Economy of Mozambique
Encyclopedia
The economy of Mozambique has developed since the end of the Mozambican Civil War
(1977–1992), but the country is still one of the world's poorest and most underdeveloped. Civil war opposing RENAMO to FRELIMO, ineffective socialist economic policies, government mismanagement, and severe droughts plagued Mozambique's economy throughout the 1980s, leaving it heavily dependent on external assistance. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Inflation
was brought to single digits during the late 1990s although it returned to double digits in 2000-02. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget
, and a large majority of the population remains below the poverty line. Subsistence agriculture
continues to employ the vast majority of the country's workforce. A substantial trade imbalance persists although the opening of the MOZAL aluminium
smelter, the country's largest foreign investment project to date has increased export earnings. Additional investment projects in titanium
extraction and processing and garment manufacturing should further close the import/export gap. Mozambique's once substantial foreign debt has been reduced through forgiveness and rescheduling under the International Monetary Fund
's Heavily Indebted Poor Countries
(HIPC) and Enhanced HIPC initiatives, and is now at a manageable level.
participated in the trading networks of East Africa
as early as the 16th century, they did not establish hegemonic (total) colonial dominance over the entire territory that now comprises Mozambique until the 19th century. Portugal founded settlements, trading posts, forts and ports. Cities, towns and villages were founded all over the territory by the Portuguese, like Lourenço Marques
, Beira
, Vila Pery, Vila Junqueiro, Vila Cabral and Porto Amélia. Others were expanded and developed greatly under Portuguese rule, like Quelimane
, Nampula
and Sofala
. By this time, Mozambique had become a Portuguese colony, but administration was left to the trading companies (like Mozambique Company
and Niassa Company
) who had received long-term leases from Lisbon
. By the mid-1920s, the Portuguese succeeded in creating a highly exploitative and coercive settler economy, in which African natives were forced to work on the fertile lands taken over by Portuguese settlers. Indigenous African peasants mainly produced cash crops designated for sale in the markets of Portugal
. Major cash crops included cotton
, cashews, tea
and rice
. This arrangement ended in 1932 after the takeover in Portugal by the new António de Oliveira Salazar
's government. Thereafter, Mozambique, along with other Portuguese colonies, was put under the direct control of Lisbon. In 1951, it became an overseas province. The economy expanded rapidly during the 1950s and 1960s, attracting thousands of Portuguese settlers to the country. It was around this time that the first nationalist guerrilla groups began to form in Tanzania
and other African countries. The strong industrial and agricultural development that did occur throughout the 1950s, 1960s and early 1970s was based on Portuguese development plans, and also included British and South African investment.
In 1959-60, Mozambique's major exports included cotton
, cashew nuts, tea
, sugar
, copra
and sisal
. The expanding economy of the Portuguese overseas province was fuelled by foreign direct investment
, and public investment which included ambitious state-managed development plans. British capital owned two of the large sugar concessions (the third was Portuguese), including the famous Sena states. The Matola Oil Refinery, Procon, was controlled by England and the United States. In 1948 the petroleum concession was given to the Mozambique Gulf Oil Company. At Maotize coal
was mined; the industry was chiefly financed by Belgian capital. 60% of the capital of the Compagnie de Charbons de Mozambique was held by the Societe Miniere et Geologique Belge, 30% by the Mozambique Company
, and the remaining 10% by the Government of the territory. Three banks were in operation, the Banco Nacional Ultramarino
, Portuguese, Barclays Bank, D.C.O., British, and the Banco Totta e Standard de Moçambique (a joint-venture between Standard Bank
of South Africa and Banco Totta & Açores of the Portuguese mainland). Nine out of the twenty-three insurance companies were Portuguese. 80% of life-insurance was in the hands of foreign companies which testifies the openness of the economy
. The Portuguese overseas province of Mozambique was the first territory of Portugal, including the European mainland, to distribute Coca Cola. Lately the Lourenço Marques Oil Refinery was established by the Sociedade Nacional de Refinação de Petróleo (SONAREP) - a Franco-Portuguese syndicate. In the sisal plantations Swiss capital was invested, and in copra concerns, a combination of Portuguese, Swiss and French capital was invested. The large availability of capital from both Portuguese and international origin, allied to the wide range of natural resources and the growing urban population, lead to an impressive growth and development of the economy. From the late stages of this notable period of high growth and huge development effort started in the 1950s, was the construction of Cahora Bassa
dam by the Portuguese, which started to fill in December 1974 after construction was commenced in 1969. In the face of intransigent Portuguese ruling authorities, the main nationalist movement, FRELIMO, began a guerrilla war which gradually wrested control of parts of the northernmost regions of the territory from the Portuguese. The Mozambican War of Independence
came to an end in 1974 following a leftist military coup in Portugal. The new left-wing government
in Lisbon had no wish to maintain an empire and negotiations on the country’s independence began immediately. In 1975, after the leftist military coup of 24th April 1974 in Portugal
that overthrew the Estado Novo regime which had governed the nation and its overseas territories, the colonial wars
that raged in the various Portuguese African territories since the early 1960s ended. At independence, Mozambique’s industrial base was well-developed by Sub-Saharan Africa standards, thanks to a boom in investment in the 1960s and early 1970s. Indeed, in 1973, value-added in manufacturing was the sixth highest in Sub-Saharan Africa. However, further industrialisation was stopped by the hasty exodus of 90 percent of the ethnic Portuguese citizens during and after the independence process which was concluded on June 25, 1975. Portuguese population's rapid exodus left the Mozambican economy in disarray. The situation was exacerbated by the Mozambican Civil War
(1977–1992) during the following years that destroyed the remaining wealth and left the former Portuguese Overseas Province in a state of absolute disrepair.
in 1977 opposing RENAMO to FRELIMO, drove the country to absolute chaos. Mozambique became an independent nation and the Frente de Libertacao de Mocambique (FRELIMO), the socialist guerrilla organization that had fought the colonial war against Portugal, assumed power. Over the next several years, FRELIMO pursued numerous socialist policies, including nationalization of land and large industries, centralized planning, and heavy funding for the national educational and health systems, which however, remained weak for decades in independent Mozambique, and still are among the most ineffective and underfunded in the world. The exodus (mass departure) of the Portuguese following independence in 1975 facilitated the takeover of many shops by Mozambicans. Unfortunately, the exodus, which totaled over 275,000 ethnic Portuguese, also led to a huge loss of professionals, productive machinery, entrepreneurs, and skilled workers. By the early 1980s, Mozambique became what Joseph Hanlon—author of Peace Without Profit: How the IMF Blocks Rebuilding in Mozambique —called a "Cold War battlefield." The term refers to the situation in which socialist FRELIMO, with Soviet backing, was forced to fight a lengthy civil war (Mozambican Civil War
) against a counterinsurgency movement of Mozambicans named RENAMO, funded and directed by the neighboring capitalist economies of apartheid South Africa
and the then Rhodesia
. The cold war
was defined by animosity between capitalist
and socialist world powers, and though there was never an outright military conflict between the former and the latter, each respectively funded counterinsurgency movements against governments they disfavored. The capitalist governments of South Africa and Zimbabwe feared that a successfully ruled African socialist system might send a message of revolution and self-rule to citizens in contemporaneous free African countries, such as their own. Under the guidance of the Reagan administration
, the United States
also provided support to RENAMO, which sustained a civil war against FRELIMO until a Peace Accord was signed in October 1992.
The political pressure of the ideologically charged civil war, in conjunction with the excruciating need for aid and funds to finance imports, compelled FRELIMO to negotiate its first structural adjustment package (SAP) with the World Bank
and the International Monetary Fund
(IMF) in 1986 (commonly referred to as the Bretton Woods Institutions or International Financial Institutions—IFIs). The series of SAPs that followed thereafter, required privatization of major industries, less government spending, deregulation of the economy, and trade liberalization. The SAPs, therefore, have essentially focused on the implementation of an unfettered free market economy.
Today, the economy of Mozambique continues to be dominated by agriculture. Major exports include prawns, cotton, cashew nuts, sugar, citrus, copra and coconuts, and timber. Export partners, in turn, include Spain, South Africa, Portugal, the United States, Japan, Malawi, India, and Zimbabwe. Imports, such as farm equipment and transport equipment, are capital goods that are worth more than agricultural products, hence Mozambique's large trade deficit. The country also imports food, clothing, and petroleum products. Import partners include South Africa, Zimbabwe, Saudi Arabia, Portugal, the United States, Japan, and India. In the past several years, the value of imports outweighed the value of exports by 5 to 1 or more—a factor that obliges Mozambique to depend heavily on foreign aid and loans by foreign commercial banks and the Bretton Woods Institutions (BWIs). In 1995 alone, Mozambique received $1.115 billion in aid. In 1999, the total external debt stood at $4.8 billion. Fortunately, in the same year significant economic recovery did occur, as the real GDP growth rate reached 10 percent.
and agriculture
to tourism
and finance
, declined sharply after independence from Portugal
in 1975, but picked up in the 2000s after the end of the Mozambican Civil War
, although they are still performing well below potential.
is the mainstay of the economy and the country has a great potential for growth in the sector. Agriculture employs more than 80 percent of the labour force and provides livelihood
s to the vast majority of over 23 million inhabitants. Agriculture contributed 31.5 percent of the GDP in 2009, while commerce and services accounted for 44.9 percent. By contrast, 20 percent of the total export value in 2009 originated from the agriculture sector, mostly through the export of fish (mainly shrimps and prawns), timber
, copra
, cashew
nuts and citrus
, cotton
, coconuts
, tea
and tobacco
.
Agricultural potential is high, particularly in the fertile northern regions, which accounts for the bulk of the country's agricultural surplus. The main cash crops are sugar, copra, cashew nuts, tea, and tobacco. Total sugar production was expected to rise by 160% in the 2000s, which would make the country a major net exporter for the first time since independence. All the plantations and refineries have been privatized. Marine products, particularly prawns, are Mozambique's largest single export. There is an abundance of marine resources that are not fully exploited. After the Mozambican Civil War
, the return of internally displaced persons and the gradual restoration of rural markets have enabled Mozambique to increase agricultural production dramatically.
s and flood
s. Water resources are relatively plentiful and the country is traversed by a number of perennial rivers and enjoys considerable mineral reserves. Nevertheless, Mozambique is a highly indebted, poverty-stricken country.
Mozambique net importer of food. Total annual cereal import requirements average 0.89 million tons (0.14 million of maize, 0.39 of rice and 0.36 of wheat). Mozambique must also import substantial quantities of meat and livestock products.
has estimated that there was the potential for exports worth US$200m by 2005 – in the late 1990s they totaled US$3.6m, some 1% of total exports, and a contribution of less than 2% of GDP. Minerals currently being mined include marble, bentonite, coal, gold, bauxite, granite, titanium and gemstones. Illegal exports from artisanal production are estimated at $50 million US.
aluminium smelter which was approved in mid-2001. The country’s largest ever foreign investment, Mozal has little impact on employment, but is making a substantial contribution to balance of payments through taxes generated. Exports generated in the first quarter of 2001 were worth US$85.3, the primary factor for the 172% expansion in Mozambique’s exports for the period. Completion of the smelter resulted in aluminium accounting for up to 70% of exports. Construction materials, agricultural processing, beverages and consumer goods were the main sub-sectors.
, but has been developed, although it is still performing well below potential. The national strategy is to promote high-value, low-volume tourism. The first section of the “Peace Park” initiative which links with Kruger Park in South Africa, and Gonarezhou in Zimbabwe, was project aimed at the development of tourism.
wireless broadband and mobile data services, and then the landing of the first international submarine fibre optic cable in the country (SEACOM) in 2009. Further improvements can be expected from the ongoing rollout of 3G mobile services and a national fibre backbone network as well as the landing of the second international fibre (EASSy
) in 2010. The lower cost of bandwidth has already started to trickle down to lower consumer prices in some service segments, while others have remained unchanged.
: at the end of the civil war in 1992, Mozambique ranked among the poorest countries in the world. It still ranks among the least developed nations, with very low socioeconomic indicators. In the last decade, however, it has experienced a notable economic recovery. Per capita GDP in 2000 was estimated at $222; in the mid-1980s, it was $120. With a high foreign debt (originally $5.7 billion at 1998 net present value) and a good track record on economic reform, Mozambique was the first African country to receive debt relief under the initial Heavily Indebted Poor Country (HIPC) Initiative. In April 2000, Mozambique qualified for the Enhanced HIPC program as well and attained its completion point in September 2001. This led to the Paris Club
members agreeing in November 2001 to substantially reduce the remaining bilateral debt. This will lead to the complete forgiveness of a considerable volume of bilateral debt, including that owed to the United States
.
, transportation, and tourism
sectors. More than 75% of the population engages in small scale agriculture, which still suffers from inadequate infrastructure, commercial networks and investment
. Yet 88% of Mozambique's arable land is still uncultivated; focusing economic growth in this sector is a major challenge for the government.
since December 2000, although in late 2001 it began to stabilize.
and/or sector liberalization are underway for the remaining parastatals, including telecommunications, electricity
, water service, airports, ports, and the railroads
. The government frequently selects a strategic foreign investor when privatizing a parastatal. Additionally, customs
duties have been reduced, and customs management has been streamlined and reformed. The government introduced a highly successful value-added tax in 1999 as part of its efforts to increase domestic revenues. Plans for 2001-02 include Commercial Code reform; comprehensive judicial reform
; financial sector strengthening; continued civil service reform; improved government budget, audit, and inspection capability; and introduction of the private management of water systems in major cities.
, a large aluminum smelter that commenced production in mid-2000, has greatly expanded the nation's trade volume. Traditional Mozambican exports include cashews, shrimp
, fish, copra
, sugar
, cotton
, tea
, and citrus fruits. Most of these industries are being rehabilitated. Mozambique is becoming less dependent on imports for basic food and manufactured goods due to steady increases in local production.
(SADC Trade Protocol). The Protocol will create a free trade zone among more than 200 million consumers in the SADC region. Beginning the 10-year implementation process of the SADC Trade Protocol is a major goal for the region in 2002.
purchasing power parity - $18.95 billion (2008 est.)
GDP - real growth rate:
6.5% (2002 est.)
GDP - per capita:
purchasing power parity - $900 (2008 est.)
GDP - composition by sector:
agriculture:
23.4% (2008 est.)
industry:
30.7% (2008 est.)
services:
45.9% (2008 est.)
Household income or consumption by percentage share:
lowest 10%:
2.1% (2002)
highest 10%:
39.4% (2002)
Distribution of family income - Gini index:
47.3 (2002)
Inflation rate (consumer prices):
11.2% (2008 est.)
Labor force:
10.04 million (2008 est.)
Labor force - by occupation:
agriculture 81%, industry 6%, services 13% (1997 est.)
Unemployment rate:
21% (1997 est.)
Budget:
revenues:
$2.786 billion (2008 est.)
expenditures:
$3.108 billion (2008 est.)
Industries:
food, beverages, chemicals (fertilizer
, soap
, paints), aluminium
, petroleum products
, textiles, cement
, glass
, asbestos
, tobacco
Industrial production growth rate:
9% (2008 est.)
Electricity - production:
14.62 billion kWh (2006 est.)
Electricity - consumption:
9.555 billion kWh (2006 est.)
Electricity - exports:
12.83 billion kWh (2006 est.)
Electricity - imports:
9.839 billion kWh (2006 est.)
Oil - consumption:
14390 oilbbl/d (2006 est.)
Oil - proved reserves:
0 bbl (0 l) (1 January 2006 est.)
Natural gas - production:
1.65 billion cu m (2006 est.)
Natural gas - consumption:
1.45 billion cu m (2006 est.)
Natural gas - exports:
0 cu m (2005 est.)
Natural gas - imports:
0 cu m (2007 est.)
Natural gas - proved reserves:
127.4 billion cu m (1 January 2008 est.)
Agriculture - products:
cotton
, cashew nuts, sugar cane, tea
, cassava
(tapioca
), coconut
s, sisal
, citrus and tropical fruits; potato
es, sunflower
s, beef
, poultry
Exports:
$2.693 billion f.o.b. (2008 est.)
Exports - commodities:
aluminum, prawn
s, cashew
s, cotton
, sugar
, citrus, timber; bulk electricity
Exports - partners:
Italy 19.4%, Belgium 18.4%, Spain 12.5%, South Africa 12.3%, UK 7.3%, China 4.1% (2007)
Imports:
$3.292 billion f.o.b. (2008 est.)
Imports - commodities:
machinery and equipment, vehicles, fuel, chemicals, metal products, foodstuffs, textiles
Imports - partners:
South Africa 36.7%, Australia 8.5%, China 4.6% (2007)
Debt - external:
$4.316 billion (31 December 2008 est.)
Currency:
1 metical (Mt) = 100 centavos
Exchange rates:
meticais (MZM) per US dollar - 24.125 (2008 est.), 26.264 (2007), 25.4 (2006)
Fiscal year:
calendar year
Mozambican Civil War
The Mozambican Civil War began in 1977, two years after the end of the war of independence. The ruling party, Front for Liberation of Mozambique , was violently opposed from 1977 by the Rhodesian- and South African-funded Mozambique Resistance Movement...
(1977–1992), but the country is still one of the world's poorest and most underdeveloped. Civil war opposing RENAMO to FRELIMO, ineffective socialist economic policies, government mismanagement, and severe droughts plagued Mozambique's economy throughout the 1980s, leaving it heavily dependent on external assistance. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, have led to dramatic improvements in the country's growth rate. Inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
was brought to single digits during the late 1990s although it returned to double digits in 2000-02. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities. In spite of these gains, Mozambique remains dependent upon foreign assistance for much of its annual budget
Budget
A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods...
, and a large majority of the population remains below the poverty line. Subsistence agriculture
Subsistence agriculture
Subsistence agriculture is self-sufficiency farming in which the farmers focus on growing enough food to feed their families. The typical subsistence farm has a range of crops and animals needed by the family to eat and clothe themselves during the year. Planting decisions are made with an eye...
continues to employ the vast majority of the country's workforce. A substantial trade imbalance persists although the opening of the MOZAL aluminium
Aluminium
Aluminium or aluminum is a silvery white member of the boron group of chemical elements. It has the symbol Al, and its atomic number is 13. It is not soluble in water under normal circumstances....
smelter, the country's largest foreign investment project to date has increased export earnings. Additional investment projects in titanium
Titanium
Titanium is a chemical element with the symbol Ti and atomic number 22. It has a low density and is a strong, lustrous, corrosion-resistant transition metal with a silver color....
extraction and processing and garment manufacturing should further close the import/export gap. Mozambique's once substantial foreign debt has been reduced through forgiveness and rescheduling under the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
's Heavily Indebted Poor Countries
Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(HIPC) and Enhanced HIPC initiatives, and is now at a manageable level.
Portuguese rule
Although the PortuguesePortuguese people
The Portuguese are a nation and ethnic group native to the country of Portugal, in the west of the Iberian peninsula of south-west Europe. Their language is Portuguese, and Roman Catholicism is the predominant religion....
participated in the trading networks of East Africa
East Africa
East Africa or Eastern Africa is the easterly region of the African continent, variably defined by geography or geopolitics. In the UN scheme of geographic regions, 19 territories constitute Eastern Africa:...
as early as the 16th century, they did not establish hegemonic (total) colonial dominance over the entire territory that now comprises Mozambique until the 19th century. Portugal founded settlements, trading posts, forts and ports. Cities, towns and villages were founded all over the territory by the Portuguese, like Lourenço Marques
Maputo
Maputo, also known as Lourenço Marques, is the capital and largest city of Mozambique. It is known as the City of Acacias in reference to acacia trees commonly found along its avenues and the Pearl of the Indian Ocean. It was famous for the inscription "This is Portugal" on the walkway of its...
, Beira
Beira, Mozambique
Beira is the second largest city in Mozambique. It lies in the central region of the country in Sofala Province, where the Pungue River meets the Indian Ocean. Beira had a population of 412,588 in 1997, which grew to an estimated 546,000 in 2006...
, Vila Pery, Vila Junqueiro, Vila Cabral and Porto Amélia. Others were expanded and developed greatly under Portuguese rule, like Quelimane
Quelimane
Quelimane is a seaport in Mozambique. It is the administrative capital of the Zambezia Province and the province's largest city, and stands 25 km from the mouth of the Rio dos Bons Sinais . The river was named when Vasco da Gama, on his way to India, reached it and saw "good signs" that he was on...
, Nampula
Nampula
Nampula is the capital city of Nampula Province in Mozambique.It has a population of 471,717 making it the third largest city in Mozambique after Maputo and Beira. It is home to the Mozambique National Ethnographic Museum, several markets, cathedrals and mosques.It is also the center of business...
and Sofala
Sofala
Sofala, at present known as Nova Sofala, used to be the chief seaport of the Monomotapa Kingdom, whose capital was at Mount Fura. It is located on the Sofala Bank in Sofala Province of Mozambique.-History:...
. By this time, Mozambique had become a Portuguese colony, but administration was left to the trading companies (like Mozambique Company
Mozambique Company
The Mozambique Company, in Portuguese the Companhia de Moçambique, was a royal company in the Portuguese colony of Mozambique, that had the concession of the lands that include the present provinces of Manica and Sofala....
and Niassa Company
Niassa Company
The Nyassa Company, in Portuguese the Companhia do Nyassa, and sometimes spelled "Niassa", was a royal company in the Portuguese colony of Mozambique, then known as Portuguese East Africa, that had the concession of the lands that include the present provinces of Cabo Delgado and Niassa between...
) who had received long-term leases from Lisbon
Lisbon
Lisbon is the capital city and largest city of Portugal with a population of 545,245 within its administrative limits on a land area of . The urban area of Lisbon extends beyond the administrative city limits with a population of 3 million on an area of , making it the 9th most populous urban...
. By the mid-1920s, the Portuguese succeeded in creating a highly exploitative and coercive settler economy, in which African natives were forced to work on the fertile lands taken over by Portuguese settlers. Indigenous African peasants mainly produced cash crops designated for sale in the markets of Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
. Major cash crops included cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, cashews, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
and rice
Rice
Rice is the seed of the monocot plants Oryza sativa or Oryza glaberrima . As a cereal grain, it is the most important staple food for a large part of the world's human population, especially in East Asia, Southeast Asia, South Asia, the Middle East, and the West Indies...
. This arrangement ended in 1932 after the takeover in Portugal by the new António de Oliveira Salazar
António de Oliveira Salazar
António de Oliveira Salazar, GColIH, GCTE, GCSE served as the Prime Minister of Portugal from 1932 to 1968. He also served as acting President of the Republic briefly in 1951. He founded and led the Estado Novo , the authoritarian, right-wing government that presided over and controlled Portugal...
's government. Thereafter, Mozambique, along with other Portuguese colonies, was put under the direct control of Lisbon. In 1951, it became an overseas province. The economy expanded rapidly during the 1950s and 1960s, attracting thousands of Portuguese settlers to the country. It was around this time that the first nationalist guerrilla groups began to form in Tanzania
Tanzania
The United Republic of Tanzania is a country in East Africa bordered by Kenya and Uganda to the north, Rwanda, Burundi, and the Democratic Republic of the Congo to the west, and Zambia, Malawi, and Mozambique to the south. The country's eastern borders lie on the Indian Ocean.Tanzania is a state...
and other African countries. The strong industrial and agricultural development that did occur throughout the 1950s, 1960s and early 1970s was based on Portuguese development plans, and also included British and South African investment.
In 1959-60, Mozambique's major exports included cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, cashew nuts, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
, sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, copra
Copra
Copra is the dried meat, or kernel, of the coconut. Coconut oil extracted from it has made copra an important agricultural commodity for many coconut-producing countries. It also yields coconut cake which is mainly used as feed for livestock.-Production:...
and sisal
Sisal
Sisal is an agave that yields a stiff fibre traditionally used in making twine, rope and also dartboards. The term may refer either to the plant or the fibre, depending on context...
. The expanding economy of the Portuguese overseas province was fuelled by foreign direct investment
Foreign direct investment
Foreign direct investment or foreign investment refers to the net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor.. It is the sum of equity capital,other long-term capital, and short-term capital as shown in...
, and public investment which included ambitious state-managed development plans. British capital owned two of the large sugar concessions (the third was Portuguese), including the famous Sena states. The Matola Oil Refinery, Procon, was controlled by England and the United States. In 1948 the petroleum concession was given to the Mozambique Gulf Oil Company. At Maotize coal
Coal
Coal is a combustible black or brownish-black sedimentary rock usually occurring in rock strata in layers or veins called coal beds or coal seams. The harder forms, such as anthracite coal, can be regarded as metamorphic rock because of later exposure to elevated temperature and pressure...
was mined; the industry was chiefly financed by Belgian capital. 60% of the capital of the Compagnie de Charbons de Mozambique was held by the Societe Miniere et Geologique Belge, 30% by the Mozambique Company
Mozambique Company
The Mozambique Company, in Portuguese the Companhia de Moçambique, was a royal company in the Portuguese colony of Mozambique, that had the concession of the lands that include the present provinces of Manica and Sofala....
, and the remaining 10% by the Government of the territory. Three banks were in operation, the Banco Nacional Ultramarino
Banco Nacional Ultramarino
Banco Nacional Ultramarino was a Portuguese bank with operations throughout the world, especially in Portugal's former overseas provinces. It ceased existence as an independent legal entity in Portugal following its merger with Caixa Geral de Depósitos, the government-owned savings bank, in...
, Portuguese, Barclays Bank, D.C.O., British, and the Banco Totta e Standard de Moçambique (a joint-venture between Standard Bank
Standard Bank
The Standard Bank of South Africa Limited is one of South Africa's largest financial services groups. It operates in 30 countries around the world, including 17 in Africa.-History:...
of South Africa and Banco Totta & Açores of the Portuguese mainland). Nine out of the twenty-three insurance companies were Portuguese. 80% of life-insurance was in the hands of foreign companies which testifies the openness of the economy
Open economy
An open economy is an economy in which there are economic activities between domestic community and outside, e.g. people, including businesses, can trade in goods and services with other people and businesses in the international community, and flow of funds as investment across the border...
. The Portuguese overseas province of Mozambique was the first territory of Portugal, including the European mainland, to distribute Coca Cola. Lately the Lourenço Marques Oil Refinery was established by the Sociedade Nacional de Refinação de Petróleo (SONAREP) - a Franco-Portuguese syndicate. In the sisal plantations Swiss capital was invested, and in copra concerns, a combination of Portuguese, Swiss and French capital was invested. The large availability of capital from both Portuguese and international origin, allied to the wide range of natural resources and the growing urban population, lead to an impressive growth and development of the economy. From the late stages of this notable period of high growth and huge development effort started in the 1950s, was the construction of Cahora Bassa
Cahora Bassa
The Cahora Bassa lake is Africa's fourth-largest artificial lake, situated in the Tete Province in Mozambique. The name Cabora Bassa is an earlier misspelling of the name...
dam by the Portuguese, which started to fill in December 1974 after construction was commenced in 1969. In the face of intransigent Portuguese ruling authorities, the main nationalist movement, FRELIMO, began a guerrilla war which gradually wrested control of parts of the northernmost regions of the territory from the Portuguese. The Mozambican War of Independence
Mozambican War of Independence
The Mozambican War of Independence was an armed conflict between the guerrilla forces of the Mozambique Liberation Front or FRELIMO , and Portugal...
came to an end in 1974 following a leftist military coup in Portugal. The new left-wing government
Movimento das Forças Armadas
The Movement of the Armed Forces was an organisation of lower-ranked left-leaning officers in the Portuguese Armed Forces which was responsible for the Carnation Revolution of 25 April 1974, a military coup in Lisbon which ended the corporatist New State regime in Portugal, the Portuguese...
in Lisbon had no wish to maintain an empire and negotiations on the country’s independence began immediately. In 1975, after the leftist military coup of 24th April 1974 in Portugal
Carnation Revolution
The Carnation Revolution , also referred to as the 25 de Abril , was a military coup started on 25 April 1974, in Lisbon, Portugal, coupled with an unanticipated and extensive campaign of civil resistance...
that overthrew the Estado Novo regime which had governed the nation and its overseas territories, the colonial wars
Portuguese Colonial War
The Portuguese Colonial War , also known in Portugal as the Overseas War or in the former colonies as the War of liberation , was fought between Portugal's military and the emerging nationalist movements in Portugal's African colonies between 1961 and 1974, when the Portuguese regime was...
that raged in the various Portuguese African territories since the early 1960s ended. At independence, Mozambique’s industrial base was well-developed by Sub-Saharan Africa standards, thanks to a boom in investment in the 1960s and early 1970s. Indeed, in 1973, value-added in manufacturing was the sixth highest in Sub-Saharan Africa. However, further industrialisation was stopped by the hasty exodus of 90 percent of the ethnic Portuguese citizens during and after the independence process which was concluded on June 25, 1975. Portuguese population's rapid exodus left the Mozambican economy in disarray. The situation was exacerbated by the Mozambican Civil War
Mozambican Civil War
The Mozambican Civil War began in 1977, two years after the end of the war of independence. The ruling party, Front for Liberation of Mozambique , was violently opposed from 1977 by the Rhodesian- and South African-funded Mozambique Resistance Movement...
(1977–1992) during the following years that destroyed the remaining wealth and left the former Portuguese Overseas Province in a state of absolute disrepair.
Independent Mozambique
Mozambique became an independent state in 1975. The exodus of trained Portuguese and the eruption of the Mozambican Civil WarMozambican Civil War
The Mozambican Civil War began in 1977, two years after the end of the war of independence. The ruling party, Front for Liberation of Mozambique , was violently opposed from 1977 by the Rhodesian- and South African-funded Mozambique Resistance Movement...
in 1977 opposing RENAMO to FRELIMO, drove the country to absolute chaos. Mozambique became an independent nation and the Frente de Libertacao de Mocambique (FRELIMO), the socialist guerrilla organization that had fought the colonial war against Portugal, assumed power. Over the next several years, FRELIMO pursued numerous socialist policies, including nationalization of land and large industries, centralized planning, and heavy funding for the national educational and health systems, which however, remained weak for decades in independent Mozambique, and still are among the most ineffective and underfunded in the world. The exodus (mass departure) of the Portuguese following independence in 1975 facilitated the takeover of many shops by Mozambicans. Unfortunately, the exodus, which totaled over 275,000 ethnic Portuguese, also led to a huge loss of professionals, productive machinery, entrepreneurs, and skilled workers. By the early 1980s, Mozambique became what Joseph Hanlon—author of Peace Without Profit: How the IMF Blocks Rebuilding in Mozambique —called a "Cold War battlefield." The term refers to the situation in which socialist FRELIMO, with Soviet backing, was forced to fight a lengthy civil war (Mozambican Civil War
Mozambican Civil War
The Mozambican Civil War began in 1977, two years after the end of the war of independence. The ruling party, Front for Liberation of Mozambique , was violently opposed from 1977 by the Rhodesian- and South African-funded Mozambique Resistance Movement...
) against a counterinsurgency movement of Mozambicans named RENAMO, funded and directed by the neighboring capitalist economies of apartheid South Africa
South Africa
The Republic of South Africa is a country in southern Africa. Located at the southern tip of Africa, it is divided into nine provinces, with of coastline on the Atlantic and Indian oceans...
and the then Rhodesia
Rhodesia
Rhodesia , officially the Republic of Rhodesia from 1970, was an unrecognised state located in southern Africa that existed between 1965 and 1979 following its Unilateral Declaration of Independence from the United Kingdom on 11 November 1965...
. The cold war
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
was defined by animosity between capitalist
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
and socialist world powers, and though there was never an outright military conflict between the former and the latter, each respectively funded counterinsurgency movements against governments they disfavored. The capitalist governments of South Africa and Zimbabwe feared that a successfully ruled African socialist system might send a message of revolution and self-rule to citizens in contemporaneous free African countries, such as their own. Under the guidance of the Reagan administration
Reagan Administration
The United States presidency of Ronald Reagan, also known as the Reagan administration, was a Republican administration headed by Ronald Reagan from January 20, 1981, to January 20, 1989....
, the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
also provided support to RENAMO, which sustained a civil war against FRELIMO until a Peace Accord was signed in October 1992.
The political pressure of the ideologically charged civil war, in conjunction with the excruciating need for aid and funds to finance imports, compelled FRELIMO to negotiate its first structural adjustment package (SAP) with the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
and the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF) in 1986 (commonly referred to as the Bretton Woods Institutions or International Financial Institutions—IFIs). The series of SAPs that followed thereafter, required privatization of major industries, less government spending, deregulation of the economy, and trade liberalization. The SAPs, therefore, have essentially focused on the implementation of an unfettered free market economy.
Today, the economy of Mozambique continues to be dominated by agriculture. Major exports include prawns, cotton, cashew nuts, sugar, citrus, copra and coconuts, and timber. Export partners, in turn, include Spain, South Africa, Portugal, the United States, Japan, Malawi, India, and Zimbabwe. Imports, such as farm equipment and transport equipment, are capital goods that are worth more than agricultural products, hence Mozambique's large trade deficit. The country also imports food, clothing, and petroleum products. Import partners include South Africa, Zimbabwe, Saudi Arabia, Portugal, the United States, Japan, and India. In the past several years, the value of imports outweighed the value of exports by 5 to 1 or more—a factor that obliges Mozambique to depend heavily on foreign aid and loans by foreign commercial banks and the Bretton Woods Institutions (BWIs). In 1995 alone, Mozambique received $1.115 billion in aid. In 1999, the total external debt stood at $4.8 billion. Fortunately, in the same year significant economic recovery did occur, as the real GDP growth rate reached 10 percent.
Sectors
All economic sectors ranging from manufacturingManufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...
and agriculture
Agriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
to tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
and finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, declined sharply after independence from Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
in 1975, but picked up in the 2000s after the end of the Mozambican Civil War
Mozambican Civil War
The Mozambican Civil War began in 1977, two years after the end of the war of independence. The ruling party, Front for Liberation of Mozambique , was violently opposed from 1977 by the Rhodesian- and South African-funded Mozambique Resistance Movement...
, although they are still performing well below potential.
Agriculture, fishing and forestry
In Mozambique, agricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
is the mainstay of the economy and the country has a great potential for growth in the sector. Agriculture employs more than 80 percent of the labour force and provides livelihood
Livelihood
A person's livelihood referers to "means of securing the necessities of life". For instance a fisherman's livelihood depends on the availability and accessibility of fish.- In social sciences :...
s to the vast majority of over 23 million inhabitants. Agriculture contributed 31.5 percent of the GDP in 2009, while commerce and services accounted for 44.9 percent. By contrast, 20 percent of the total export value in 2009 originated from the agriculture sector, mostly through the export of fish (mainly shrimps and prawns), timber
Timber
Timber may refer to:* Timber, a term common in the United Kingdom and Australia for wood materials * Timber, Oregon, an unincorporated community in the U.S...
, copra
Copra
Copra is the dried meat, or kernel, of the coconut. Coconut oil extracted from it has made copra an important agricultural commodity for many coconut-producing countries. It also yields coconut cake which is mainly used as feed for livestock.-Production:...
, cashew
Cashew
The cashew is a tree in the family Anacardiaceae. Its English name derives from the Portuguese name for the fruit of the cashew tree, caju, which in turn derives from the indigenous Tupi name, acajú. It is now widely grown in tropical climates for its cashew nuts and cashew apples.-Etymology:The...
nuts and citrus
Citrus
Citrus is a common term and genus of flowering plants in the rue family, Rutaceae. Citrus is believed to have originated in the part of Southeast Asia bordered by Northeastern India, Myanmar and the Yunnan province of China...
, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, coconuts
COcOnuts
COcOnuts is the second album released by Jane, comprising Animal Collective member Panda Bear, and Scott Mou. It was originally self-released on CD-R's, but later became the first album released by Psych-o-path Records in 2005. The Psych-o-path version was remastered by Rusty Santos and Edik Kleyner....
, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
and tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
.
Agricultural potential is high, particularly in the fertile northern regions, which accounts for the bulk of the country's agricultural surplus. The main cash crops are sugar, copra, cashew nuts, tea, and tobacco. Total sugar production was expected to rise by 160% in the 2000s, which would make the country a major net exporter for the first time since independence. All the plantations and refineries have been privatized. Marine products, particularly prawns, are Mozambique's largest single export. There is an abundance of marine resources that are not fully exploited. After the Mozambican Civil War
Mozambican Civil War
The Mozambican Civil War began in 1977, two years after the end of the war of independence. The ruling party, Front for Liberation of Mozambique , was violently opposed from 1977 by the Rhodesian- and South African-funded Mozambique Resistance Movement...
, the return of internally displaced persons and the gradual restoration of rural markets have enabled Mozambique to increase agricultural production dramatically.
Food security, vulnerability and risk management
Mozambique’s diverse soils and climatic conditions, influenced by latitude, variations in altitude, topography and the proximity to the coast, offer a wide range of production opportunities; agricultural potential is high despite frequent droughtDrought
A drought is an extended period of months or years when a region notes a deficiency in its water supply. Generally, this occurs when a region receives consistently below average precipitation. It can have a substantial impact on the ecosystem and agriculture of the affected region...
s and flood
Flood
A flood is an overflow of an expanse of water that submerges land. The EU Floods directive defines a flood as a temporary covering by water of land not normally covered by water...
s. Water resources are relatively plentiful and the country is traversed by a number of perennial rivers and enjoys considerable mineral reserves. Nevertheless, Mozambique is a highly indebted, poverty-stricken country.
Mozambique net importer of food. Total annual cereal import requirements average 0.89 million tons (0.14 million of maize, 0.39 of rice and 0.36 of wheat). Mozambique must also import substantial quantities of meat and livestock products.
Mining and semi-processing
There are large mineral deposits, but exploration has been constrained by the civil war (1977–1992) and poor infrastructure. The World BankWorld Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
has estimated that there was the potential for exports worth US$200m by 2005 – in the late 1990s they totaled US$3.6m, some 1% of total exports, and a contribution of less than 2% of GDP. Minerals currently being mined include marble, bentonite, coal, gold, bauxite, granite, titanium and gemstones. Illegal exports from artisanal production are estimated at $50 million US.
Manufacturing
Although very well developed during the 1960s and early 1970s, industrialisation declined rapidly with the decline of most Portuguese after independence. Since 1995 production has increased sharply and was expected to grow by 33% in 2001 due to the expansion (costing US$860m) of the MozalMozal
Mozal is the largest aluminium producer in Mozambique and the second-largest in Africa having a total annual production of around 530,000 tonnes. Ownership is BHP Billiton, Mitsubishi Corporation, IFC and the Government of Mozambique...
aluminium smelter which was approved in mid-2001. The country’s largest ever foreign investment, Mozal has little impact on employment, but is making a substantial contribution to balance of payments through taxes generated. Exports generated in the first quarter of 2001 were worth US$85.3, the primary factor for the 172% expansion in Mozambique’s exports for the period. Completion of the smelter resulted in aluminium accounting for up to 70% of exports. Construction materials, agricultural processing, beverages and consumer goods were the main sub-sectors.
Tourism
This sector declined sharply after independence from PortugalPortugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
, but has been developed, although it is still performing well below potential. The national strategy is to promote high-value, low-volume tourism. The first section of the “Peace Park” initiative which links with Kruger Park in South Africa, and Gonarezhou in Zimbabwe, was project aimed at the development of tourism.
Telecommunication
Immediately after a long civil war ended in 1992 the country started to reform telecommunication sector. The mobile sub-sector has experienced excellent growth rates following the introduction of competition in 2003 between Vodacom Mozambique and mCel, the incumbent mobile subsidiary of the national telco, Telecomunicações de Moçambique (TDM). The government is intent on introducing competition to the fixed-line sector as well, but it is hesitating to privatise TDM. All other services are open to competition, subject to licensing by the industry regulator, INCM. Internet usage in the country has been hampered by the inadequate fixed-line infrastructure and the high cost of international bandwidth, but this market sector has started to accelerate following the introduction of various kinds of broadband services including ADSL, cable modems, WiMAXWiMAX
WiMAX is a communication technology for wirelessly delivering high-speed Internet service to large geographical areas. The 2005 WiMAX revision provided bit rates up to 40 Mbit/s with the 2011 update up to 1 Gbit/s for fixed stations...
wireless broadband and mobile data services, and then the landing of the first international submarine fibre optic cable in the country (SEACOM) in 2009. Further improvements can be expected from the ongoing rollout of 3G mobile services and a national fibre backbone network as well as the landing of the second international fibre (EASSy
EASSY
The Eastern Africa Submarine Cable System is an undersea fibre optic cable system connecting countries of eastern Africa to the rest of the world....
) in 2010. The lower cost of bandwidth has already started to trickle down to lower consumer prices in some service segments, while others have remained unchanged.
Finance
The banking system collapsed after independence from Portugal in 1975. From an earlier position (in the 1980s) of central government control of the economy, Mozambique has initiated rapid reforms in recent years, accelerating the implementation of market-based economic policies, and committing to a policy of fiscal and monetary discipline. In 1995 the government introduced its medium-term economic growth, strategy which it continues to pursue. Since the late 1990s, both national and international banking, established an environment for rapid economic growth and development of the financial system.Macroeconomic review
Alleviating povertyPoverty
Poverty is the lack of a certain amount of material possessions or money. Absolute poverty or destitution is inability to afford basic human needs, which commonly includes clean and fresh water, nutrition, health care, education, clothing and shelter. About 1.7 billion people are estimated to live...
: at the end of the civil war in 1992, Mozambique ranked among the poorest countries in the world. It still ranks among the least developed nations, with very low socioeconomic indicators. In the last decade, however, it has experienced a notable economic recovery. Per capita GDP in 2000 was estimated at $222; in the mid-1980s, it was $120. With a high foreign debt (originally $5.7 billion at 1998 net present value) and a good track record on economic reform, Mozambique was the first African country to receive debt relief under the initial Heavily Indebted Poor Country (HIPC) Initiative. In April 2000, Mozambique qualified for the Enhanced HIPC program as well and attained its completion point in September 2001. This led to the Paris Club
Paris Club
The Paris Club is an informal group of financial officials from 19 of some of the world's biggest economies, which provides financial services such as war funding, debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors...
members agreeing in November 2001 to substantially reduce the remaining bilateral debt. This will lead to the complete forgiveness of a considerable volume of bilateral debt, including that owed to the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
.
Rebounding growth
The resettlement of war refugees and successful economic reform have led to a high growth rate: the average growth rate from 1993 to 1999 was 6.7%; from 1997 to 1999, it averaged more than 10% per year. The devastating floods of early 2000 slowed GDP growth to a 2.1%; estimates point to a full recovery in 2001. The government projects have caused the economy to continue to expand between 7%-10% a year for the next 5 years, although rapid expansion in the future hinges on several major foreign investment projects, continued economic reform, and the revival of the agricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
, transportation, and tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
sectors. More than 75% of the population engages in small scale agriculture, which still suffers from inadequate infrastructure, commercial networks and investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
. Yet 88% of Mozambique's arable land is still uncultivated; focusing economic growth in this sector is a major challenge for the government.
Low inflation
The government's tight control of spending and the money supply, combined with financial sector reform, successfully reduced inflation from 70% in 1994 to less than 5% from 1998-99. Rates spiked in 2000, however, to a rate of 12.7% due to economic disruptions stemming from the devastating floods. Inflation began to increase in the second half of 2001. The value of Mozambique's currency, the Metical, lost nearly 50% of its value against the U.S. dollarUnited States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
since December 2000, although in late 2001 it began to stabilize.
Extensive economic reform
Economic reform has been extensive. Over 1,200 state-owned enterprises (mostly small) have been privatized. Preparations for privatizationPrivatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
and/or sector liberalization are underway for the remaining parastatals, including telecommunications, electricity
Electricity
Electricity is a general term encompassing a variety of phenomena resulting from the presence and flow of electric charge. These include many easily recognizable phenomena, such as lightning, static electricity, and the flow of electrical current in an electrical wire...
, water service, airports, ports, and the railroads
Rail transport
Rail transport is a means of conveyance of passengers and goods by way of wheeled vehicles running on rail tracks. In contrast to road transport, where vehicles merely run on a prepared surface, rail vehicles are also directionally guided by the tracks they run on...
. The government frequently selects a strategic foreign investor when privatizing a parastatal. Additionally, customs
Customs
Customs is an authority or agency in a country responsible for collecting and safeguarding customs duties and for controlling the flow of goods including animals, transports, personal effects and hazardous items in and out of a country...
duties have been reduced, and customs management has been streamlined and reformed. The government introduced a highly successful value-added tax in 1999 as part of its efforts to increase domestic revenues. Plans for 2001-02 include Commercial Code reform; comprehensive judicial reform
Judicial Reform
Judicial reform is the complete or partial political reform of a country's judiciary. Judicial reform is often done as a part of wider reform of the countrys political system or a legal reform....
; financial sector strengthening; continued civil service reform; improved government budget, audit, and inspection capability; and introduction of the private management of water systems in major cities.
Improving trade imbalance
In recent years, the value of imports has surpassed that of exports by almost 2:1, an improvement over the 4:1 ratio of the immediate post-war years. In 2000 imports were $1,217 million, and exports were $723 million. Support programs provided by development partners have largely compensated for balance of payments shortfalls. The medium-term outlook for exports is encouraging, since a number of foreign investment projects should lead to substantial export growth and a better trade balance. MOZALMozal
Mozal is the largest aluminium producer in Mozambique and the second-largest in Africa having a total annual production of around 530,000 tonnes. Ownership is BHP Billiton, Mitsubishi Corporation, IFC and the Government of Mozambique...
, a large aluminum smelter that commenced production in mid-2000, has greatly expanded the nation's trade volume. Traditional Mozambican exports include cashews, shrimp
Shrimp
Shrimp are swimming, decapod crustaceans classified in the infraorder Caridea, found widely around the world in both fresh and salt water. Adult shrimp are filter feeding benthic animals living close to the bottom. They can live in schools and can swim rapidly backwards. Shrimp are an important...
, fish, copra
Copra
Copra is the dried meat, or kernel, of the coconut. Coconut oil extracted from it has made copra an important agricultural commodity for many coconut-producing countries. It also yields coconut cake which is mainly used as feed for livestock.-Production:...
, sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
, and citrus fruits. Most of these industries are being rehabilitated. Mozambique is becoming less dependent on imports for basic food and manufactured goods due to steady increases in local production.
SADC trade protocol
In December 1999, the Council of Ministers approved the Southern African Development Community Trade ProtocolSouthern African Development Community
The Southern African Development Community is an inter-governmental organization headquartered in Gaborone, Botswana. Its goal is to further socio-economic cooperation and integration as well as political and security cooperation among 15 southern African states...
(SADC Trade Protocol). The Protocol will create a free trade zone among more than 200 million consumers in the SADC region. Beginning the 10-year implementation process of the SADC Trade Protocol is a major goal for the region in 2002.
Statistics
GDP:purchasing power parity - $18.95 billion (2008 est.)
GDP - real growth rate:
6.5% (2002 est.)
GDP - per capita:
purchasing power parity - $900 (2008 est.)
GDP - composition by sector:
agriculture:
23.4% (2008 est.)
industry:
30.7% (2008 est.)
services:
45.9% (2008 est.)
Household income or consumption by percentage share:
lowest 10%:
2.1% (2002)
highest 10%:
39.4% (2002)
Distribution of family income - Gini index:
47.3 (2002)
Inflation rate (consumer prices):
11.2% (2008 est.)
Labor force:
10.04 million (2008 est.)
Labor force - by occupation:
agriculture 81%, industry 6%, services 13% (1997 est.)
Unemployment rate:
21% (1997 est.)
Budget:
revenues:
$2.786 billion (2008 est.)
expenditures:
$3.108 billion (2008 est.)
Industries:
food, beverages, chemicals (fertilizer
Fertilizer
Fertilizer is any organic or inorganic material of natural or synthetic origin that is added to a soil to supply one or more plant nutrients essential to the growth of plants. A recent assessment found that about 40 to 60% of crop yields are attributable to commercial fertilizer use...
, soap
Soap
In chemistry, soap is a salt of a fatty acid.IUPAC. "" Compendium of Chemical Terminology, 2nd ed. . Compiled by A. D. McNaught and A. Wilkinson. Blackwell Scientific Publications, Oxford . XML on-line corrected version: created by M. Nic, J. Jirat, B. Kosata; updates compiled by A. Jenkins. ISBN...
, paints), aluminium
Aluminium
Aluminium or aluminum is a silvery white member of the boron group of chemical elements. It has the symbol Al, and its atomic number is 13. It is not soluble in water under normal circumstances....
, petroleum products
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
, textiles, cement
Cement
In the most general sense of the word, a cement is a binder, a substance that sets and hardens independently, and can bind other materials together. The word "cement" traces to the Romans, who used the term opus caementicium to describe masonry resembling modern concrete that was made from crushed...
, glass
Glass
Glass is an amorphous solid material. Glasses are typically brittle and optically transparent.The most familiar type of glass, used for centuries in windows and drinking vessels, is soda-lime glass, composed of about 75% silica plus Na2O, CaO, and several minor additives...
, asbestos
Asbestos
Asbestos is a set of six naturally occurring silicate minerals used commercially for their desirable physical properties. They all have in common their eponymous, asbestiform habit: long, thin fibrous crystals...
, tobacco
Tobacco
Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...
Industrial production growth rate:
9% (2008 est.)
Electricity - production:
14.62 billion kWh (2006 est.)
Electricity - consumption:
9.555 billion kWh (2006 est.)
Electricity - exports:
12.83 billion kWh (2006 est.)
Electricity - imports:
9.839 billion kWh (2006 est.)
Oil - consumption:
14390 oilbbl/d (2006 est.)
Oil - proved reserves:
0 bbl (0 l) (1 January 2006 est.)
Natural gas - production:
1.65 billion cu m (2006 est.)
Natural gas - consumption:
1.45 billion cu m (2006 est.)
Natural gas - exports:
0 cu m (2005 est.)
Natural gas - imports:
0 cu m (2007 est.)
Natural gas - proved reserves:
127.4 billion cu m (1 January 2008 est.)
Agriculture - products:
cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, cashew nuts, sugar cane, tea
Tea
Tea is an aromatic beverage prepared by adding cured leaves of the Camellia sinensis plant to hot water. The term also refers to the plant itself. After water, tea is the most widely consumed beverage in the world...
, cassava
Cassava
Cassava , also called yuca or manioc, a woody shrub of the Euphorbiaceae native to South America, is extensively cultivated as an annual crop in tropical and subtropical regions for its edible starchy tuberous root, a major source of carbohydrates...
(tapioca
Tapioca
Tapioca is a starch extracted Manihot esculenta. This species, native to the Amazon, Brazil, Colombia, Venezuela, Cuba, Puerto Rico, Haiti, the Dominican Republic, Honduras, and most of the West Indies, is now cultivated worldwide and has many names, including cassava, manioc, aipim,...
), coconut
Coconut
The coconut palm, Cocos nucifera, is a member of the family Arecaceae . It is the only accepted species in the genus Cocos. The term coconut can refer to the entire coconut palm, the seed, or the fruit, which is not a botanical nut. The spelling cocoanut is an old-fashioned form of the word...
s, sisal
Sisal
Sisal is an agave that yields a stiff fibre traditionally used in making twine, rope and also dartboards. The term may refer either to the plant or the fibre, depending on context...
, citrus and tropical fruits; potato
Potato
The potato is a starchy, tuberous crop from the perennial Solanum tuberosum of the Solanaceae family . The word potato may refer to the plant itself as well as the edible tuber. In the region of the Andes, there are some other closely related cultivated potato species...
es, sunflower
Sunflower
Sunflower is an annual plant native to the Americas. It possesses a large inflorescence . The sunflower got its name from its huge, fiery blooms, whose shape and image is often used to depict the sun. The sunflower has a rough, hairy stem, broad, coarsely toothed, rough leaves and circular heads...
s, beef
Beef
Beef is the culinary name for meat from bovines, especially domestic cattle. Beef can be harvested from cows, bulls, heifers or steers. It is one of the principal meats used in the cuisine of the Middle East , Australia, Argentina, Brazil, Europe and the United States, and is also important in...
, poultry
Poultry
Poultry are domesticated birds kept by humans for the purpose of producing eggs, meat, and/or feathers. These most typically are members of the superorder Galloanserae , especially the order Galliformes and the family Anatidae , commonly known as "waterfowl"...
Exports:
$2.693 billion f.o.b. (2008 est.)
Exports - commodities:
aluminum, prawn
Prawn
Prawns are decapod crustaceans of the sub-order Dendrobranchiata. There are 540 extant species, in seven families, and a fossil record extending back to the Devonian...
s, cashew
Cashew
The cashew is a tree in the family Anacardiaceae. Its English name derives from the Portuguese name for the fruit of the cashew tree, caju, which in turn derives from the indigenous Tupi name, acajú. It is now widely grown in tropical climates for its cashew nuts and cashew apples.-Etymology:The...
s, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, sugar
Sugar
Sugar is a class of edible crystalline carbohydrates, mainly sucrose, lactose, and fructose, characterized by a sweet flavor.Sucrose in its refined form primarily comes from sugar cane and sugar beet...
, citrus, timber; bulk electricity
Exports - partners:
Italy 19.4%, Belgium 18.4%, Spain 12.5%, South Africa 12.3%, UK 7.3%, China 4.1% (2007)
Imports:
$3.292 billion f.o.b. (2008 est.)
Imports - commodities:
machinery and equipment, vehicles, fuel, chemicals, metal products, foodstuffs, textiles
Imports - partners:
South Africa 36.7%, Australia 8.5%, China 4.6% (2007)
Debt - external:
$4.316 billion (31 December 2008 est.)
Currency:
1 metical (Mt) = 100 centavos
Exchange rates:
meticais (MZM) per US dollar - 24.125 (2008 est.), 26.264 (2007), 25.4 (2006)
Fiscal year:
calendar year
See also
- Economy of AfricaEconomy of AfricaThe economy of Africa consists of the trade, industry, and resources of the people of Africa. , approximately 922 million people were living in 54 different countries. Africa is by far the world's poorest inhabited continent...
- Economy of South AfricaEconomy of South AfricaThe economy of South Africa is the largest in Africa, accounts for 24% of its Gross Domestic Product in terms of PPP, and is ranked as an upper-middle income economy by the World Bank, which makes the country one of only four countries in Africa represented in this category...
- Transportation in Mozambique