Sam Jones speaks to STV about challenges of firm formalization in Mozambique

On 10 December 2024, Sam Jones, UNU-WIDER Research Fellow and Resident Advisor at the Inclusive growth in Mozambique (IGM) programme, was interviewed in the STV programme Semanário Económico on the challenges of firm formalization in Mozambique.

Drawing from the research carried out under the IGM programme, in particular on the survey on manufacturing sector firms (IIM 2022) and the recent research brief reflecting on the benefits of firm formalization in Mozambique , Jones highlighted the high share of informal enterprises in the Mozambican economy and the importance of not seeing formality as a dichotomy (formal/non-formal) but rather as a continuum to better address the challenges firms encounter in the formalization process.

In terms of obstacles, he mentioned the complexity of the regulatory environment and the high costs associated with formalizing a business, which, according to the studies, deter many entrepreneurs from taking the necessary steps to operate legally. These financial burdens, combined with limited access to funding and resources, make it difficult for many businesses to thrive in the formal economy.

As a solution, Jones mentioned digitalization as a tool to promote financial inclusion and overcome some of the above-mentioned challenges, referring to technology as ‘a great ally in reducing costs and simplifying the registration process’. He further called for focusing on companies with the greatest growth potential and giving them incentives, such as easier access to financing and management training. Efforts to formalize micro and small firms that gain very little from the process and contribute very little terms of tax, draw away resources from areas which could bring along bigger and more sustained development of the private sector in Mozambique.