Local Content

Local Content  is the portion of local production factors which were used in producing goods or providing services, as well as the participation of Mozambican citizens in the share capital of companies. Local Content Goods are goods with a minimum of 10% of Local Content; for each sector, dynamic minimum percentages may be set within a time frame of 7 to 10 years. Local Content Services are services provided by Mozambican citizens, or legal entities incorporated under Mozambican Law, that operate in Mozambican territory.

Local Content Plan

Companies operating in Mozambican territory shall present to the relevant authorities, on an annual basis, a Local Content Plan, with the actions and strategies to be developed in the following year. Furthermore, contracting companies  shall also elaborate a Long-Term Plan for a period of 5 years.

The companies shall submit, on an annual basis, to the relevant authorities, a report with a detailed evaluation of the performance of the Local Content Plan.

Local Participation

Local Participation is the subscription, up to 15%, of the share capital of:

• Joint Ventures, to be created between Mozambican citizens or legal entities and the companies contracted by the concessionaires
• Enterprises, through companies, to be created, between foreign and Mozambican citizens or legal entities

The minimum percentage of Local Participation is not transferable to foreign persons or companies

Goods or services to be purchased shall present the correspondent Local Content Certificate. The purchasing entity shall give preference to those goods or services with the highest local production factors. Suppliers may form associations to provide goods or services, provided that the requirements set by the purchasing entity are met.

Mozambican citizens or companies that intend to subcontract other entities to provide for goods or services, shall present a request for that effect.

The monitoring and management of the Local Content  will be carried out by a public entity. This public entity would likewise be responsible for keeping a database on the Certified Mozambican suppliers. Goods and services of Local Content are subject to certification, to be issued by a public entity. The natural persons or companies will be deemed as “Local suppliers” by presenting the correspondent certificate.

This public entity is also responsible for establishing the percentage of Local Content, in accordance with the criteria and procedures to be set by the Mozambican Government.

In the event the goods or services required by the purchasing entity are not available in Mozambican territory, such goods or services may be purchased in foreign territory, provided that previous authorization is granted.

Technology share

The foreign natural persons or companies shall also elaborate a plan to share technology, experience, technical knowledge and skills to the Mozambican natural persons or companies to which they are associated with.

Penalties may be applied if rules are violated through the application of fines or suspension of the supplier for a period of 2 years. Subcontractors are jointly liable for the lack of compliance with the Local Content Law or other legal dispositions currently in force in Mozambique

Although the LCDL is not currently in effect in Mozambique, there are already a number of legal dispositions in force with local content provisions, especially in the Oil & Gas and Mining as well.

Mozambique made its largest discovery of natural gas reserves in the Rovuma Basin (upwards of 100 trillion cubic feet of proven reserves), Northern Mozambique. This placed the country among the world’s leaders in terms of natural gas reserves, increasing its visibility internationally. The Mozambican government has been creating legal instruments to regulate gas exploration activities and has been acquiring foreign investments for the development of the sector.

The Mozambican Petroleum Law and the Mega Project Law have several local content dispositions, such as:

• Concessionaires are required to obtain Mozambican participation in their share capital, in an amount between 5% to 20%, via the stock exchange and on commercial terms
• When the public interest so requires, holders of oil or gas exploration rights shall give preference to the Mozambican Government in the acquisition of petroleum produced in the concession area.
• Mandatory registration of oil and gas companies, on the Mozambique Stock Exchange

There are considerable expectations that the extractives sector will contribute to economic and social development by means of procuring locally produced goods and services and hiring Mozambicans. These projects currently being developed, generally have clear incentives for procuring and recruiting locally.

In its five-year economic plan, the Government of Mozambique indicated agriculture as its top priority. Given that agriculture is Mozambique’s main source of employment, it would seem that food supply to industry catering services should be a local content success case but this is not so.

Three constraints to food supply are often cited as challenges to food producers:

• Quantity: volumes can be significant – at one stage, Vale required 1,500 kg of chicken per day;
• Quality: predictable high quality is paramount; and
• Reliability: delivery at agreed times, and to quality and quantity requirements, is critical.

In each of these three challenges, local producers and catering firms face strong competition from commercial operations in neighboring countries, particularly Zimbabwe and South Africa, even sourcing from “local” companies does not guarantee local products.

Currently, nearly 80% of our population works in the agricultural sector, and it generates about 25% of the GDP. However, due to low productivity levels, too many farmers still live in abject poverty. That can be changed, though. Simply by using fertilizers, farmers can enhance their yield by nearly 40%.

While imported fertilizers are too expensive for the majority of the farmers, Mozambique can create a more affordable option. By building infrastructure to transform natural gas into nitrogenous fertilizers, not only would Mozambique help its farmers, but it would also create local job opportunities. Mozambique could reduce significantly its imports of agricultural products from South Africa and become an affordable source of food for domestic consumption.

Having suppliers nearby reduces lead times and facilitates a closer relationship to shape the development of products, services, and processes. Recruiting from the domestic market would similarly be in the company’s interests, as the cost of such labor is likely to be lower than that of foreign workers, who need to be enticed to move and who may require various kinds of special benefits to compensate for their expatriate situation.