Regulatory Environment, Investment Climate, and Policy Framework

The economic narrative of Mozambique in 2025 is defined by a dichotomy: the country receives substantial attention from the international investor community due to massive natural resource developments, particularly Liquefied Natural Gas (LNG), yet it simultaneously ranks among the riskiest countries in the world to do business. The overall policy framework aims to leverage this resource wealth through significant legal and regulatory modernization, but the investment climate remains challenged by acute governance issues, pervasive corruption, and institutional weaknesses.

I. Investment Climate Benchmarking and Major Risks

Mozambique's investment climate is generally considered risky and unfavorable. International indexes consulted by foreign investors consistently place Mozambique poorly. For example, the country ranked 138 out of 190 economies on the World Bank's 2020 Doing Business report and 137th out of 141 economies in the World Economic Forum's 2019 Global Competitiveness Ranking.

The primary barriers that deter investors are generally political stability and security, along with the lack of an enabling legal and regulatory environment.

Pervasive Governance and Corruption: Corruption is cited as the number one obstacle to conducting business for both international and domestic investors, consistently across all firm sizes. This issue is exacerbated by the lack of transparency, which fosters abuses of power. Mozambique ranked 146 out of 180 economies in Transparency International's 2019 Corruption Perception Index.
De Facto Barriers: Corruption and political instability rank disproportionately high as key barriers for FDI and mid-to-large firms. The opaque regulatory framework allows fiscal authorities to charge more than they should. Customs checkpoints are notorious corruption hotspots.
Political Risk: Political risks frequently reported to affect FDI include unpredictable and arbitrary actions by the government, absence of regulatory transparency, delays in obtaining necessary permits, transfer/convertibility restrictions, and breaches of contract. Post-election tension and violent demonstrations beginning in late 2024 added significant uncertainty to the political and economic environment of the country.

II. Key Policy and Regulatory Reforms in 2025

The government acknowledges the dampening effect of investment barriers and views improving the investment climate as a policy priority. Policy efforts have targeted commercial law, foreign investment, local content, and financial governance.

A. Modernizing Commercial and Investment Law

New Commercial Code: The New Commercial Code (Decree-Law No. 1/2022) came into force in September 2022, aiming to modernize commercial entity formation, operation, and governance. This code reduced bureaucracy, introduced flexible company structures like the Simplified Joint Stock Company (SAS) to respond to World Bank calls to simplify company creation, and supports the digitalization of corporate acts. It also mandates the disclosure of beneficial ownership, aligning with anti-money laundering frameworks.

Private Investment Law: The Private Investment Law (Law No. 8/2023 of June 2023) and its Regulation (Decree 8/2024 of March 2024) establish the framework for private investments eligible for fiscal and non-fiscal incentives. This specialized statute complements the Commercial Code and aims to facilitate FDI. Projects exceeding MZN 2.7 million (around $42,000) must register with APIEX (Agency for Promotion of Investment and Exports) to access incentives. Projects may fall under a mere registration regime or an authorization regime, the latter applying to large-scale investments. The law provides guarantees, including the free remittance of funds abroad (after fulfilling tax obligations).

B. Extractive Sector Regulation and Local Content

The legal framework for the extractive sector (mining, oil, and gas) is largely independent of the general Investment Law. The government is pushing forward a local content agenda in 2025:

Local Content Law (LCL): The government announced in May 2025 that the new Local Content Law was nearing completion (95% drafted) and expected to be submitted to the National Assembly. This bill aims to establish standards requiring megaprojects to prioritize the acquisition of goods and services produced in the country and the hiring and training of local labor. The draft law proposes the creation of a Local Content Agency responsible for regulation, oversight, and penalties.
Petroleum Law Review: A public consultation regarding proposed amendments to the Petroleum Law (Law No. 21/2014) commenced in June 2025. The revision aims to strengthen the State's role in petroleum operations, both through the National Hydrocarbons Company (ENH) and by guaranteeing a domestic market quota. Furthermore, Ministerial Diploma No. 55/2024 was published in July 2024 to establish clearer mechanisms for guiding the obligations of concessionaires regarding local employment, education, and procurement.

C. Financial and Public Sector Governance

Mozambique has undertaken significant reforms to stabilize its financial system and improve governance:

FATF Gray List Exit: Reforms were completed in 2023 to establish the legal framework for the registration of virtual asset service providers at the Banco de Moçambique, which was intended to remove the country from the Financial Action Task Force (FATF) gray list and improve FDI attraction.

SWF and Debt Strategy: The government approved the Medium-Term Debt Management Strategy for 2025-2029 in November 2025 to create a prudent framework for public debt management. The government also committed to promoting transparency in resource management by launching its Sovereign Wealth Fund (SWF).

Digital Governance: The government is leveraging digital systems to reduce bureaucracy and corruption. Efforts include the ongoing implementation of the electronic tax filing system (e-tributação) and interfacing the customs system (JUE) with the financial management system (e-SISTAFE) to streamline resource transfer and classification. The adoption of the X-Road platform aims to improve interoperability between state systems, such as immigration and civil registry.

III. Persistent Institutional and Operational Bottlenecks

Despite the policy commitment to reform, Mozambique remains rigid in its operational environment. The predicted effect of proposed reforms on investment and employment may be small and take several years to materialize.

Implementation Deficit: Reforms often do not result in substantive changes for businesses due to a consistent lack of implementation of legislation. Key implementation challenges include insufficient public official capacity, inadequate infrastructure capacity, and a need for better internal coordination among different agencies.
Coordination Failures: Mozambique is characterized by weak coordination among various agencies and levels of government. Different authorities may apply and interpret the same regulations differently, creating inconsistency. This complexity, for instance, affects the land titling process, where improved coordination is needed between central, provincial, and municipal institutions.
Uncertainty for FDI: The current setup of the investment framework is criticized for being outdated, fragmented, and lacking detail and definition. This uncertainty is exacerbated by the legal framework for Special Economic Zones (SEZs), which is governed by ad hoc decrees rather than a single, clear law, creating a confusing set of provisions for investors.
Labor and Land: The labor market remains relatively rigid, despite ongoing efforts to reform the labor law. Furthermore, restrictions persist on land use rights (DUAT), which cannot be sold or used as collateral for financing, although they can be granted for PPPs involving national resources.
Trade Barriers: In trading across borders, inefficient customs procedures and high administrative fees remain a burden. Mozambique does not rely on an efficient risk-based management system, often applying physical inspections to practically all consignments. Furthermore, customs legislation is enshrined in about 45 legislative acts, requiring better harmonization.

Summary

The regulatory environment in Mozambique in 2025 resembles a complex, high-stakes game of chess: while the government is rapidly changing the board (introducing new Commercial and Investment Codes, and strengthening Local Content mandates), the players (implementing agencies and customs officials) struggle with the new rules due to institutional weaknesses and governance issues. Consequently, foreign investors must often deal not just with written law, but with de facto barriers—the complexity of overlapping rules and sometimes also face systemic corruption—which undermine the intended benefits of liberalization and digital transformation.