Maputo, Mozambique (ILO News) -

“Tell me what the gains will be if I am formal,” said one representative of a small business association during a knowledge sharing workshop to support the formalization of enterprises in Mozambique. The event took place in Mozambique), where approximately 95 per cent of the working population operates in the informal economy according to ILO estimates.

The workshop was held on 26 May 2023 and aimed to facilitate an exchange of information among a wide range of stakeholders in Mozambique on concepts, challenges and drivers of informality among small enterprises in the country, and to explore fiscal and non-fiscal incentives that could support them to enter and stay in the formal economy. It was organized under a project supported by the European Union and Organization of African, Caribbean and Pacific States, implemented with the United Nations Development Programme.

Technical sessions were held on concepts, definitions and data on informality in Mozambique, as well as on the ILO’s integrated approach to support the formalization of enterprises, which includes making it easier to register one’s business and comply with regulations, making it more attractive and feasible to formalize and developing appropriate compliance strategies adapted to the needs and characteristics of informal enterprises.

Workshop participants also discussed the drivers of informality in Mozambique and the role of incentives and support schemes in facilitating the transition to formality. Some of the key challenges that contribute to the persistence of informality in Mozambique are complex and costly formalization processes, lack of understanding of the benefits of being a formal enterprise, and structural barriers such as lack of investments to general formal jobs. Participants identified existing incentives and support schemes to help small enterprises, such as a One-Stop-Shop for business, tax and licensing procedures and government programmes that support women and youth empowerment.

Representatives from the Mozambique Association of Operators and Producers of the Informal Sector and the Association of Informal Sector Workers also shared that their organizations negotiated with banks to create special conditions for their members to allow them to open bank accounts in a simplified way, and gain access to a credit line. It was agreed that developing the right fiscal and non-fiscal incentives and support schemes is essential to convince business owners to formalize their enterprises.

A wide variety of stakeholders participated in the workshop, including government institutions such as the Labour Consultative Commission, the Ministry of Labour and Social Security, the Institute for the Promotion of Small and Medium Enterprises, the National Institute of Statistics, and Mozambique’s Tax Authority, along with employers’ and workers’ organizations and representatives of informal sector businesses and workers. The Mozambique Central Bank and the development financial institution, GAPI, also participated in the workshop.

The workshop was facilitated by Mr Antenor Pereira, ILO Consultant based in Mozambique, along with Ms Judith van Doorn, Specialist on Enterprise Formalization, and Mr Kareem Bayo, Technical Officer, both based at ILO’s Headquarters in Geneva.

Next Steps

After the workshop, the next steps under the project include the development of an action plan on enterprise formalization, the design and implementation of incentives and support schemes for businesses to formalize and measures to enhance financial inclusion for formalization and business growth.