Mozambique Business Overview

by Alex Daruty | Mar 18, 2021 | Business Expansion

Mozambique borders Tanzania, Malawi, Zambia, Zimbabwe, South Africa, and Eswatini. Its long Indian Ocean coastline of 2,500 kilometres faces east to Madagascar.

About two-thirds of its population of more than 31 million (2020) live and work in rural areas. It is endowed with ample arable land, water, energy, as well as mineral resources and newly discovered natural gas offshore; three, deep seaports; and a relatively large potential pool of labour. It is also strategically located; four of the six countries it borders are landlocked, and hence dependent on Mozambique as a conduit to global markets. Mozambique’s strong ties to the region’s economic engine, South Africa, underscore the importance of its economic, political, and social development to the stability and growth of Southern Africa as a whole.

Economic Outlook

Mozambique’s economy is expected to gradually recover in 2021, but substantial downside risks remain due to uncertainty surrounding the path of the COVID-19 (coronavirus) pandemic. While the economy registered its first contraction in 2020 in nearly three decades, growth is expected to rebound over the medium-term, reaching about 4% by 2022.

As the recent Mozambique Economic Update (March 2021) notes, the country needs to press ahead with its structural reform agenda as the pandemic subsides. In the near-term, measures to support viable firms and households would be crucial for a resilient and inclusive recovery. In the recovery phase, policies focusing on supporting economic transformation and job creation, especially for the youth, would be critical. Targeted interventions to support women and alleviate gender inequalities as well as to harness the power of mobile technology would support sustainable and inclusive growth in the medium term.

Opportunities in Mozambique

Improving Costal Cities Resilience

For years, the coastal city of Beira has been hit by violent storms and recurrent flooding. With poorly planned settlements, inadequate housing and the effects of climate change worsening, large portions of the city’s residents were left vulnerable to climate-related disasters. Through the Mozambique Cities and Climate Change Project, funded by $120 million IDA credit, the city has strengthened its resilience to weather-related hazards. The project upgraded and built 11 km of drainage canals, installation of six flood control stations and the construction of a 170, 000 cubic meter large water retention basin, among other benefits.

Supporting an enabling environment for sustainable fishery 

Through several initiatives, the Bank-supported SWIOFish Project is helping Tanzania and Mozambique fishing communities increase their fish stocks and restore livelihoods and fisheries. The project also helped significantly reduce the illegal fishing practices such as blast fishing in Tanzania. In Mozambique, the project is providing financing to fishing associations, and helping fishers, particularly women, save their earnings, borrow money and grow their businesses.

Providing Low-Cost Irrigation for Smallholder Farmers

The Bank is investing $70 million to help small farmers grow and sell rice and vegetables through rehabilitated and expanded irrigation schemes in the central provinces of Manica, Sofala, and Zambézia. More than 6,000 people have directly benefited from the Sustainable Irrigation Development Project (PROIRRI) so far. At completion, the project is expected to ensure irrigation more than 3,000 hectares, of which 1,700 ha are dedicated to rice production, 800 ha for horticulture, and 500 ha for contract production. 

Supporting Rural Electrification in Mozambique

The World Bank supports the expansion of photovoltaic solar energy programs, connecting over 500 rural health centres and 300 schools throughout Mozambique. IDA-funded projects which contributed to building new transmission lines and distribution networks, expanding access to electricity. The Bank also supports the use of environmentally-friendly cooking stoves, which brings down pressure on wood fuels, reduces deforestation, and protects women and children against carbon monoxide and volatile particles emanating from coal. 

The World Bank Group works closely with other development partners to improve the quality and effectiveness of development assistance to Mozambique. Collaboration with development partners has also focused on education, health, roads, and fiduciary and monitoring and evaluation.