Best practices for best outcomes in Mozambique

Mozambique

Patricia Quirino, tax partner at PwC Mozambique, talks to The Energy Year about supporting local renewables projects and the need for swift action in the development of Mozambique’s LNG resources. PwC is a multinational professional services network that provides audit, consulting and tax and legal services globally.

How does PwC see Mozambique’s economic prospects?
Mozambique’s economy has shown resilience despite challenges. While highly anticipated LNG projects were delayed due to force majeure in 2021, other energy projects, both brownfield and greenfield, have contributed to GDP growth. Estimates from the IMF and the World Bank are positive and suggest potential growth of 6%.
The diversification of Mozambique’s economy beyond LNG projects is a positive sign, with development projects in agriculture, energy, tourism and other sectors contributing to long-term stability. Overall, Mozambique is well-positioned for future success.
Every year, PwC conducts its CEO Survey and Mozambique has participated for the first time with the perspectives of 35 CEOs. The results were positive with 44% of Mozambique CEOs being optimistic about global growth prospects – versus 38% worldwide – despite high concerns about inflation and geopolitical conflicts. Also, 47% of executives in Mozambique expect the number of employees in their organisation to increase by 5% or more in 2024, as opposed to only 39% globally. Regarding leaders’ confidence in the viability of their businesses, 59% of Mozambican CEOs – compared to 53% worldwide – believe that, by maintaining the current course, their business can be viable for more than a decade, without the need for reinvention. This survey provides critical insights into the economic prospects of Mozambique.

What is PwC’s assessment of current and potential LNG projects in Mozambique?
PwC provides both audit and consulting services to LNG projects, and we believe they are highly attractive due to the experience and quality of the operators involved. However, while Mozambique’s geographical location offers advantages for exporting to Asian and European markets, especially considering current global energy challenges, timing is crucial. The LNG market is competitive, and Mozambique faces major competition from Qatar and the US. We shouldn’t miss the opportunity to bring our LNG to market in significant quantities while conditions are favourable.
An interesting opportunity lies in a collaboration with Tanzania, leveraging our shared gas reserves and strong relationships to become bigger global exporters. But swift action is required. Initiating LNG production trials in Area 1 and Area 4 within the next five years is what would most significantly improve Mozambique’s position in the global LNG market.

What consulting services does PwC provide, specifically in Mozambique’s energy industry?
At PwC, we’re committed to providing comprehensive support for businesses in Mozambique. Auditing has always been a cornerstone of our global business, and here in Mozambique, we consistently rank among the top firms. However, businesses need more than just audits and we’ve seen a significant increase in demand for our advisory services, particularly in areas such as digitalisation, corporate restructuring and M&As, all of which are crucial for attracting foreign investment.
My area of expertise is regulatory and tax compliance. I support clients during their entire journey in Mozambique, from the initial establishment of business to potential exit. This includes support in areas such as taxation, exchange control and various related issues.
While offering audit, advisory and tax services is common among consulting firms in the region, I’d like to highlight a recent development that is specific to PwC. We’ve transitioned from the Southern Africa Market and have now integrated the PwC Portugal hub, which includes Angola, Cape Verde, and Portugal.
This move reflects a trend within the industry. By targeting regions with a common language and legal framework, we can enhance our ability to share best practices. The strong relationships among these countries help us to further strengthen our service offerings. The combined experience of Mozambique, Angola and Portugal creates a valuable resource pool, allowing us to better serve clients from jurisdictions around the world.

How can local content legislation contribute to Mozambican economic growth?
PwC is following Mozambique’s local content legislation closely. The draft proposal hasn’t been passed yet, but we appreciate the collaborative approach between regulators and the private sector, which allows for open consultation on important legislation that impacts businesses.
We believe the final legislation should be organic and reflect Mozambique’s current needs. While external expertise is crucial now, especially in specialised sectors, the legislation should also consider the future growth of the Mozambican knowledge base. As Mozambican markets gain strength, the ability of locals to participate more competitively will rise, potentially leading to a need for future adjustments to the legal framework.
Finding the right balance is key. Overly restrictive regulations could hinder growth, and legislation should encourage the transfer of expertise to the local market. As Mozambique develops its domestic capabilities, its requirements will evolve, necessitating a different local content framework in the future.

What role are renewables playing in Mozambique’s energy production?
Mozambique has a wealth of renewable energy sources and plenty of potential for developing them. We witnessed the government’s commitments at COP28 further consolidated in the Government’s policy for the development of renewable energy programmes.
Mozambique is already the region’s largest electricity exporter thanks to the Cahora Bassa Hydroelectric Complex, and we expect even greater export capacity as new projects come on line. The Temane Transmission Project, funded by the World Bank, will be a game-changer. It will address rural electrification and increase domestic electricity consumption, in addition to supporting gas-to-power and LNG projects with domestic market obligations.
PwC is an active supporter of both gas-powered and renewable energy projects, and we’re currently advising four wind and solar projects that are in the construction phase. Mozambique’s vast natural gas reserves must be utilised responsibly, and global operators should follow rigorous social and environmental practices to ensure that hydropower and natural gas resources are utilised sustainably.

The Mozambique Energy & Industry Summit 2024 will take place in Cabo Delgado. How important is this milestone?
In my view, the return of the Mozambique Energy & Industry Summit to Cabo Delgado represents a turning point for the region. The conference’s presence, particularly after a security-motivated hiatus, strongly suggests a collective commitment to ensuring safety and stability. This renewed focus on security will likely foster trust among residents and pave the way for a return to normalcy. Ultimately, a secure environment is vital for the successful resumption of energy projects and the economic development of Cabo Delgado.

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