The Mozambican Parliament approved, this Friday (8), in general terms, the Local Content law and the law establishing the Development Bank of Mozambique (BDM), an institution that will begin operations with a share capital of 32 billion meticais (around 428 million euros).
According to Lusa, the bill creating the BDM was approved in general terms and by consensus by all four parliamentary benches: the Liberation Front of Mozambique (FRELIMO, the majority party), the Optimistic People for the Development of Mozambique (PODEMOS, the main opposition party), the Mozambican National Resistance (RENAMO, the third political force), and the Democratic Movement of Mozambique (MDM, the fourth force).
In its justification, the government stated that the bank’s capital will be subscribed by the State, but multilateral banks and development institutions may hold up to 49%. The Executive explained the creation of the institution as necessary for “industrialisation, productive diversification, and the reduction of regional inequalities.”
It also argued that existing credit institutions focus on the short term and low-risk operations, making them insufficient for infrastructure and energy financing.
In the same session, Parliament also unanimously approved the Local Content law, which requires large-scale oil and gas exploration projects to hire national goods, services, and labour, with penalties of up to 300,000 US dollars.
The government explained that the law establishes progressive obligations for the use of national goods, services, labour, and capital, promoting economic diversification, the growth of Mozambican companies, and the creation of skilled jobs—conditions considered essential to ensure that wealth generated by the extractive sector translates into lasting and effective social welfare.
The law also makes it mandatory for megaprojects to ensure the training and development of the national business sector, including technology transfer.
According to the Executive, the law responds to the need to increase national participation in oil and gas projects, ensure that natural resources contribute to economic and social development, and prioritise national suppliers in the petroleum sector.
It also aims to promote national employment and encourage strategic partnerships between local and foreign companies.
A Local Content Authority will be created to regulate, monitor, and evaluate the development of local content, ensuring alignment with national development priorities, as well as sanctioning entities that fail to comply with the law.
This body will certify national companies that supply goods and services, ensure exclusivity in sectors with strong local capacity, and allow contractual flexibility where national capacity is insufficient.
According to the government, the fiscal impact of implementing the law is estimated at 1.6 million US dollars.
Violations include failure to purchase goods or hire services with local content, contract splitting, omission of local content clauses in contracts, and failure to submit annual procurement plans on time.
Penalties range from loss of tax benefits, cancellation of concession contracts, exclusion from future bidding processes under petroleum and local content regulations, and fines ranging from 50,000 to 300,000 US dollars.
Mozambique currently has three approved megaprojects for the development of liquefied natural gas (LNG) reserves in the Rovuma Basin, considered among the largest in the world, offshore Cabo Delgado.
Source: Diário Económico
