Mozambique Economic Acceleration Package
Mozambique Economic Acceleration Package: A Strategic Opportunity for Investors
Launched in August 2022 by President Filipe Nyusi, the Mozambique Economic Acceleration Package (EAP) comprises 20 transformative reform measures designed to position the private sector as the cornerstone of economic development. Crafted to address challenges such as suspended international funding, the Cabo Delgado insurgency, the Covid-19 pandemic, and natural disaster risks, these reforms aim to enhance Mozambique's investment climate by 2025. With a focus on fiscal incentives and business environment improvements, the EAP is particularly advantageous for U.S. investors eyeing agriculture and agro-industry, offering streamlined market entry, reduced costs, and enhanced profitability. This article outlines the EAP's key components, emphasizing opportunities for investors in these sectors, supported by 2025 data and policy developments.
Fiscal and Economic Reforms: Catalyzing Agricultural Investment
The EAP's fiscal reforms are tailored to stimulate investment in agriculture and agro-processing, sectors critical to Mozambique's economy, contributing 25-27% to GDP and employing 70% of the workforce
These measures, effective through 2025, create a compelling case for investors.
VAT Reduction: The Value Added Tax (VAT) dropped from 17% to 16%, reducing operational costs for agro-processing ventures like cashew and sugarcane mills, enhancing margins by 1-2% on processed exports.
VAT Exemption on Production Inputs: Imports of agricultural inputs (e.g., seeds, fertilizers) and electrification equipment are VAT-exempt, lowering setup costs for irrigation systems in the Limpopo and Zambezi basins by up to 15%.<grok:render type="render_inline_citation"> 31</grok:render> This supports initiatives like the Baixo Limpopo Irrigation Project, boosting yields for high-value crops
Corporate Income Tax (IRPC) Reduction: A cut from 32% to 10% for agriculture and aquaculture significantly boosts ROI for investments in cashew processing (projected 218,900 tons in 2025) and aquaculture ventures like tilapia farming.
Fiscal Incentives for Key Sectors: New investments in agriculture, agro-processing, and manufacturing benefit from tax credits (5-10% on IRPC for 5 years) and customs exemptions on capital goods, available through 2025. Special Economic Zones (SEZs) like Nacala offer IRPC exemptions for 1-10 years, ideal for processing hubs
Simplified Repatriation of Earnings: Streamlined processes reduce costs of moving profits out of Mozambique, increasing market attractiveness. This benefits U.S. investors in export-oriented agro-processing, with repatriation costs down by 10-15%.
Natural Resource Export Supervision: Enhanced oversight curbs illegal trade, protecting agricultural exports like sesame and cotton, ensuring stable supply chains for processing.
Construction Material Production: Promoting local materials reduces costs for agro-industrial facilities, such as storage silos in Nampula, by 5-10%.
Revenue Allocation to Provinces: 10% of natural resource tax revenues fund infrastructure in extraction provinces, indirectly supporting agro-industrial logistics in regions like Sofala.
Guarantee Fund for SMEs: A new fund lowers financing costs for small agro-processors, covering up to 50% of loan risks, critical for scaling cashew and cotton ventures.
Biofuel Blending Mandate: Mandatory blending of imported fuels with biofuels creates demand for sugarcane-based ethanol, with potential for $100 million in annual processing investments.
These reforms align with the $5 billion in H1 2025 investment approvals, with agriculture and agro-processing attracting significant FDI due to these incentives.
