Formalization is a word that often appears in political speeches, development plans, and training sessions. But on the street—where business actually happens, where banks close at 6 a.m., where clients decide on the spot, standing—formalization still sounds like cost, paperwork, bureaucracy, and unfulfilled promises.
What if we looked at it differently?
Formalization shouldn’t be an end. It should be a beginning.
In Mozambique, almost all companies are small. Over 98% are micro, small, or medium enterprises. Yet most remain informal—and it’s not due to laziness or lack of vision. Often, it’s a matter of survival, responding to what the system doesn’t provide.
For many, informality is the only way to exist. What protects today can stagnate tomorrow. The question we should ask is not: “Why don’t they formalize?” but rather: “What structures do we offer to make formalization worthwhile?”
What I see on the ground, working with SMEs:
- Many entrepreneurs have never seen a contract template, making it hard to submit proposals, protect themselves legally, or negotiate with confidence.
- Talented individuals run small businesses by intuition and daily effort—but lack access to basic tools like an Excel template, cash register, or simple billing plan.
- Businesses with real potential approach large clients… and fall short because they lack an active tax ID, the ability to issue receipts, or a business bank account.
It’s not ambition that’s missing. It’s structured support.
Even when they try to formalize, the shock comes:
- Fees;
- Minimum taxes;
- Mandatory contributions;
- Tax obligations that appear even before the first customer.
In practice, formalizing in Mozambique often means paying before even generating revenue—with fees, licenses, and tax obligations arising from day one.
Rethinking the tax burden: a crucial step to encourage formalization
No microenterprise should be stopped at the first steps because of taxes. Many entrepreneurs take the formalization step with hope but retreat when faced with a system that charges before it supports.
A more effective formalization policy could include:
- Partial or full tax exemptions during the first 12–24 months of formal activity;
- Graduated taxation, adjusted to actual turnover;
- Initial technical support for tax management and minimal obligations, with guidance through Single Service Desks (BAU), IPEME, and, where possible, certified accountants or incubators.
Encouraging formalization is more than registering businesses—it’s about creating conditions for them to survive, grow, and contribute to the real economy.
A possible model: formalize to grow, not to complicate
1. Formalize with purpose
Reduce complexity in the early steps: simplify without infantilizing and communicate clearly the benefits—not just the costs.
Without opportunities linked to formalization, no one is convinced. This goes beyond access to public tenders: small contracts with larger companies, trade fairs with achievable criteria, and realistic financing options all matter.
2. Simple tools that help start
A simple budgeting model. A basic contract template. A sales record in Excel (or even on paper). No platforms requiring stable Wi-Fi or technical English—tools must work even where resources are limited.
3. Grow together: consortia that make sense
I’ve seen small businesses that, together, could respond to a major opportunity. For this, they need legal models that allow trust, collaboration, and sharing—whether through temporary consortia, formal partnerships, or agreements with technical support. What matters is that collaboration is possible—and safe.
4. Measure what matters
It’s not just about counting registered businesses. It’s about how many survive. How many grow. How many go from two employees to five or twenty. How many enter stable supply chains.
And the big projects? And the Government?
Here lies a sensitive—and strategic—point.
When a large company decides to source locally but requires criteria no formal SME can meet, it excludes them before they even begin.
When the government simplifies registration but does not create economic incentives, it only makes something easier that remains unprofitable.
Formalization becomes desirable only when it opens doors—real doors.
We need tripartite partnerships with clear objectives:
- Large companies + SMEs + facilitating entities;
- With targets, pilot contracts, mentorship, and effective technical support;
- And above all, trust—built with transparency.
Formalize to scale is not just registering a company.
It should help structure what already exists: businesses with customers, demand, and potential—but lacking legal, fiscal, contractual, or management foundations to sustain growth.
It should turn individual effort into access to financing, markets, and real contracts.
It should create growth paths with clear rules, minimal accounting, and practical support—instead of relying on improvisation and the goodwill of entrepreneurs.
Mozambique does not lack entrepreneurs. It lacks systems that take them far. And here—between the courage of those who start businesses and the responsibility of those who decide—a new economy can be born.
An economy with local roots and structured wings.
