Hailed as one of sub-Saharan Africa’s success stories, the Republic of Mozambique has made a remarkable transformation from one of the world’s poorest countries in the 1970s, to enjoying one of its strongest growth rates throughout the recent global economic crisis. In fact, it wasn’t until the end of a particularly brutal civil war (1977 – 1992) that the government of Mozambique was able to embark on the series of macroeconomic reforms that have enabled it to stabilise and begin a rebuilding process.
Keeping pace with the tremendous amount of change in the country’s legal and regulatory environment over the past twenty years has been local law firm, Fernanda Lopes & Associates. The firm, based in Maputo was established in 1995 by Fernanda Lopes and Teodato Hunguana to provide a wide range of legal services to domestic and international clients. It is now seeing a huge surge in inward investment, particularly in the development of the country’s vast oil, gas and mineral wealth.
Located on the eastern coast of Africa, Mozambique was part of Portugal’s colonial holdings from 1505 until its emancipation in 1975. Despite sitting on a wealth of natural resources, the country was rated one of the poorest in the world at that time. The colonial war ended around 1974, after the Revolution in Portugal, but peace came for a short time only, since an internal bloody civil war started.
In 1992, exhausted from years of civil war and coupled with the social changes in South Africa, the leaders of the two main political parties signed the Rome General Peace Accords, and elections took place in 1994, enacting a new constitution that provided for a multi-party political system, free elections and a market-based economy. Since then, there has been a focus on establishing a legal, tax and regulatory framework within which foreign investors can operate. The goal, for a country that is still dependent on foreign aid for its annual budget, is to become economically self-sustaining by 2030.
The potential for foreign investment is huge, but so are the challenges. The government has set aside six development zones but first, roads, rail services, communication and power generation infrastructure all need to be built/rebuilt. “The country is known all over the world for having huge reserves in natural resources,” comments Lopes. “However, the exploration and exploitation of natural resources demands not only proper infrastructure but also supplier industries to serve the resource extraction. All of those, in turn, require energy supply and transportation networks.”
Already, Anadarko of the US and ENI from Italy have found large reserves of gas off Mozambique’s northern shore, with Anadarko announcing plans to develop a major LNG facility by 2018. Britain’s Rio Tinto and ENRC have expressed interest in unexploited coking coal reserves in the Tete Province, which Brazil’s Vale started exporting on a small scale at the end of 2011. The anticipated level of 50 to 100 million tonnes per annum, however, will not be achievable until transport bottlenecks are resolved.
“However, the exploration and exploitation of natural resources demands not only proper infrastructure but also supplier industries to serve the resource extraction. All of those, in turn, require energy supply and transportation networks”, says Lopes.
The challenges run deep. Financial capital must be raised to build power generation capacity and transport networks that will enable resource extraction, but the lack of human capital is as great a problem. Only 16 percent of the country’s population has access to electricity. 75 percent live and work in small-scale agricultural operations, hampered by the lack of infrastructure to support more modern methods and increased yields. As a result, nearly 90 percent of Mozambique’s arable land is still uncultivated.Finally, huge opportunities are apparent in tourism. Mozambique’s coast is home to some of the most pristine beaches and UNESCO Heritage sites in the Indian Ocean. Seasoned travellers who prefer to ‘rough it’ in exchange for peace and quiet are already beginning to ‘discover’ Mozambique, and developers won’t be far behind.
The wealth of opportunity in Mozambique is attracting global attention. According to the country’s Centre for Investment Promotion (CIP), the top ten sources of foreign investment in 2011 were South Africa, Portugal, Mauritius, UK, UAE, China, Pakistan, India, Swaziland and Brazil. The main targets for investment are mining, infrastructure, agri-business, industry and trade, and financial services.
Despite the potential rewards, however, the path to investing in Mozambique is still rocky. In the 2012 World Bank Doing Business Report, Mozambique dropped seven places from its 2011 ranking to 139 out of 183 economies. In this scale, a low numbered ranking indicates a regulatory environment that is favourable to starting and operating a local firm, which includes factors such as ease of obtaining permits and accessing credit, and the complexity of tax regulations and enforceability of the law.
“It is important for anyone seeking to set up a new business in Mozambique to work with professionals who understand the current system and how it is constantly evolving,” says Lopes. “It is very important that the lawyers assisting graduated in Mozambique and are trained in Mozambique law, as well as being part of the wider network of local legal practitioners and lawmakers.”
To provide a high quality regional alternative, three law firms in Kenya, Tanzania and Uganda came together to form the Africa Legal Network (ALN) in 2004. The ALN is committed to becoming the leading provider of cross border transactional and advisory legal services in Africa and raising the bar on legal service delivery across the continent.
Our focus is not on the quantity of lawyers in the team but rather the quality of the customer relationships we build
Over the ensuing eight years from 2004 to the present day, practices in Botswana, Burundi, Ethiopia, Malawi, Mauritius, Mozambique, South Africa and Zambia have been added.
“We are proud to be the exclusive ALN partners in Mozambique,” says Lopes. “Our place in the network is evidence of our expertise in local law, particularly as it applies to inward investment. This has also been recognised in our high ranking in Chambers Global, the leading international legal directory.”
A large percentage of Fernanda Lopes & Associate’s work is with clients in the mining, and oil and gas sectors, to whom the firm provides services in corporate law, mergers and acquisitions, property, employment law, litigation and arbitration. With the legal environment constantly changing as the government initiates new laws to deal with international taxation, exchange controls, property ownership, the development of a skilled labour force and corruption among low-level government officials, legal advisors need to constantly update these laws and, whenever possible, give their input into the law-making community.
One area the firm has found itself increasingly involved in is labour matters. “The government has to balance the need for skilled workers to build our infrastructure today, with the equally important need to develop opportunities to up-skill the Mozambique labour force,” Lopes points out. “So although procedures for acquiring visas and work-related permits have been eased, the Ministry of Labour introduced a quota system limiting the number of contracted expatriates in 2008. Some investment projects may get approval to be exempted from the quota system, and we have been assisting several local and international companies in labour matters over the last few years.”
The firm is also regularly asked to assist investors understand and work with the rules of land use and allocation in a country where all land is owned by the state. The legal system does recognise and protect property rights to movable property and land use concessions of up to 50 years, but foreign investors can be deterred by the lack of private land ownership.
Facing the future
Having graduated from universities in Portugal, both of the founding partners instilled the firm with an international perspective. In 2007, the firm went to Portugal to open an office in Lisbon, giving it the ability to handle international transactional projects for clients originating in both Mozambique and Portugal. In order to improve its capacity in Portugal, and to avoid ramifications stemming from the European economic crisis, which has gripped Portugal, the law office in Lisbon merged with MC&A, a Portuguese law office based in Lisbon.
This was a major step in the development of the firm, which continues to pursue a strategy of slow growth to ensure that quality of customer service is always the top priority. “Our focus is not on the quantity of lawyers in the team but rather the quality of the customer relationships we build,” says Lopes.
As the firm continues to grow, the question remains: will the country’s political environment remain sufficiently stable for the government to continue its program of reform and regulation to create economic stability and prosperity? Lopes is optimistic, and cites the growing interest among major investors around the world as evidence of Mozambique’s bright future. “But as lawyers, we have no political involvement at all,” she concludes. “Politics is not discussed in the office; we serve clients and justice, not power.”