Mozambique: Reaping The Dividends of Peace

Capital(s):     Maputo
Population:     19,406,703 (2007)
Area: 801,590 Km²
Currency:      1 metical = 100 centavos; plural meticais                       
Language(s): Portuguese      

Time Zone:    GMT+2h00                                                      
ISO Code:      MZ
Dialing Code: +258

Mozambique is an independent Republic which lies on the south-east coast of Africa and forms part of the Southern African region. The capital city is Maputo. Other major towns are Beira and Nampula and the ports of Quelimane and Nacala.

The official language is Portuguese. Mozambique has a centrally planned economy although the government is instituting free-market reforms. The local currency is the Metical (plural meticais). (US$ / Metical - current exchange rate).

Mozambique's first democratic elections were held in October 1994, under close international scrutiny. Frelimo’s Joaquim Chissano (who had succeeded Machel following the latter’s death in an air-crash in 1986) was elected president on 53% of the vote. Renamo’s Afonso Dhlakama received 35%. Frelimo won 129 of the 250 seats in parliament and Renamo 112; a coalition of smaller parties, the Democratic Union, won the 9 remaining seats.

Both presidential and parliamentary elections were held again in December 1999, and Chissano was re-elected with 52% of the vote, against Dhlakama's 48%. Frelimo won 133 seats in parliament and the Renamo-Electoral Union coalition of eleven parties 117. In the most recent elections, held in December 2004, Chissano’s successor, Armando Guebuza, won 64% of the vote and Dhlakama 32%. Frelimo took 158 seats in parliament and Renamo took 92.

Renamo has repeatedly criticised the electoral process, and boycotted municipal elections in 1998. But international observers – although noting irregularities – have declared national elections to be free and fair; or at least reflecting the will of the electorate. Observers found the 2004 elections to be the least satisfactory since 1994. Frelimo’s inroads into Renamo’s central region heartlands fed widespread suspicion of fraud, although Renamo’s legal challenge has not been successful.      

Economy

GDP: US$8.132 bn (2007 estimate)
GDP per head: US$333 (2005)
Annual GDP Growth: 7.5% (2007 estimate)
Inflation: 8% (2007 estimate)

Major Industries: aluminium (processing only); natural gas; hydro power, prawns and fish (45%); cotton (2%); cashew nuts (9%); timber, sugar and copra (14%); agriculture

Major trading partners: (exports) Spain, South Africa, US, Belgium, Italy; (imports) South Africa, Australia, Portugal.

Mozambique’s economy was devastated by decades of conflict. Its high growth rate over the last decade has been from a very low base, and has been greatly dependent on capital-intensive investment by the private sector, and on the strong South African economy. Neither of these influences have favoured smaller businesses, or the central and northern regions, raising concerns about the distribution of wealth. Problems with governance – corruption, legislation and revenue collection in particular – have also inhibited economic development. The government has initiated widespread reforms to alleviate this, particularly in banking, the management of public finance and the collection of customs dues.

Agriculture employs 83% of the population and until recently accounted for 80% of exports. Minerals make up an increasing share of exports, and recent investment in Mozambique’s mineral and gas deposits may increase their contribution to the economy. The Mozambican economy also benefits from the transit of goods to and from the African interior. Investment in infrastructure for the Beira, Nacala and Maputo Corridors, which respectively link Zimbabwe, Malawi and South Africa’s Gauteng province to the Indian Ocean has increased in recent years. Industrial development has been slow as a result of the civil war that destroyed the transport system and other infrastructure. Mozambique has considerable mineral resources despite limited exploitation. The country’s oil and gas industry also has potential. Electricity is provided by the parastatal utility, Electricidade de Mozambique (EDM). The country exports electricity to South Africa from the Caborra Bassa hydroelectric facility.

Mozambique is one of Africa’s success stories and is making economic progress, although the country is still dependant on foreign assistance. The economy was reformed by the elimination of subsidies and quantitative restrictions on imports, the reduction and simplification of import tariffs and the liberalisation of crop marketing. A major privatisation program involving the entire banking sector and state manufacturing companies is another active step in economic reform.

Mozambique has the natural resources to sustain the development of the agriculture, forestry, fishing, energy and tourism industries. Placed in an ideal trading location, increased exports in these areas will increase the amount of foreign exchange brought into the country. The country’s proximity to South Africa has resulted in a range of major projects that support continued high levels of growth. The country's major exports are agricultural products, coal and energy, aluminium, textiles, cement, glass, asbestos and tobacco.

Indicators such as inflation, which continues to decline, show that the country’s economy is likely to continue on its successful growth path. The government has adopted new tax codes and increased fuel taxes in order to rectify the effects of past inflation. The country’s GDP totaled US$3.9 billion in 2002, 23.3% of which was constituted by agriculture, 31% industry and services counted for 45.7%. In 2001, foreign direct investment amounted to US$479.9 million.

Mozambique's economy continued to grow at a fast pace of 7.3% in the first half of 2005, on the back of a few giant and largely South African-financed ventures. Since 1994 major SA investment in the economy have included SA Breweries' US$25m in 1995; Standard Bank's US $6m in 1995; Anglo American's US $13m in 1996; Shoprite Checkers' US$3m in 1997; Industrial Development Corporation and others' US $1.34bn in 1997; Illovo Sugar's US US$52m in 1997; Basil Read, Stocks and Stocks and other construction companies in the Maputo Development Corridor $1bn in 1998; Eskom's $120m in 1998; Southern Sun Hotels' $13m in 2000; and the IDC and others' US $860m in 2001.

Credit rating agency Standard and Poor's (S&P), gave Mozambique a B grade in its first assessment of the country under a UN-funded program. This is the same grade as Burkina Faso and Madagascar. S&P says that Mozambique's outlook is "positive" for the next few years and that Mozambique's strengths include the rapid growth in its exports, increased foreign direct investment in the country, and the government's "commitment to deepening reform". In addition, Mozambique enjoyed a "consistently high level of donor financial support,"

In the first half of the 2005, commodity exports amounted to US$792 million, US$78 million more than in January-June 2004. Over the past few years Mozambican exports have grown at an average rate of 10% per year - a far higher rate than the international average of 6% - but these are largely as a result of aluminium exports from the SA-owned Mozal plant. The inflation rate has been cut to 4.1% - two percent lower than the same period last year.

The US Agency for International Development (USAID) has developed a programme that concentrates on improving the country’s trade policies, creating a more supportive enabling environment, and directly increasing exports in target sectors in Mozambique's economy.

Despite the economic growth rate, 50% of the Mozambican population still lives in absolute poverty. The UN Human Development Report published in 2005 ranked Mozambique as 168th out of the 177 countries covered. The low rating has been ascribed to the impact of HIV/AIDS, which has infected some 15% of the population and cut life expectancy rates, and frequent droughts and crop failure. The UN World Food Programme has warned that it needs US$19m for feeding 430,000 people in Mozambique. Across the region, the agency said it still needs about US$191m to feed 8.5 million people in Lesotho, Malawi, Mozambique, Swaziland, Zimbabwe and Zambia between December and April. The situation has been compounded in Mozambique by the bleak outlook for agricultural production in the next season. The government appealed for international assistance for nearly 550,000 people in May 2005 when it became clear that 43% of the maize crop in southern areas had been lost. 

International Trade

Mozambique is a member of COMESA, whose main export commodities include citrus fruits, coal, seafood, sugar tea and coffee and timber. The main import commodities include mining equipment, pharmaceuticals, raw materials, spare parts, chemical products, consumer goods and crude oil.

The importation and exportation of local currency is prohibited and foreign exchange transactions including the surrender of foreign exchange proceeds are effected through commercial banks.

All imports exceeding USD 500 are subject to licensing by the Ministry of Commerce and the customs tariff is based on the Customs Co-operation Council Nomenclature (CCCN).

Touristic attractions

Gorongosa National Park, Banhine National Park, Barra Beach, Bazaruto Archipelago, Bazaruto Island, Beira Old City, Benguerra Island, Chapel of Nossa Senhora de Balnorte, Church of the Misercordia, Fort, Fort of Sao Sebastiao, Gile Game Reserve, Ilha de Moçambique, Limpopo National Park, Macuti Beach.

The international time zone for Mozambique is GMT +2. The international dialing code is +258. Maputo, Beira and Nampula have international airports that serve South African Airways and Air Portugal, the principal airlines flying to Mozambique. Linhas Aereas de Mocambique (LAM) and Empresa Nacional de Transporte e Trabalho Aereo (TTA) are to be privatised. There are three main railway systems running east to west in Mozambique. Development of the Maputo Corridor between Mozambique and South Africa will decrease travelling distance and facilitate exports and foreign investment projects. All visitors to Mozambique require visas.