Could Mozambique become an African economic dragon?
On 27 February, the President of Mozambique, Armando Emilio Guebuza – on a visit to the Netherlands – delivered an address to the Dutch community to attract private investment. Over the past decade, successive presidents of Mozambique have paid regular tribute to their main economic partners who have played their part in making Mozambique one of the more attractive economies in Africa. Over the past few years, Mozambican exports have grown at an average rate of 10 per cent per year and the forecast for 2008 is 7 per cent.
Maputo.
© Umberto Marin-TimeForAfrica Onlus.
Since the year 2000, Mozambique's economy has recorded an annual growth rate of 8 per cent and the country has benefited from increasing foreign direct investment, specifically in mineral resources but also in industry, agro-industry and services, whilst infrastructure building is still booming. At the same time, the country has implemented successful fiscal and monetary policies. This has brought down the inflation rate from 13 per cent in 2002-2004 to 9 per cent in 2005-2007. Mozambique is also striving to maximise agriculture and small enterprises. Changes to taxation and the banking system have been made in favour of small entrepreneurs. The Ambassador of Mozambique to the Benelux and the European Communities, Maria Manuela Lucas, followed up a visit of her President to the Netherlands, focusing her speech in Utrecht on a sound financial industry in rural areas.
The Netherlands is a good example for Mozambique. In his speech in Rotterdam, President Guebuza noted that “in 2006, [Mozambique's] exports to the Netherlands amounted to over US$1.4 bn against US$6.5M in 2001. Similarly, imports from the Netherlands increased from US$9.4M in 2001 to US$423M in 2006.” With US$1M invested in Mozambique in 2003, China ranked ninth in the table of top investors in the country. By 2007, it had climbed to sixth place with US $60M invested, but still some way behind top investor, the United States of America with US $5bn.
Over the past few years, Mozambique has grown in its attractiveness as an investment destination. It is one of the countries whose foreign investments have been guaranteed by the World Bank's Multilateral Investment Guarantee Agency (MIGA) since 1994. Among the sectors in MIGA’s portfolio are manufacturing, agribusiness, tourism, oil and gas and infrastructure. The tourism sector, for instance, registered a total of US$144M in 2006. And the unspoilt wilderness of the Niassa Reserve of Northern Mozambique has become a big tourist destination. The Mozambique government is expecting large gains from this sector during the 2010 World Cup in South Africa.
The elimination of subsidies, reduction and simplification of imports tariffs and liberalisation of crop marketing feature among economic reforms. A large privatisation programme was implemented in the banking sector and in state manufacturing companies. New tax codes were adopted to lessen the impact of past inflation.
In the near future, Mozambique has the potential to develop big niches in various sectors. Only a small amount of its oil and gas reserves have been exploited so far and it has huge mineral resources. The government is putting a lot of emphasis on the development potential of agriculture, not only for consumption but also for energy. Estimations of the country’s bio-energy potential are around 40M litres of bio-diesel and 21M litres of bio-ethanol per year. The government is, however, fully aware of the need to balance such potential with farming to feed its people. Economic growth seems to have been unaffected by the 2007 floods in the country.
Could Mozambique soon become an African economic dragon? The answer is linked to another question. Despite the current growth rate, how long will it be to bring down the figure of 50 per cent of the Mozambican population still living in poverty? Mozambique's government also seems to be fully focussed on this issue.
