Economy & Industry

Extracting potential

With peace and stability, Mozambique’s economy has dramatically improved over the last 25 years.

Mining

Mining newIn this video...Albano and Manuela talk to geologists about how coal is found in Tete Province.

Growing at around 7% each year, the country’s economy is one of Africa’s strongest performers. Foreign companies have increasingly chosen to invest here, particularly in mining ventures.

Mining safety sign in MozambiqueMozambique has a wealth of natural resources, including deposits of iron ore, gold, bauxite, graphite, marble and limestone. There are also rare and important minerals such as tantalite and ilmenite (a source of titanium). And the Tete highlands have large reserves of coal, which is exported to places like India and China.

But the most important earner for Mozambique is aluminum. Since the opening of a large smelter near Maputo in 2000 (the country’s largest foreign investment project to date), aluminum became the most valuable export. Low global prices for this commodity can seriously affect the economy.

More investment needed

Despite the growing economy, Mozambique remains one of the world’s poorest countries. This is partly because of its continuing trade imbalance, where more is spent on imports such as food, oil, machinery and manufactured goods, than the country earns from its exports.

Half of Mozambique’s revenue therefore comes from foreign donors for the support of development projects. The country has also benefitted from the significant reduction of foreign debts.

Investors sought

With Portuguese as a shared language, Brazil is a major trading partner. The Mozambique government is hoping to learn from Brazil’s success in agriculture.

More investment is needed, particularly in agriculture, the most widespread economic activity. Subsistence and smallholder farming employs the majority of the country’s workforce, but yields are generally low. One focus of the government’s Poverty Reduction Action Plan (2011-2014) is to improve lives by increasing productivity in agriculture and fishing.

Prospects for the future

High inflation (through rising costs of imported oil and food) caused widespread unrest during 2010. This led to a stronger focus on domestic food production and newly-targeted subsidies on transport costs and wheat flour for the poorest (among other tax and financial measures).

The government hopes for continued growth in the economy of over 7%. Sectors of rising potential include electricity production from hydro-electric sources such as the Cahora Bassa Dam (see the Map of Mozambique) and tourism. With its long sandy beaches and rich marine life, the coastline of Mozambique is becoming an ever more popular tourist destination.

And with its tax-friendly stance towards foreign investors, the government aims to attract more businesses to Mozambique. Manufacturing and processing sectors are particularly important.

International companies are increasingly setting up factories to process locally-grown crops – such as cashews – so products no longer have to be shipped elsewhere before reaching consumers.