“Formalization” — it’s a word that appears often in political speeches, development plans, and training programs. But on the street — where business actually happens, where market stalls close at 6 p.m., where customers decide on the spot — the word “formalize” still sounds like cost, paperwork, hassle, a promise that never delivers. But what if we looked at it differently?
Formalizing shouldn’t be the end goal. It should be the beginning.
In Mozambique, almost all companies are small. Over 98% are micro, small, or medium enterprises. Yet most remain informal. And it’s not out of laziness or lack of vision! Often, it’s about survival, about responding to what the system doesn’t provide. For many, informality is the only way to exist. But what protects you today may hold you back tomorrow.
So perhaps the question should change. Instead of asking, “Why don’t they formalize?”, we should ask, “What structure do we offer to make formalization worthwhile?”
Here are a few things I observe on the ground when working with SMEs:
- Many entrepreneurs have never seen a contract template — which makes it difficult to submit proposals, protect themselves legally, or negotiate with confidence;
- Talented people manage small businesses with intuition and daily effort, but without access to simple tools like an Excel template, a cashbook, or a basic invoicing plan;
- Promising businesses knock on the doors of big clients but are turned away because they lack an active NUIT, the ability to issue receipts, or a company bank account.
It’s not ambition that’s missing — it’s structured support. Because even when entrepreneurs try to formalize, they’re hit with shock: fees, minimum taxes, mandatory contributions, and fiscal demands that appear before their first client does.
In practice, formalizing in Mozambique often means starting to pay before you start to earn — with fees, licenses, and tax obligations that appear right at the outset.
Encouraging formalization is more than registering businesses; it’s about creating conditions for them to survive, grow, and contribute to the real economy.
Rethinking the tax burden: a crucial step to encourage formalization
No microenterprise should be held back in its early steps because of taxes. Many entrepreneurs take the leap toward formalization with hope, only to step back when they realize the system starts charging before it starts supporting.
A more effective policy to promote formalization could include:
- Partial or full tax exemption for the first 12–24 months of formal operation;
- Graduated taxation, adjusted to actual revenue levels;
- Initial technical support for tax management and minimum obligations, with follow-up from BAU (One-Stop Service Desks), 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 first steps: simplify without infantilizing, and communicate clearly what entrepreneurs gain — not just what they pay. If there are no tangible opportunities linked to formalization, no one will be convinced.
And it’s not only about access to public tenders — it’s about small contracts with larger companies, trade fairs with real benefits, and realistic financing lines.
2. Simple tools that help businesses start
A basic budgeting template. A simple contract model. A sales register — even handwritten. No platforms that require stable internet or technical English. Tools that work where resources are still limited.
3. Growing together: meaningful consortiums
I’ve seen small companies that, together, managed to seize big opportunities. But to do that, they need legal frameworks that enable trust, collaboration, and sharing — whether through temporary consortiums, formal partnerships, or supported agreements. What matters is ensuring that collaboration is possible — and safe.
4. Measure what truly matters
It’s not just about counting how many businesses are registered. It’s about knowing how many survive, grow, expand from two to five, twenty employees, and enter stable supply chains.
And what about large projects? And the government?
Here lies a sensitive — and strategic — point. When a large company decides to buy locally but demands requirements that no formal SME can meet, it excludes them before they even start. When the government simplifies registration but doesn’t create economic incentives, it only makes something easier that still doesn’t pay off.
Formalization only becomes desirable when it creates access, when it opens real doors.
What we need are tripartite partnerships with clear objectives — large companies + SMEs + facilitating entities — with measurable goals, pilot contracts, mentoring, and real technical assistance. Above all, we need trust — built through transparency.
Formalizing to scale isn’t just about registering a business. It should structure what already exists — businesses with customers, demand, and potential — but lacking a legal, fiscal, or contractual foundation, or a clear management model to sustain growth.
It should allow individual effort to translate into access to financing, markets, and real contracts. And it should create growth pathways with clear rules, basic accounting, and practical support — instead of relying solely on improvisation and goodwill.
Mozambique doesn’t suffer from a lack of entrepreneurs. It suffers from a lack of systems that help them go far. And it’s here — between the courage of those who build and the responsibility of those who decide — that a new economy can emerge: one with local roots and structured wings.
