Investing in Mozambique

Land in Mozambique is the property of the State and, for this reason, cannot be sold, mortgaged or charged. Besides occupation, the only vehicles the law provides for access to land are the right to use and benefit from land (Direito de Uso e Aproveitamento da Terra – “DUAT”) or Special Licenses. Land Use and Benefit Rights (DUATs) are regulated by Law No. 19/97 of 1 October (Land Law) and Decree No. 66/98, of 8 December (Land Law Regulation).

In order to acquire land directly from the State it is therefore necessary to apply for a land use and benefit title or DUAT (Direito de Uso e Aproveitamento da Terra). Foreign individuals can apply for a DUAT if they have been living in Mozambique for more than 5 years. For foreign companies a registration or incorporation in Mozambique is required.

The law defines foreign companies as any company or other institution incorporated under Mozambican or foreign legislation in which more than 50% of the share capital is held by foreign citizens, companies or institutions.

DUAT holders are entitled to transfer infrastructures, buildings and other properties located on the land in question, upon presentation of a public deed preceded by an authorization issued by a competent state entity.

Formal land use by investors is subject to conditions: the application must be accompanied by an approved project (Legislation on Investment) and an environmental license subsequent to an environmental and social impact assessment (Legislation on Environment).

All investments receive a provisional right valid for 2 years, until the project has reached a significant and verifiable phase of implementation. Once a project is cleared, a definitive DUAT is granted and the investor can secure possession for up to 50 years, renewable for a further 50 years.

Under the legal regime established by the Land Law for acquiring and using land rights, the DUAT granted by the State in legal terms is a private right and not easily revoked. It also enjoys the general guarantees of property rights under Article 82 of the Constitution.

The State can only revoke a DUAT in the public interest or need (for example for the implementation of a public infrastructure) but it must pay in advance a reasonable and fair compensation (Constitution, Article 82, number 2, and Land Law Article 18). The DUAT can also be revoked if the right holder is not using the land properly, either with respect to the project for which the DUAT was granted, or with respect to environmental, social and other norms.

In urban areas, the DUAT of a plot passes automatically to the purchaser of a house or building. In rural areas, the purchaser of physical infrastructure or improvements and crops must request authorization from the Government for the DUAT to be transferred into his or her name. The legal regime imposed on rural land gives way to discretionary powers, which are perhaps the critical issue that still impedes the full use of rural DUATs (or at least the investments related to land use) for securing bank credits for agriculture and other agrarian investments.

Investors can also seeking new DUATs on community land, but then they are legally required to undertake a ´community consultation´ in order to verify whether the area they are interested in is free and available. If the land requested by the investor is occupied, the consultation will determine the terms on which the locally held DUAT can be transferred to the investor or the terms by which a partnership between the local community and the private investor will be governed (Article 27, paragraph 3, of the 1998 Land Law Regulation). If the terms of the negotiation are not satisfactory, a community can refuse to transfer its DUAT to investors. The State can only force such transfer on public interest grounds and after conducting a thorough consultation and expropriation process as regulated by the legislation on land, the legislation on territorial planning, as well as the legislation on resettlement for economic purposes.