Country Commercial Guide 2006

Chapter 3: Selling U.S. Products and Services
 

• Using an Agent or Distributor
• Establishing an Office
• Franchising
• Direct Marketing
• Joint Ventures/Licensing
• Selling to the Government
• Distribution and Sales Channels
• Selling Factors/Techniques
• Electronic Commerce
• Trade Promotion and Advertising
• Pricing
• Sales Service/Customer Support
• Protecting Your Intellectual Property
• Due Diligence
• Local Professional Services
• Web Resources

Using an Agent or Distributor

An agent can be an advantage in establishing a market presence in Mozambique.  Agents assist in overcoming red tape and in keeping abreast of regulatory changes.  To locate an agent, U.S. firms may contact the Mozambican-U.S. Chamber of Commerce, a local consulting firm, or the Commercial Section of the U.S. Embassy.

Establishing an Office      

Most companies find it advantageous to establish a local office in Mozambique to assist in dealing with local officials and clients.  At a minimum, this involves registration with three ministries: the Ministries of Industry and Commerce, the Ministry of Planning and development and the Ministry of Finance.  Red tape, though reduced, remains a problem, and petty corruption can obstruct the securing of local licenses and permits.  Most U.S. firms hire a consulting firm to assist with the registration process, and small-to-medium-sized businesses experience significant delays.  Prospective investors use the government’s Investment Promotion Center (CPI) for assistance in obtaining licenses and permits.

Franchising        

This business concept has only recently begun to take hold.  The first fast-food franchises from South Africa entered the market in 1997; to date there are only a handful.  The first U.S. fast-food franchise to enter Maputo was KFC (2003).  A Franchising Association has been established.

Direct Marketing       

The local banking, postal, debt collection and customs services are not adequate at this time to support direct marketing campaigns.  Telemarketing may be possible, but could be poorly received by an audience unfamiliar with direct marketing.  Door-to-door sales may have a place, and the Internet may also provide opportunity for direct marketing to a select population, including foreigners.

Joint Ventures/Licensing      

Joint ventures with Mozambican companies are encouraged by the government and can help in dealing with regulatory issues and red tape.

Selling to the Government      

Major government purchases are almost always subject to the procurement rules of the particular donor agency financing the project, since government funds for purchases are often not available. 

Until the end of 2005, major projects managed by individual ministries were often the responsibility of the department that administered the project.  In December 2005 the Council of Ministers approved a long-awaited procurement regulation, which was the result of work since 2002 by government officials, the donor community and the private sector.  As of the drafting of this guide (early February 2006), the regulation is not yet in effect and it is too early to say what its exact impact will be on government tenders.  It is clear, however, that the regulation has built in preferences, especially for small contracts, for companies that are majority-owned by Mozambican nationals.  American companies interested in competing in a Mozambican-government tender should contact the Embassy for further information.

Distribution and Sales Channels     

The line between wholesale and retail is still quite blurred.  The war destroyed colonial distribution channels.  A new national distribution system is coalescing, driven by local manufacturers attempting to distribute their products.  For now, wholesalers are simply retailers who import in volume and sell to other retailers; these retailers (or “micro-retailers”) then distribute these goods in the countryside.  The three principal sales regions are the northern, central and southern sections of the country.  Few traders distribute in all three regions due to the distances involved and limited infrastructure in place.  An estimated 50 percent of imported products are consumed in the three principal cities of Maputo (south), Beira (center), and Nampula (north).  Many U.S. firms service Mozambican distributors or clients from offices and/or warehouses in South Africa.

Selling Factors/Techniques     

Most local businesses lack working capital. Some U.S. exporters have increased sales by offering deferred letter of credit (L/C) terms, thus financing a substantial portion of the shipping/sales cycle. Leasing may also be an option. Two leasing companies exist. Promotional material should be written in the Portuguese language. Few American sales representatives have been able to justify traveling to Mozambique on the sales generated by one trip, although U.S. firms are encouraged to participate in catalog shows and trade fairs by sending promotional material to the Foreign Commercial Service (Johannesburg or Durban) or the U.S. Embassy when a trade fair is identified. Twenty-three U.S. firms participated in the Water Africa 2004 Trade Fair in Maputo (March 2004), and over 100 business leads were generated.  In addition, a general international trade fair is held annually in September in Maputo and is attended by representatives from approximately 20 countries.

Electronic Commerce 

No information is currently available.

Trade Promotion and Advertising    

Government-owned Televisão de Moçambique (TVM) offers coverage in provincial capitals and Maputo. Foreign-based Rádio Televisão Portuguesa- África (RTP-África), Portuguese government-owned TV for Portuguese African speaking countries, and Rádio Televisão Miramar, owned by the Brazilian “Universal Church of the Kingdom of God,” are also seen in Maputo and in other cities by satellite, and accept local advertising. Privately owned “SOICO-TV” (STV), currently broadcasting to the cities of Maputo, Inhambane, Xai-Xai and Beira, also accepts local advertising.  Television advertising may be the most effective medium to reach affluent Mozambicans, the likely purchasers of imported products for both distribution and personal use. According to the ITU, six percent of households in Mozambique have a television (100,000 television sets estimated in Maputo), while 46% have a radio. Television advertising is inexpensive. A 30-second prime time spot at TVM may sell for as little as $210. The only radio station with national coverage is the government-owned Rádio Moçambique. The second most popular Maputo station is Rádio Moçambique’s FM station “Rádio Cidade.” Both stations reach wide audiences. 

Pricing       

Product mark-ups in Mozambique vary greatly by product and geographic location. Duties on imported goods range from zero to 20 percent, depending on whether a product is a primary input, intermediate, or consumer good.  A value-added tax of 17 percent is also assessed at the point of sale.    These rates are in accord with the Southern African Development Community agreement, but apply to imports from all countries enjoying Most Favored Nation (MFN) treatment.  Although the top rate is relatively high, the average duty paid on all imports is now nine percent on a trade-weighted basis, making the Mozambican tariff regime overall one of the lowest in Africa. 

However, as a result of the import duty and transportation costs, prices on consumer goods imported from South Africa are generally significantly higher than in South Africa. Sales and discounts are not typical. Prices of necessities are tempered by the ability of the consumer to afford the item. High end products, like computers, are considerably more expensive than in developed country markets. Inventory carrying costs are high due to high interest rates.

Sales Service/Customer Support     

The provision of service is an important factor in making a vehicle or equipment sale, as local availability of parts and technical expertise is inadequate. Foreign companies are increasingly making inventory and technicians available to service their sales in Mozambique.

Protecting Your Intellectual Property   

There is a small Intellectual Property Rights office in the Ministry of Industry and Commerce.  However, Mozambique’s judicial system is grossly understaffed, inefficient and, at times, corrupt, offering only limited IPR protection.  Please read, “Protection of Property Rights” in Chapter 6 and visit http://www.wipo.int/about-ip/en/ipworldwide/pdf/mz.pdf for more information on PIR in Mozambique.

Due Diligence

Verifying the bona fides of banks, agents, business partners, contractors, sub-contractors, and customers is extremely important in a developing country like Mozambique. A local consulting firm or the American Embassy can help in this regard. Business reputation is important in the small business community in Mozambique, so checking with other local business people is also useful.

Local Professional Services

Legal advice is essential if an investment is being considered. Law firms are not well established, and most lawyers practice as individuals. Many local consulting firms also offer legal counsel services for potential investors. The American Embassy can provide a list of local attorneys on request. The U.S.-Mozambique Chamber of Commerce may also assist in identifying lawyers.

Web Resources       

United States Government Contacts

U.S. Embassy, Maputo, Mozambique
http://mozambique.usembassy.gov

 U.S. Commercial Service
   http://www.buyusa.gov/home/

 Southern Africa Global Competitiveness Hub
   http://www.satradehub.org/

 USDA, Foreign Agricultural Service
   http://www.fas.usda.gov/

 US Foreign Commercial Service (South Africa)
   http://buyusa.gov/southafrica/en/

 US Trade and Development Agency (South Africa)
http://www.ustda.gov/USTDA/USTDA%20By%20Region/subsaharanafrica.htm

Mozambican Government and NGO Contacts

INE – Instituto Nacional de Estatística
  www.ine.gov.mz

IPEX – Mozambique Export Promotion Institute
  www.ipex.gov.mz

CPI – Mozambique National Investment Promotion Agency
  www.cpi.co.mz

Banco de Moçambique –
  http://www.bancomoc.mz/ 

CTA - Confederação das Associações Económicas de Moçambique
  www.cta.org.mz

U.S. – Mozambique Chamber of Commerce
  www.ccmusa.online.co.mz