Country Profile MOZAMBIQUE
About Mozambique
Mozambique became independent in the mid 1970s, but the country’s development was hindered through economic dependence, a severe drought and prolonged civil war until the mid 1990s. A new constitution was established in 1990, allowing multiparty elections and a free market economy. In late 2004, Mozambique underwent a delicate transition, as Chissano stepped down after 18 years in office. The newly elected president Guebaza promised to continue the sound economic policies that have encouraged foreign investment.
Since 2013, a low-intensity insurgency by the Mozambican National Resistance (RENAMO) has been occurring, mainly in the country’s central and northern regions.
Mozambique is a member of the Non-Alignment Movement and ranks among the moderate members of the African block in the UN. Additionally, Mozambique is a member of the African Union, the Southern African Development Community (SADC), the Organisation of the Islamic Conference, the Commonwealth of Nations and the Community of Portuguese Language Countries (CPLP).
Economy
Overview
The vast majority of the country’s work force continues to be employed in subsistence agriculture. Mozambique’s substantial foreign debt has been reduced under IMF’s HIPC and Enhanced HIPC initiatives, and is now at a manageable level. Generally, Mozambique is one of Africa’s strongest performers, with an average annual rate growth of 6% to 8% in the last decade.
Trade
Mozambique is a member of the SADC — The SADC free trade protocol is aimed at making the Southern African Market more competitive, by eliminating tariffs and other trade barriers.
In recent years, the value of imports has surpassed that of exports by almost 2:1. Support programs provided by development partners have largely compensated for shortfalls in payments of balance. The long term outlook for exports is promising, since a number of foreign investment projects should lead to substantial export growth and a better trade balance.
Reforms
In 1987, the Mozambican government embarked on a series of macroeconomic reforms designed to stabilize the economy. These reforms combined with donor assistance have led to a dramatic improvement in the country’s economic performance. Inflation was brought to single digits in the late 1990s and fiscal reforms have improved the government’s revenue collection
Investment Climate
Overview
According to the latest World Bank reports, Mozambique is ranked 138 among 190 economies in the ease of doing business, with a score of 54 which is 4 points above the regional average in Sub-Saharan Africa. A Deloitte 2017 report called the country’s economic prospects positive, with inflation expected to be below 10% and a predicted GDP growth of 5.8% according to the Governor Central Bank.
Policies Towards FDI
- The government of Mozambique is open to foreign investment, which it views as means to drive economic growth and promote job creation, with the Investment Promotion Centre (CPI) being investor’s primary contact to the government.
- In 2017, the Council of Ministers merged CPI, the Office of Economic Zones for Accelerated Development and the Institute for the Promotion of Exports, creating the Agency for Investment Promotion and Exports. The new CPI assists both local and foreign investors in obtaining licenses and permits.
- Mozambique’s Law on Investment from 1993 and its related regulations govern national and foreign investment, however there are almost no restrictions on the form or extent of foreign investment.
- Generally, Mozambique’s Investment Law and regulations do not make distinctions based upon investor origin, nor do they limit foreign ownership or control of companies. The government additionally recognises and enforces the protection of private property.
Key Sectors in Mozambique
Sector I: Gas and Oil
Recent oil and gas discoveries across East Africa, most notably in Mozambique and Tanzania, have seen the region emerge as a new player in the global oil and gas industry.
The discoveries were expected to drive billions of dollars in annual investment to the region over the next decade. According to BMI estimates, the finds in the last few years are more than that of any other region in the world, and the discoveries are expected to continue for the next few years.
As liquefied natural gas (LNG) contracts remain heavily indexed to oil, the fall in global oil prices poses significant downside risk to gas production projects. Persistent oversupply in the oil market continues to put downward pressure on oil prices. Industry research estimates that an oil price of USD70–80/bbl would be needed for the LNG gas projects just to break even. Companies such as EDF, Tokyo Gas and Centrica signed purchase agreements ranging from 15 to 20 years.
Sector II: Agriculture and Food Security
Mozambique has a variety of regional cropping patterns with agro-climatic zones ranging from arid and semi-arid to the sub-humid zones and humid highlands. The most fertile areas are in the northern and central provinces. Food crop production is the most important agriculture sub-sector accounting for around 80% of the cultivated area. Mozambique’s diverse soil and climate conditions, influences by variations in latitude, altitude, typography and the proximity to the coast, offer a wide range of production opportunities, meaning agricultural potential is high despite frequent droughts and floods. Water resources are relatively plentiful and the country is traversed by a number of rivers and enjoys considerable mineral reserves. Maize and cassava are the major staples, other crops include sorghum, millet, rice, beans, groundnut, sweet potato and a wide variety of vegetables. Main cash crops are tobacco, cotton and tea.
Nevertheless, Mozambique is a highly indebted, poverty-stricken country. The United Nations Development Program estimates that around 64% of the Mozambican population is food insecure, with prevalence higher in the southern regions (75%). With more than 80% of its population dependent on agriculture for livelihood, Mozambique’s food security can be extremely volatile. Large-scale productive farming is virtually non-existent.
Uhusiano Capital
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