Africa-focused agricultural and forestry company Obtala announced on Wednesday that its forestry subsidiary, Argento Mozambique has been awarded CPI status by the Mozambican authorities entitling it to various tax benefits and protections in return for inward investment from the company's subsidiary Argento Continental Corporation.
The AIM-traded firm said CPI is a government institution with a mandate to attract and facilitate the establishment of private domestic and foreign direct investment in Mozambique.
Companies operating under CPI status also have the advantage of non-tax benefits including insurance services specifically to offset investment risk, VAT exemption on domestic acquisitions, and legal protections and compensation against expropriation with international bodies.
To satisfy qualification for CPI status Argento is required to implement a phased investment plan of $3m over a five year period.
The award covers all operations within Mozambique and allows Argento to apply for Industrial Free Zone status with Mozambique's Office for Accelerated Development Economic Areas (Gazeda).
Gazeda established a duty free zone in the district of Nacala, Nampula province in 2007 which services the export of Obtala's timber to international markets via Nacala Port, and the board said achieving IFZ status in Nacala would lead to further enhanced tax incentives.
The company added it is in continued talks with investors regarding inward investment via the previously announced Argento Preference Share, with investor due diligence trips scheduled to its African operations in November.
"The award of CPI status by the Mozambican authorities is a highly significant and welcome development as we seek to bolster our production capabilities within the country," said company chairman Miles Pelham.
"We anticipate that the forestry division will drive revenue expansion and as such CPI tax benefits should have material future impact on our bottom line."
Pelham explained that the exemption from VAT will reduce the level of capex required to bring Obtala's forestry assets into full production.
"This award underlines our already strong commitment to Mozambique.
"As well as providing inward investment we anticipate that our activities will have significant positive social impact through job creation, training and upskilling of local labour and a sustainable approach to forestry operations."