Government policy normally requires that at least 51 percent of invested capital be registered in the name of a Portuguese citizen. Government expenditures under the First Development Plan (1953-58) were primarily directed toward improvement of communications and transportation facilities, irrigation and land reclamation projects for the settlement of European and African farmers, improved housing, sanitation, education, water and power supply, and other social assistance programs. The second Six-Year Plan (1959-64) will contribute to further development. The program, however, does not include the establishment of any particular industries. There continues to be a real need for both domestic and foreign capital and techniques in Mozambique; this need is not being fully met at present from local or Portuguese financial sources. Regulations on Property Ownership Land rights for agricultural and forest exploitation, mineromedicinal water rights, and rights for mineral prospecting and exploitation require special concessions from the state. Interested parties must file appropriate applications with the Land Survey Department (Servicos Geograficos e Cadastrais) and the Bureau of Mines (Servicos de Geologia e Minas). Specific laws and regulations are published governing the concession of lands as well as of rights for mineral waters, quarries, and mineral ores. Land Ownership Decree law No. 3,983, of March 16, 1918, established the principle that all land not belonging to any individual or corporate holder at that time was state property. The only land, therefore, which can be bought and sold outright and to which a permanent title can be obtained is that land which was owned by an individual prior to March 16, 1918. Land belonging to the state is granted for the use of individuals under several different systems, as indicated below. The Government, however, retains permanent title. The right of obtaining land concessions is extended only to Europeans (white), Asians (Chinese and Indians), and assimilated Africans and mulattoes. The right of land ownership or concession is denied to other indigenous Africans, although they may utilize the land of their immediate surroundings for farming and cattle ranching in the so-called "native reserves." Africans cannot be moved from such lands nor from lands granted to other individuals or corporations. Land concessions apply only to surface rights, all subsoil being the exclusive property of the state. Lands in Mozambique are divided into (a) first-class lands, i.e., urban and suburban lands; (b) second-class lands, i.e., those outside the urban and suburban perimeter and not occupied by Africans; and (c) thirdclass lands, forming the "native reserves." Land grants may be made by municipalities (urban plots) or by the state (both urban and suburban). Property rights may be acquired by an individual or a corporation in one of three ways: (a) Under the quitrent system (concessao por aforamento); (b) under leasehold tenure (concessao por arrendamento); or (c) by outright purchase. Lands obtained under the quitrent system must be improved with buildings or agricultural developments of significant value or industrial plants, in the first 5 years of concession, failing which the land reverts to the state. Once the land is improved, the quitrent may be paid out fully (i.e., by paying 20 times the annual quitrent established by the state) and full domain obtained. Lands under leasehold cannot be converted into full domain title. Leasehold lands for dairy installation, cattle pasture, industrial sites, warehouses, and salt pans entitle the holder to utilize the land for the duration of the lease contract. Usually, leasehold contracts are valid for 10 years, but under special circumstances may be made for a longer period. Outright sales may be made for urgent development of a specific region. River valley plots of 100 hectares2 each may be obtained under the quitrent system for raising rice and other cereals and grains. Two or more adjoining plots, of 100 hectares each, may be granted, provided a program of scheduled work and evidence of financial resources are made to the satisfaction of the state. All other land for cattle ranching and/or large-scale agricultural crops (citrus plantations, etc.) may be granted under a quitrent system up to a maximum of 5,000 hectares. Mining Regulations The Government of Portugal reserves the right to prohibit mineral survey and prospecting in certain areas of its Overseas Territories. At the present time some regions of Mozambique are closed to prospecting for mineral ores and for radio-active minerals. Prospecting for petroleum is generally prohibited in Mozambique, but exclusive exploration rights covering a large area of the Province have been granted to the Mozambique Gulf Oil Co. and the Pan American Oil Co., on the basis of a contract with the Portuguese Overseas Ministry, Lisbon. The mining laws and regulations of Mozambique are complex. A copy of these in book form, in English, may be purchased from the Impresa Nacional de Mocambique, Lourenco Marques, or borrowed from the Near Eastern and African Division, Bureau of Foreign Commerce, Department of Commerce, Washington 25, D. C. Foreign Ownership No discrimination is made against land ownership by foreign nationals or corporations, excepting the fact that they are precluded from holding property within 10 kilometers3 of any border territory. The state also reserves the rights on all coastal land up to 80 meters4 from the coastal water line, but leaseholds to nationals 2 One hectare equals 2.471 acres. 8 One kilometer equals 0.62137 miles. 4 One meter equals 39.37 inches. and foreigners may be permitted under special circumstances for the establishment of naval yards, drydocks, naval repair installations, fishing grounds, salt pans, cargo loading and unloading facilities, coal bunkers, and other public utility operations. Foreign individuals or corporations applying for land or mining rights must submit to the jurisdiction of Portuguese law, waiving all rights under the laws of their own country. Entry and Repatriation of Capital Screening Procedure and Criteria There are no standard screening procedures and criteria controlling the entry and repatriation of capital in Mozambique and the remittance of earnings. Before making any large-scale investment, the company concerned should submit a detailed application to the Ministry of the Overseas Provinces in Lisbon and negotiate with the Ministry the specific terms of capital operations in minute detail. This is essential in any activity requiring any type of concession by either the Government of Portugal or the Government of Mozambique. Smaller capital investments in Mozambique are handled by the various Public Departments concerned. These review the applications and submit them to the Governor-General with a recommendation for approval or rejection. Legal provisions relating to this procedure are contained in decree No. 26509 of April 11, 1936, and legislative diploma No. 2049 of June 16, 1948. Tax relief for new industries is possible under the provisions of legislative diplomas Nos. 2241 and 2286 of 1950 and decree law No. 37817 of 1953 (see section on taxation). Separate legislation pertaining to the issue of mineral and timber rights applies equally to foreigners and nationals. Mineral concessions are governed by the terms of a basic decree dated September 20, 1906, as amended. Timber concessions are governed by the terms of legislative diploma No. 2162 dated July 20, 1947. Exchange Controls The remittance of earnings (interest, dividends, profits, capital returns on investments) from Mozambique is controlled by decree No. 21,154 of April 22, 1932. Article 30 authorizes the remittance of profits, dividends, and invested capital. Article 26 provides that the transfer of capital to foreign countries will not be permitted beyond the foreign exchange availabilities of the Mozambique Exchange Fund. Until recently the favorable balance-of-payments position of Mozambique and the strong reserves of the Mozambique Exchange Fund in gold and foreign currency permitted the transfer of capital earnings in dollar and other foreign currencies without undue difficulty. The present unfavorable balance-of-payments position, however, has altered the situation, and restrictions or delays in the transfer of capital earnings may be experienced in the future unless the balanceof-payments position shows considerable improvement. Industrial Investment Guarantees The only guarantees for industrial or other investments granted by the Government in Mozambique are in the form of monopolistic or quasimonopolistic concessions, e.g., the newly authorized petroleum refinery obtained an exclusive contract for 10 years; Mozambique Gulf Oil Co. and Pan American Oil Co. also have an exclusive contract for petroleum prospecting. The only flour mill, the cement companies, sugar factories, breweries, and tobacco factories have enjoyed a privileged position for many years in that no new competing enterprises have been authorized. This protection is a stimulus to such industries in Mozambique owing to the relatively small domestic market in the Province for their products. Imports of tobacco, sugar, wheat flour, etc., are either prohibited or heavy duties are imposed, to provide these industries with adequate protection. Tariff Concessions Decree No. 41,024 of February 28, 1957, article 3, provides that the Overseas Minister may authorize, upon recommendation of the Governor General, exemption from customs duties and other taxes, excepting a 1-percent stamp duty on all imports of construction materials, metallic structures, equipment, machinery, accessories and spare parts, instruments, and tools required for the installation of new industries. This exemption may also be granted on these items, with the exception of construction materials, for the expansion of existing industries. Farming enterprises of economic interest to the Province may also benefit from import duty exemption on equipment, machinery and tools, metallic structures, prefab houses, and fencing material. All industries may be exempted by the Minister from the payment of customs duties and other taxes, excepting the 1-percent stamp duty, on imports of raw materials, whether of Portuguese or foreign origin. While not specified in law, other tax exemptions may be granted through negotiations with the Overseas Minister, based on recommendations of the Governor General. The Governor of Mozambique also may control prices for locally manufactured products to protect and encourage new industries. Business Organizations All business organizations and their operations in Mozambique must conform to the basic legislation included in the Codigo Comercial Portugues (Portuguese Commercial Code)-1888-as amended. There are no separate laws or regulations applicable to foreign firms, as distinct from local firms. From the point of view of overall practicability, the organization of a large-scale operation in Mozambique might best be served through the vehicle of a stock company, with a proportion of shares made available for subscription by Portuguese interests. This type of organization would probably also be the most practicable form for a large firm abroad that might wish to establish a branch agency in Mozambique, with all or part of the shares subscribed by foreign capital. |