ECONOMY: Mozambique’s Growth Rate the Envy of its Neighbours

By James Hall Reprint | | Print |

James Hall

MAPUTO, Nov 21 2001 (IPS) - Mozambique, which a decade ago was ranked as the world’s poorest country, now has a growth rate that is the envy of its neighbours in the Southern Africa region.

While the 14 nations that comprise the Southern Africa Development Countries, from diamond rich Botswana to the regional economic powerhouse South Africa, dawdled along at an average annual growth rate of 3.2 percent, Mozambique this year achieved 15 percent.

Next year will see a projected 10 percent growth rate.

True, Mozambique is starting from a base of almost nothing, as a nation ravaged by 15 years of civil war undertakes reconstruction. But much of the growth is credited to an influx of foreign direct investment from Australia, Europe and Asia, with the former colonial power Portugal scrambling to catch up.

Also remarkable is the Indian Ocean nation’s recovery from last year’s devastating flooding that inundated the southern provinces and left 400,000 people homeless. The setback caused last year’s gross domestic product to decline by 2 percent, only to rebound in 2001 as the first of the large-scale infrastructure projects went on line.

“From dramatic Ocean choral reefs yet to be explored by tourists to deposits of natural resources that have lain dormant during the decades of civil war, this country represents an opportunity for the resilient Mozambique people and for savvy investors from overseas,” says Muriel Sithole.

Sithole works for the Mozambican Business Woman Association in Maputo.

Maputo, the capital city is now connected to Johannesburg via the country’s first toll road, completed this year as part of the Lubombo Spatial Development Initiative entered into by Mozambique and South Africa as a way to develop their shared Lubombo mountain region.

As a buyer of Mozambique goods, and a key source of tourists and imported products, neighbouring South Africa plays a crucial role in Mozambique’s recovery. But it is not the only player. Of the 200,000 foreign visitors to Mozambique last year, welcomed by a population of 16 million, the group most numerous following South Africans were from Portugal, followed by Americans.

A four-nation consortium provided financing to build the 1.5- billion-U.S.-dollar Mozambique Aluminium Smelter, Mozal, outside Maputo. In operation for only a year, the smelter’s output accounts for 4 percent of Mozambique’s gross domestic product (GDP).

On the first anniversary of the plant’s opening, Joaquim Chissano, the country’s president noted, “Mozal proves this investment in Mozambique was not only a vote of confidence for our recovery efforts from war and natural disaster, but also a sound business investment.”

Leading the way in the revival of the mining sector, Mozambicans have been granted the bulk of the 40 prospecting licenses issued this year. However, they must compete with an estimated 1,000 illegal mining operations which thrive in the central interior mountains where law enforcement broke down during the civil war and is only now being restored.

The war left a legacy of land mines; tens of thousands of are believed to be planted in the soil, complicating agriculture initiatives and imperilling ordinary Mozambicans, farmers and travellers.

Most Mozambicans remain desperately poor, with 11.3 million people living in absolute poverty according to a U.N. survey.

Government has unveiled a plan to cut poverty in half by 2010, though this will still leave 10.8 million people living in poverty when the country’s population growth rate of 2.3 percent is considered.

Prime minister Pascoal Mocumbi’s five-year Economic and Social Plan has as its principal goal poverty alleviation.

“Mozambique is a capitalistic economy, but we have not lost sight of our concern that the newly developing wealth of our land be shared by all the people, many of whom today struggle with basic needs,” Mocumbi told an assembly of donor nations in Rome this year.

In October, international donors met in Maputo, and pledged 700 million U.S. dollars in development assistance. Eighty percent of the funds are outright grants. The country is also entitled to debt relief under the Highly Indebted Poor Countries Initiative.

Also in October, the South African banking group Absa spent 10 million U.S. dollars to purchase controlling interest in Mozambique’s Banco Austral.

“The deal is the largest we’ve seen in the country’s financial sector, and it comes from Absa’s desire to have a base of operations in Mozambique to pull off the deals,” says a news producer with Radio Mozambique.

Another major South African country, the petrochemicals and synthetic fuels group Sasol, plans to invest over one billion to expand its existing fuels and chemical plant, Secunda.

The firm is spending another one billion to build a natural gas pipeline set to deliver 40 million cubic feet of natural gas a day from the Pande and Temane gas fields, through the Secunda facility, and into South Africa.

Industry and financing remain secondary sectors compared to the engine of Mozambique’s economy, noted Planning and Finance Minister Luisa Diogo. “The agricultural sector was the main contributor to our growth rate last year.”

And down on the farm, for Simeo Ferrao, whose maize crop may end up in Zimbabwe, Zambia, Malawi or Tanzania, which are all importing Mozambique grain, “The market has never been so good. I am going to expand my fiends next year. Many of us are making a decent living now.”

Sugar cane is another crop that small landholder farmers may grow for a profit. To process the cane, the Development Bank of Southern Africa has granted a 12-million-U.S.-dollar loan to rehabilitate Mozambique’s largest sugar mill, Marromeu, near Beira.

When war damage is repaired, production is expected to rise from this year’s 30,000 metric tonnes to a full capacity of 100,000 metric tonnes. Over 10,000 hectares of sugar cane along the Zambezi River will be replanted.

The mill testifies to both the nation’s revival and the international interest in seeing this happen: a consortium headed by the Mauritian sugar producer Champanhia e Sena SARL, reopened the mill in 1998.

Some 116 million U.S. dollars will be spent to return operations to normal. But when this is done another potent symbol of accomplishment will be realised, one as important to the agricultural heartland of the Zambezi river valley as the Mozal aluminium smelter is to the reawakening industrial scene in Maputo.