General Information

Economic Indicators

Trade Indicators

Economic Overview

In the late 1980s, the government declared its intention to move towards a market-based economy with the assistance the World Bank and the IMF. Given the enormous economic problems facing Mozambique at the time the transformation has been gradual. The private sector is growing but remains small due to the lack of private capital and domestic credit. Some estimate that the government still accounts for 70% of the formal economic sector, though the informal sector represents a growing share of the overall economy. The government's privatisation program has sold  about 270 mostly small and medium size companies, with the larger parastatals scheduled for sale within the next two the three years. The successful privatisation of these larger firms will further reduce the role of the government in the economy. 1

Commerce and services are the largest sectors of the economy followed by agriculture at 26.3% of GDP in 1997 - although this is believed to be an underestimate given gaps in official sources. Recent research indicates a very active informal sector to the extent that GDP may be underestimated (in 1997) by some 70%. Agriculture is experiencing very rapid growth with the restoration of rural markets following the end of the civil war. 2

Mozambique currently has US$ 11 billion in proposed foreign investment in a number of major project across a range of sector including transport, mining, energy manufacturing, agriculture and tourism. Regulations regarding FDI are still cumbersome but the government has established the Centre de promocao de Investimentors (CPI) to promote and facilitate investment. 3

Regulatory Environment

Mozambique is very receptive to foreign investment, which is considered a vital component in Mozambique's economic reconstruction. New laws more favourable to investment were enacted in mid-1993. Acquisitions, mergers, takeovers, and "greenfield" investments are all permitted. Investment proposals are channelled through the CPI, the government organisation established to assist investors implement their projects. CPI's effectiveness continues to receive mixed reviews from foreign investors. 4

Investments made by foreign investors in new business or those destroyed or damaged by the civil war will benefit from a 50% reduction in corporate taxes while the investors recover their investment, for a period not to exceed 10 years. If the investment is made in the provinces of Niassa, Tete, or Cabo Delgado, the tax is reduced by 80%. Following the expiry of these tax benefits, investments in these three provinces will receive a 50% reduction in corporate taxes for an additional six year. Investments in Sofala, Manica, Zambezia and Nampula will receive a 40% reduction in corporate taxes for an additional three years. In the remaining provinces, investment projects outside of provincial capitals will benefit from a 25% reduction for an additional three years. The minimum investment required to benefit from these fiscal incentives is US$50,000. 5

Current Process of Liberalisation

"Mozambique has emerged as a rapid reformer in recent years as the government has accelerated the implementation of market-based economic policies [that] have established the country as a model for post-war rehabilitation and economic reform." 6

Public sector reform is intended to be wide-ranging, including the overhaul of the role and management of the public service, decompression of salaries and review of general remuneration. Budgetary reforms are being to increase both efficiency and transparency in resource allocation and procurement under the Government's Fiscal Management Reform Strategy (FMRS). The objective of the Government's fiscal policy is to strengthen revenue and work towards progressive reduction in expenditure funded by external assistance. The chief priorities of structural adjustment in the 1990s  have been the deregulation of the trade regime, the privatisation of major state-owned enterprises and opening up the economy to international markets. Mozambique has implemented one of the most rapid and successful privatisation programs in sub-Saharan Africa. 7

"The development of the private sector is the cornerstone of the government's reform and economic development plan". The Federation Economic Associations (CTA) is the main private-sector organisation articulating private-sector opinions on policy issues. 8

In the area of foreign invetment the government has established the CPI to serve as a "one-stop shop" to assist foreign investors manoeuvre through the government bureaucracy. Previously there was no standard methodology for registering a foreign investment, and each investment, and each investor negotiated his own package of financial incentives with the government. 9

Mozambique does not have nay major bilateral trade agreements. However it is a member of COMESA and SADC that offer certain preferential terms for trade among their members, though trade with member states represents only a small percentage of Mozambique's overall trading activity.

1. CIA World Fact Book 1997 (http://www.odci.gov/cia/publications/facbook/country-frame.hmtl).
2. Country Profile: Mozambique : 1999-2000 (Economist Intelligence Unit, London, 1999), pp.23-24.
3. Ibid, pp. 31-33, 45.
4. CIA World Fact Book....
5. Ibid..
6. Country Profile... 1999-2000, p.25.
7. Ibid., p.27
8. Ibid., p.26
9. CIA World Factbook...