VZCZCXRO4403
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #1251/01 3470719
ZNR UUUUU ZZH
R 120719Z DEC 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 9712
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0313

UNCLAS SECTION 01 OF 02 MAPUTO 001251 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD PREL PGOV MZ
SUBJECT: CAFE SOL, AN EXAMPLE OF COMMERCIAL ADVOCACY 
 
REF: A. MAPUTO 1010 
 
¶1.  (SBU) SUMMARY:  Mozambique is ranked 141 out of 181 
economies on the World Bank's "Doing Business8 report (Ref 
A), which means that Embassy Maputo's outreach to U.S. 
companies and investors in this challenging business 
environment is especially important for their success.  The 
Mission plays a key role in acting as a conduit between the 
U.S. business community and the GRM, particularly with 
small-to-medium sized businesses that often do not have the 
same access to the GRM as large enterprises.  One of the most 
daunting challenges to foreign investment in Mozambique is 
navigating the difficult and opaque tax regulations in the 
country.  The mission plans to continue its efforts to assist 
the GRM in streamlining the tax code, and making accounting 
regulations and processes more simple.  Cafe Sol, a small 
American expatriate-owned coffee shop, illustrates the 
rewards and obstacles a small business operating in 
Mozambique faces and the greater role the U.S. Embassy can 
serve to the business community.  END SUMMARY. 
 
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CAFE SOL ) A HOBBY TURNED BUSINESS 
---------------------------------- 
 
¶2.  (U) In May of 2007, three American expatriates in 
Mozambique turned their passion for coffee into reality by 
opening Cafe Sol in Maputo, the city's first premium coffee 
roaster.  This small premium coffee shop in an upscale 
neighborhood of Maputo serves as the marketing arm for a 
retail and wholesale coffee roasting business, which has 
already expanded its product line, featuring their coffees in 
fine hotels and supermarkets across the country.  The 
business currently employs approximately 15 Mozambicans and 
generates a small profit.  In August of 2008, Cafe Sol gained 
a license to place the Made in Mozambique trademark on their 
coffee which allows them greater notoriety, and hopefully 
access, to the domestic market (though the unroasted beans 
are not sourced domestically).  Currently, Cafe Sol sells 
their coffee in a variety of specialty shops and locations in 
three major cities in Mozambique.  The owners plan to expand 
their distribution network, eventually exporting their 
product. 
 
-------------------------------- 
CHALLENGES IN TAX AND ACCOUNTING 
-------------------------------- 
 
¶3.  (SBU) In late November, the owners described to Econoff 
the difficulties of operating a business in Mozambique, which 
requires persistence and patience.  The owners said that they 
believe that running a small operation is even more difficult 
than large-scale businesses, many of which have special tax 
benefits and assistance from the GRM, since large scale 
foreign investors in Mozambique have the capacity to generate 
millions of dollars in tax revenues-- to say nothing of job 
creation.  The owners of Cafe Sol stated that among their 
biggest challenges is navigating Mozambique's Byzantine tax 
code.  They are consistently surprised by burdensome and 
unforeseen taxes that hinder their ability to generate a 
profit and expand their business.  For example, the GRM 
levies a combined corporate income tax of up to 32 percent in 
Mozambique, levied in a series of up to 37 payments per year. 
 This is compared to South Africa where corporate tax rates 
are 29 percent spread over 11 payments, and the SADC average 
of 21.7 percent over 7 payments. 
 
--------------------------------------------- -- 
BUSINESS IN MOZAMBIQUE: DIFFICULT BUT REWARDING 
--------------------------------------------- -- 
 
¶4.  (U)  Although operating in the Mozambican business 
environment can be difficult, the owners explained that the 
rewards outweigh the negatives.  For example, Cafe Sol owners 
enjoy being leaders in the expatriate business community, 
have assisted in the development of the Overseas Security 
Advisory Committee (OSAC--a security forum for American 
business people living in Mozambique), and assisted the 
U.S./Mozambique Chamber of Commerce (CCMUSA) by interacting 
with potential U.S. investors interested in establishing 
themselves in Mozambique.  Equally important, their business 
provides a socially responsible model for domestic companies. 
 According to several employees, Cafe Sol is one of the best 
places to work in Maputo.  At Cafe Sol, Mozambican employees 
receive a competitive wage, including tips, and engage in a 
profit sharing program, while receiving on-the-job 
professional training. 
 
-------------------------------- 
EMBASSY ASSISTS SMALL BUSINESSES 
-------------------------------- 
 
MAPUTO 00001251  002 OF 002 
 
 
 
¶5.  (U) Post assisted Cafe Sol by coordinating several 
meetings with appropriate members of the Government of 
Mozambique (GRM) with an end result of allowing the owners to 
gain licenses to sell their product in Mozambique.  In 
addition, Post has raised the business community's concerns 
with the GRM regarding the heavy corporate tax system, which 
hinders business development.  The Department of Treasury's 
Office of Technical Assistance (OTA) continues its programs 
in Mozambique to train and assist the GRM in 
professionalizing its tax authority and streamlining taxation 
systems, with an eye on additional simplification of the tax 
code.  Through the USAID-led Private Sector Working Group 
(PSWG), and USAID-funded business association umbrella group 
CTA, the Mission continues to look at ways to convince the 
GRM to improve its business climate, including taxation.  As 
Cafe Sol continues to develop, Mission Maputo will support 
the owners, plans to export their coffee in the region, and 
potentially to the U.S. under AGOA. 
 
--------------------------------------------- ---- 
COMMENT: EMBASSY SUPPORT HELPS THE LITTLE GUY TOO 
--------------------------------------------- ---- 
 
¶6.  (SBU) Small U.S. businesses operating in Mozambique often 
require more assistance from the Mission in delivering their 
message and concerns to the GRM.  The Embassy plans to 
intensify its efforts to advocate and assist the GRM in 
establishing a more efficient business climate, including tax 
systems for foreign enterprises in Mozambique via CTA and the 
CCMUSA, as well as through the Department of Treasury's OTA. 
We maintain a constant message that attracting U.S. 
investment means attracting responsible business partners 
that keep high standards for social responsibility, 
sustainable economic growth, and an especially good work 
environment for employees.  The Embassy continues to work 
closely with current and potential U.S. investors, like Cafe 
Sol, to send the message to the GRM that improving the 
business climate in Mozambique will result in a win-win 
situation, where profits for U.S. companies will result in 
both tax revenue generation and local employment generation, 
significantly improving living standards for Mozambicans 
throughout the country. 
Amani