Corporate Governance Developments in Mozambique

May 2005

The concept of corporate governance was introduced in Moçambique in 2001 when a team of international consultants made an assessment of business practices in the country .

The focal point for corporate governance in Mozambique is the Confederation of Business Associations (CTA) , which is an organization that has 64 associated members. Since the establishment of CTA back in 1997 the organization has been striving for proceeding into more of an umbrella organization that focuses on lobbying with the Government and providing services to the various private sector associations in the country .

The Commercial Code in Mozambique provides guidelines and rules for corporate governance, but is not a corporate governance code .

 At the same time, while a number of international audit firms are represented in Mozambique, due to the lack of trained accountants and auditors this remains an area of concern and deficiency .

An area of active oversight, that encourages good corporate governance as it is interpreted in Mozambique, is the random audit by the Finance Ministry to ensure conformity with fiscal regulations .

The increasing participation of Mozambique in the international economy due to the growing share of foreign owned companies is also beginning to bear influence on national strategies to improve the business climate, and which in one way or the other has implications for corporate governance practices .

CTA is finalising a corporate governance and corporate citizenship project to promote the concepts as well as create a code of conduct among other issues.

The Government of Mozambique has embarked on a major public sector reform programme for the country enshrined within the Global Strategy for Public Sector Reform (GSPSR), which is a programme scheduled to run from 2001 to 2011.

The first phase of the programme runs from 2001 to 2005, and is aimed at creating the conditions for the effective transformation of the public sector, with the establishment of the instruments and the mobilisation of the resources needed to set in motion the more profound changes of the second phase, which runs from 2005 to 2011.

The scope of the public sector reform is very broad and includes: the central government (ministries), provincial governments, local State bodies, municipal authorities, public enterprises, electoral and judicial administration, institutes and public agencies.

The 2000/2001 periods were devoted basically to laying the groundwork, which consisted in the creation of institutional provisions for coordinating the reform, as well as formulating its strategy. This included:

(a) The creation of the Inter-ministerial Committee on Public Sector Reform (CIRESP) by Presidential Decree 5/2000, to be the governmental body responsible for the political co-ordination of the Reform; and

(b) The creation of the Technical Unit for Public Sector Reform (UTRESP) by Decree 6/2000 of the Council of Ministers, to assist CIRESP with the technical coordination and assistance, integrated planning, monitoring and evaluation of the reform process.

The Report on the Implementation of the Global Strategy for Public Sector Reform 2001-2004 was released in 2004. The Report analyses the implementation of the GSPSR five years after the process was set in motion (from 2001–2004).

The Report inter alia covers a review of the reform at both central and provincial levels. These include:

(a) Implementation of the quick-impact programmes;

(b) Rationalisation and decentralisation of service delivery structures and processes, including:

(i) carrying out a functional analysis and preparing restructuring plans in the ministries,

(ii) policy of Decentralisation and Devolvement, and

(iii) the establishment of a Performance Improvement Facility (PIF);

(c) Improvement in the process of public policy formulation and monitoring, particularly definition of the Macro-structure of the Central Government;

(d) Professionalisation of public servants involving:

(i) design of an Integrated Personnel Information System,

(ii) preparation of a medium-term wage reform strategy for the public sector,

(iii) implementation of a pilot wage reform,
(iv) implementation of the Public Administration Training System (SIFAP), and

(v) the revision of the Public Service Code;

(e) Improvement in financial management and reporting:

(i) implementation of the System of State Financial Administration (SISTAFE),

(ii) adoption of New Rules of Procurement in the Public Sector, and

(iii) creation of an Association of Accountants as a measure to strengthen financial management in the country, and which should be done with assistance from large firms with broad experience in the field that are currently being selected;

(f) Good governance and combating corruption. Activities carried out hereunder include:

(i) revision of electoral legislation,

(ii) approval of a strategic plan for the justice sector,

(iii) approval of the general outline of a plan of action to combat corruption,

(iv) preparation of a draft Code of Ethics for public servants in management and leadership positions,

(v) revision of the criminal legislation relating to corruption, in the context of legal reform, for which an Inter-ministerial Committee on Legal Reform (CIREL) and a Technical Unit on Legal Reform (UTREL) have been created,

(vi) approval of an anti-corruption law by the Assembly of the Republic, and

(vii) preparation and launch of a national baseline study on governance and corruption;

(g) Reform management, under which activities undertaken include:

(i) the creation of Reform Units in the ministries and provinces,

(ii) strengthening UTRESP for better coordination and technical assistance to the reform process,

(iii) mobilisation of financial resources from various partners for the implementation of the reform, notably the World Bank, UNDP, Ireland, the United Kingdom (DFID), Sweden (SIDA), Denmark (Danida) and Norway (NORAD); and

(h) An evaluation of challenges to the programme, such as:

(i) the human factor and resistance to change,

(ii) the capacity of technical units to plan, monitor and co-ordinate the reform activities in sectors and provinces,

(iii) integrating reform activities into normal planning processes for sectors, and
(iv) the absence of mechanisms for continuous evaluation of impact of reform.

In addition, the Report covers an analysis of the principal aspects arising in the process of implementation and includes recommendations and the future prospects of the reform including updating and implementing the strategy to combat corruption.

Source: Pan African Consultative Forum on Corporate Governance