turnover rates (after 5-7 years of work, staff often leaves for jobs at some of the firms’ clients such as multinationals or banks).

# **3.  A Closer Look at the Markets for Professional Services**

_There is a contrast between business services and social services. In the case of the former, limited supply has translated into high prices of scarce high quality services/high salaries of quality services providers. Other symptoms are: accountants breaking their annual quotas of accounts; mega projects unable to find engineer; top law offices unable to find experienced lawyers. In the case of the latter, limited supply means a low market price even though the social value of the service may be high_ .

_Within all services, markets are vertically segmented. In business services, large firms supply high quality and expensive accounting, auditing, IT, and legal services to large enterprises, whereas small firms or individuals serve some middle enterprises. Most SMEs do not consume these professional services and are consigned to informality. In social services: physicians serve mostly urban areas, whereas non-physicians clinicians serve rural areas; the weakest students gravitate to the teaching profession_ **.**

# **3.1 Accounting and Auditing Services**

Mozambique suffers from an acute shortage of Mozambican accounting and auditing professionals in all segments of the market. For example, at the high end, there are only a couple of Mozambican chartered accountants and less than 50 foreign nationals who are certified accountants working in Mozambique. At the middle and lower end, some individual accountants are responsible for signing the accounts of 30 firms, six times the legal restriction of 5 firms per accountant. Moreover, the available accounting technicians ( _técnico de contas_ ) have variable levels of skill and training.

The market for accounting and auditing services in Mozambique is vertically segmented on both the supply and the demand side. The largest providers of accounting and auditing services in Mozambique are the 100% foreign-owned “big 4” (Deloitte, Ernst and Young, KPMG, Price Waterhouse Coopers).<sup>7</sup> Also operating in Mozambique are other international providers: BDO International, Grant Thornton International (which is only partially foreign-owned) and at least one other smaller accounting firm also partially foreign-owned. Based on enterprise census data from the national statistical institute (CEMPRE 2002) shown in Table 5, as of 2002 there are 69 firms providing auditing and accounting services in Mozambique. Assuming that many of those firms continue to operate today, this implies that in addition to the big 4 and these other 3 partially foreign-owned firms, there are more than 60 domestic accounting firms providing accounting services (plus any new firms that opened between 2002 and 2008). Also, there are about 2000 accountants registered with Mozambique’s Ministry of Finance, some of which work for domestic accounting firms while others provide their

> 7 All these firms have their offices located in Maputo, but KPMG also opened recently a delegation in Nampula, the second largest city in Mozambique.

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