Introduction

Mozambique is one of the countries in Africa located in Southeast part of the continents. The country is bordered by Tanzania on the northern side, Indian Ocean on the east, South Africa to the southwest, and Zimbabwe on the west side. The capital city of Mozambique is Maputo while the largest city is Matola. Mozambique has wide range of natural resources with the economy of the country depending significantly on agriculture. Additionally, the industry sector is still growing with key developments noted in beverages and food sector, chemicals industries as well as petroleum and aluminum sectors. Another sector that plays a primary role in the economic growth of Mozambique is tourism. The major economic partners of the country include Portugal, Belgium, South Africa, and Brazil. The major source of foreign domestic investment in Mozambique is South Africa. This paper seeks to discuss the Mozambique economic development by looking at the major sectors that impact on the economy.

More inequality and Less Poverty

In 2018, Mozambique began to surface from an economic recession, even though the World Bank warned that the fiscal outlook of the country still remained fragile. According to the Mozambique Economic Update, the country appeared to be more stable than what was experienced in 2016, when the economic slump emanated from debt crisis in the country. The Gross Domestic Product of Mozambique as reported by the World Factbook was $37.09 billion in 2017 while in 2016 it stood at $35.76 billion (World Bank Forecasts for Mozambique, 2018). The growth opportunities in Mozambique are also improving due to recovery in relation to consumer spending. As the result of households’ income remaining the same while the costs increase, the consumer purchasing power has continued to reduce. On the other hand, the high-income households have been able to enhance their purchasing power notwithstanding the rising costs, leading to more inequality.

Prior to the colonization of most Mozambique and other African countries, their economic development was based on commodities such as cowries. The relevance of African market principles was thus understood using these commodities. To understand this notion we can use Ralph Austen view point: “First of all, it can be demonstrated that the movement of cowries and slaves across a complex international market operated according to predictable patterns of supply and demand” (Ralph, 1993, 270).

Mozambique Economic Update indicates that as the result of macroeconomic policies adopted by the government, there has been a reduction in poverty level. Nevertheless, due to the economic progress becoming less inclusive, the level of inequality has been rising. Between 2008 and 2014, poverty level reduced from 59% of the Mozambique population to 48% as the result of various positive developments established by the government. Despite these gains, there was been a widening gap between the poor and better-off. As a result, the economic disparity has acted as an obstacle towards Mozambique achievement of shared prosperity. This has made the country to be of the region with highest inequality among the nations in Sub-Saharan Africa. The strategy of moving from agricultural based jobs to service oriented opportunities such as retail and catering has resulted in declined productivity of Mozambique economy labor.

Economic Sector

After Mozambique gained independence in 1975 from Portuguese, the economic performance of major sectors including finance, manufacturing, tourism, and agriculture declined sharply. However, after the Mozambican Civil War, the sectors picked even though their performance is still below potential. The section below discusses the performance of major sectors in Mozambique.

Oil and Gas Reserves

The cent discoveries of gas and oil within East Arica, especially in Tanzania and Mozambique, have made the region to become a new player in the international gas and oil industry. Oil discoveries are expected to generate billions of dollars in yearly investment over the next 10 years. BMI notes that the discoveries emerge as the biggest globally and they are expected to continue in future. Nonetheless, the reducing oil prices at the global market act as major threats to commercial viability of the oil prospects an aspect that may negatively impact on the economic performance of Mozambique.

Forestry, Agriculture and Fishing

Agriculture is the main economic activity that drives Mozambique economy. This is based on the fact that the sector hires more than 80% of the country’s labor force making it to provide livelihood to over 23 million people. In 2009, Agriculture sector contributed 31.5% to Mozambique GDP. In the same year, Mozambique’s 20% of its total exports was derived from agriculture industry mainly through export of tobacco and tea, fish such as prawns and shrimps, cotton, copra, coconuts, and cashew nuts. The potential of agriculture in Mozambique is significantly high particularly in the northern region that is regarded as fertile. The major cash crops that have positively impacted on the economic growth of Mozambique are tobacco, sugar, tea, and cashew nuts.

The privatization of refineries and plantations is also a strategy that has made the country’s economy to expand (Pitcher 2002). This is based on the increased marine resources even though full exploitation is yet to be achieved. The end of Mozambican Civil War, made the displaced person to return to their lands resulting in the expansion of rural markets making Mozambique to dramatically expand its agricultural production.

Mining, Semi-Processing and Manufacturing

Poor infrastructure and Mozambique Civil War that took place between 1977 and 1992 constrained the exploitation of huge mineral deposits in Mozambique. According to the World Bank, by 2005, Mozambique had the capability to provide exports worth at $200 million but this was just standing at $3.6 million in 1990s. The major minerals that are mined in Mozambique include gemstones, marble, titanium, coal, granite, and gold. In 2011, the country exported the first batch of coal and with continued exploration of this mineral; the country focuses on becoming global leader in coal exportation.

In 1960s and 1970s, manufacturing sector in Mozambique was quite developed, but this declined sharply after the country gained independence from Portugal. Nevertheless, as the result of Mozal aluminum smelter expansion in 2001, industrial production increased by 33%. Even though Mozal is the biggest foreign investment in Mozambique, it has insignificant impact on the level of employment, but the investor is playing a key role in establishing a balance of payment of the country based on the taxes generated. In the 1st quarter of 2001, the manufacturing sector was worth $85 leading to 172% increase in total exports for Mozambique.

Telecommunication and Tourism

Mozambique telecommunication sector experienced a major reform after the end of civil war in 1992. For example, as the result of introduction of competition between mCell and Vodacom Mozambique in 2003, the mobile sub-sector experienced a major growth that impacted on the business operations in the country. The ongoing introduction of 3G and 4G mobile services, fibre backbone network, and EASSy, will make the country to improve the telecommunication system in the country ultimately impacting on the economic performance of the country.

In reference to tourism sector, the industry was negatively affected when the country gained independence. The strategy by Mozambique government is to enhance the development of low-volume and high-value tourism through the promotion of Peace Park that is focused on linking it with Gonarezhou and Kruger Park in Zimbabwe and South Africa respectively. Mozambique has also adopted the strategy of commodification to expand its tourism sector just like approach use in Kenya. We can use the contribution of George Meiu to emphasize this strategy: “The eroticized silhouette of the moran had become a popular commodity of Kenya’s tourist industry” (George, 2017, 4).

Macroeconomic Review

After the end of 1992 civil war, Mozambique was faced with high level of poverty and it was ranked as one of the poorest nations globally. However, the country has experienced a significant economic recovery in the last decade (Blanchard 2011). As noted by the World Factbook, Mozambique GDP in 2015 stood at $34.46, $35.76 in 2016 while in 2017 it was $37.09 million. GDP-real growth rate was 6.6% in 2015, 3.8% in 2016, and 3.7% in 2017. The GDP –per capita stood at $1,200 in 2015, $1,200 in 2016, and $1,300 in 2017. GDP composition by sector in 2017 was 23.9% for agriculture, 56.6% for services, and 19.3% for industry (The World Facebook).

Conclusion

Mozambique economic development has been impacted by various factors. The inequality and poverty level are major issues that have created disparities that have further affected the economy. Most of the sectors of Mozambique were highly performing during the Portuguese colonial rule possible due to effective management of resources in the country. If properly managed, the country’s main sectors including agriculture and mining will have positive impact on the economy thus making Mozambique to emerge as a country with a very strong economy within Sub-Sahara region. Mozambique should adopt stable macroeconomic frameworks that will enhance the advancement of economy by making financial instruments more accessible. Additionally, there is need to make Mozambican companies competitive in order to increase expert capacity besides focusing on creation of broad-based organizations with institutional capacities in order to create opportunities and enhance productivity.

 

 

 

 

 

 

 

 

 

Works Cited

Blanchard, Olivier 2011 “Macroeconomics Updated.” Englewood Cliffs.  Prentice Hall. 24-56.

George, Meiu 2017 “Ethno-erotic Economies: Sexuality, Money, and Belonging in Kenya.” Chicago and London. The University of Chicago Press, 1-39.

Pitcher, Anne 2002 “Transforming Mozambique: The politics of privatization.” Cambridge. Cambridge University Press, 27-68.

Ralph, Austen 1993 “The Moral Economy of Witchcraft:  An Essay in Comparative History”, Modernity and its Maleontents, edited by Jean Comaroff and John Comaroff, 89-110. Chicago: University of Chicago Press.

The World Facebook. Mozambique-Economic  Overview. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/mz.html

World Bank Forecasts for Mozambique, June 2018. World Bank .Retrieved 13 May 2019. https://www.worldbank.org/en/country/mozambique/overview