Trading Across Borders in Mozambique

The ease of trading across borders is a significant challenge, with various stakeholders contributing to the complexity of the process. Documents preparation accounts for 64% of the time spent on trading across borders, followed by customs clearance and technical control at 11%. Ports and terminal handling account for 18%, while inland transportation and handling account for 7%. The import time breakdown reveals that it takes 23 days to export goods from Mozambique, which is higher than the average time taken by other countries in the region. The cost of exporting is also above the OECD average and 2 times higher than in Mauritius. The number of documents required to export is two times higher than in Madagascar and Seychelles. The ease of importing is also a challenge, with the number of documents required to import being two times higher than in Seychelles and Tanzania. The cost of importing is above the OECD average and 3 times higher than in Mauritius. The introduction of scanning technology in 2006 aimed to enhance security, ensure revenue protection, control contraband, and facilitate trade by speeding up the customs clearance process. However, scanning charges in Mozambique are extraordinarily high due to the high cost of procuring and operating the scanning equipment. The concession holder charges a fee to the shippers to recover the cost of the scanning operations. There is a need to subsidize the installation of equipment in non-profitable areas. The concession for scanning services was not based on a competitive and transparent bidding process. The concession holder, KUDUMBA, has interests associated with the government and persons involved in trade transactions. The outsourcing of scanning services does not lead to a reduction in costs, as all shippers pay fees, including empty containers and bulk cargo, irrespective of whether the shipment is inspected. The Treasury should bear at least part of the cost, as the decision to introduce scanners was driven by security and revenue protection concerns. Pre-shipment inspection (PSI) is mandated by law for specific commodities on the "positive" list, including used vehicles, chemicals, pharmaceuticals, detergent, and some food products. PSI takes 15 days, and Mozambique and Angola are the only SADC countries with PSI. PSI is a control method for checking goods' quality and price while clients buy from the suppliers. It was introduced in Mozambique in 1998. The debate on PSI reveals that Mozambican Customs believes PSI increases revenue collection by aiding correct valuation of imported goods. However, there is no consensus within the private sector, with some advocating the elimination of PSI and others seeing it as a protectionist mechanism. PSI is a non-tariff barrier, and valuation is a legitimate Customs responsibility. An exit strategy should be incremental, commodity by commodity, with clear deadlines. The capacity of Customs should be built to address the problem of undervaluation directly on all commodities. The Port and Terminal Handling (TEEN) system was introduced to decongest the old terminal and improve port terminal efficiency. However, the mandatory use of TEEN has led to high terminal charges, inefficiency, and weak Public-Private Partnerships (PPPs). The concession to NCL-Africa was not based on a competitive and transparent bidding process. The sector should be liberalized, and investment in port terminal facilities should be increased to make Mozambique a regional hub. The economic effects of high transportation costs include the loss of transit trade, adverse effects on export incentives, and the development of ports and transit corridors. High transportation costs also strengthen the perception of uncertainty in the business environment, leading to less investment.