Investment Opportunities In Mozambique

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Mozambique is a country located in Southern Africa bordering the Indian Ocean. It shares borders with Tanzania to the north, Malawi, and Zambia to the northwest, Zimbabwe to the west, and Eswatini and South Africa to the southwest.

South Africa is Mozambique’s main trading partner and source of foreign direct investment, while Belgium, Brazil, Portugal, and Spain are also among the country’s most important economic partners. Mozambique’s economy is dependent on agriculture. Agriculture employs 71 percent of the country’s active population and accounts for 24.5 percent of GDP. The country is also rich in natural resources such as gold, bauxite, graphite, marble, high-quality iron ore, and coal and has an abundance of marine resources that are not fully exploited. Mozambique has hydroelectric potential and possesses the world’s largest reserves of tantalite.

Top Ten Sectors to Consider for Investment in Mozambique include:

  • Agriculture
  • Real Estate
  • Mining and Quarry
  • Logistics and Warehousing
  • Manufacturing
  • Hotels and Hospitality Sector
  • Tourism
  • Heavy Industry and Construction
  • Telecommunications

The country gained its independence from Portugal on 25 June 1975. It is a Presidential Republic with the President sitting as the Head of State and Government. Its capital is Maputo and it has an administrative structure divided into 10 provinces. It runs a unicameral National Assembly as a legislative arm of the government. Portuguese is the official language while Makhuwa, Tsonga, and Nyanja are also common local languages.

Christianity is the major religion while Islam also exists in minimal numbers. It has a mixed legal system that includes Portuguese civil law, customary law, and Islamic law is applicable in predominantly Muslim villages with no formal legal system. It has an area size of 0.799 million square kilometers. Mozambique is a member of the Southern African Development Community providing market access to the member states.

Mozambique is endowed with rich and extensive natural resources. The country’s economy is based largely on agriculture, but there is rapid growth in food and beverages, chemical manufacturing, and aluminum and petroleum production. The tourism sector is also expanding.

South Africa is Mozambique’s main trading partner and source of foreign direct investment, while Belgium, Brazil, Portugal, and Spain are also among the country’s most important economic partners. Since 2001, Mozambique’s annual average GDP growth has been among the world’s highest.

Mozambique has yielded varied and abundant agriculture, and the great Zambezi River has provided ample water for irrigation and the basis for a regionally important hydroelectric power industry.

 

Investment Opportunities In Mozambique

 

Economic Overview:

Mozambique’s economy is dependent on agriculture. Agriculture employs 71 percent of the country’s active population and accounts for 24.5 percent of GDP. The country is also rich in natural resources such as gold, bauxite, graphite, marble, high-quality iron ore, and coal and has an abundance of marine resources that are not fully exploited. Mozambique has hydroelectric potential and possesses the world’s largest reserves of tantalite. Huge offshore gas reserves were discovered in 2010 and could turn the country into one of the main LNG producers in sub-Saharan Africa. Its currency is Mozambican metical. Main exports include prawns, sugar, aluminum, cotton, bulk electricity, cashews, etc. Major imports include petroleum products, foodstuffs, machinery and equipment, textiles, vehicles, chemicals, etc.

Foreign Direct Investment:

Foreign direct investment was 2.2 billion dollars which accounted for 14.26 percent of the GDP, as of 2019. Mozambique’s annual GDP growth was 2.28 percent per year in 2019. Its total investment rate was 39.24 percent of GDP in 2017

 

Top Ten Sectors to Consider for Investment

Agriculture:

Mozambique is generally considered an agricultural region. Of its 801,537 square kilometer landmass, the World Bank estimates that about 63,5 percent of it is suitable for agriculture, making it one of the countries with a vast piece of tillable land. The agricultural sector in the country currently employs about 75 percent of its workforce and contributes to 25 percent of the total economic output, measured by gross domestic product.
However, despite the huge importance of agriculture to the country, the sector is still the least explored; with food shortages still prevalent. Annually, billions of foreign exchanges are used to import food crops to supplement the local produce, which comes mainly from the peasant droppers in the hinterlands. There is a huge investment opportunity for poultry farmers and feed producers alike.

In the area of farming, a gap also exists in the inputs. The majority of the country’s farmers still rely on simple tools such as the traditional hoe and cutlass. Again, investors could also look to irrigation, an area that the current government is investing a lot of attention in. With recurrent droughts in the northern part of the country, an investor’s ability and willingness to construct dams at vantage points would mean that smallholder farmers could do all year round farming and that will go a long way to supplement existing farms.

Another area to watch in the agricultural sector is agro-processing. Agric-based investors could also set up to process some of the country’s numerous fruits for the local and regional markets.

Real Estate:

All over the world, real estate is big business. The situation is not different in Mozambique, where the housing deficit is one of the albatross around the neck of the new government. Although not many of those in the housing deficit gap is capable of owning sizeable houses, the few that can, do not have access to properly constructed houses, a challenge that presents a big business opportunity to investors. Real estate developers could easily capitalize on the deficit to supply low-cost but well-constructed properties for sale or rent. Shopping malls, high-rise buildings for office and residential rentals, and hotels are also hotcakes.

Closely related to that are the inputs in the sector. With the estate sector booming, building input suppliers can be assured of a good market, especially those that are set up strategically in emerging peri-urban communities which is another strategy investors should not lose sight of when setting up their operations. This is where the issue of affordable housing comes from. With big estate developers from neighboring South Africa and other countries coming in, not all Mozambicans can afford the prices of their products, something that calls for segmentation of the market to suit the relatively low income earning locals. This presents an opportunity for local developers struggling to match up to their foreign counterparts. A lot of them must team up, acquire land and build low-cost residential properties for rent or sale to locals and that will serve two purposes – bridge the yawning housing deficit and increase their earnings. It will also help create employment for the teaming youth.

Energy: Energy is big business in Mozambique and investors interested in the sector could take a step now. Following the liberalization of the electricity sub-sector in July 1997, private investments in that area have picked up, albeit slowly. The country still has enormous resources for the production of energy, large hydro resources, coal, natural gas, biomass, and high levels of solar radiation. These present some enormous opportunities for energy sector investors either in the production, distribution, or transmission. Indications are that demand for electricity in the country would grow around 11 percent each year. With the new reforms, both the national and international players have equal opportunities and that should be good news to investors from both divides. Solar power and hydroelectric power can create power for domestic use as the electrical power grid only reaches 14 percent of the population. The deficit in the supply also means that alternative power sources such as solar and wind could be explored. Small-sized power plants will also be in good demand by businesses and individuals suffering power blackouts. All these are sectors investors could look at.

Mining and Quarry:

Mozambique has a significant amount of mineral deposits in coal, natural gas, gold, oil, diamonds, and titanium. Following an increase in geological studies, there has been a vast increase in investment by the leading international and regional mining companies. That notwithstanding, the sector still contributes minimally to GDP, mainly as a result of a series of challenges limiting its progress. The constraints in the sector include poor infrastructure, one challenge that presents an investment opportunity for infrastructure-focused investors. Mozambique’s mining sector has been growing due to the presence of international mining companies. The other known deposits are graphite, marble, bentonite, coal, gold bauxite, granite, fluorite, diatomite, emeralds, tourmaline, apatite, and limestone.

Logistics and Warehousing:

Mozambique’s energy boom is complemented by a rapid infrastructure build. Yet transport capacity and logistics remain the biggest challenges in the country.

Manufacturing:

At the time of independence, Mozambique’s industrial base was well developed by Sub Saharan standards due to the boom in investments in this sector in the period 1960 to 1970. The sector has benefited immensely from the macroeconomic situation and the increase in the demand resulting in massive foreign investment and high economic growth. The food processing sector is one of the largest segments of this industry. Light manufacturers, such as beverages, textiles, and wood processing are also important. The manufacturing sector in Mozambique is very lucrative.

Hotels and Hospitality Sector:

Reports show that finding a place to sleep in Mozambique for less than 250 dollars per night generally entails staying in a local bed and breakfast is still around 120 dollars per night, or at a guesthouse in someone’s backyard. High prices have however not lowered occupancy rates. Instead, high demand, largely due to the booming energy industry, begs for more hotel development. This presents a good investment opportunity for investors interested in the hospitality sector. Investors that push some good money into building high-class but moderately priced hotels could be smiling with handsome rewards if they get the right management in place. This could be augmented by the increasing tourist arrivals to the country, another area that should be of interest to investors.

Tourism:

Mozambique is blessed with numerous beaches that are of interest to many tourists who throng the country for site seeing and conferences. With these breathtaking beaches, ideal tropical climate, world-class scuba diving, and diversified wildlife, Mozambique needs hotels, lodges, and resorts to attract a growing tourism industry. The average amount of investment approved for the tourism sector in Mozambique each year was 600 million dollars between 2005 and 2008, reaching a peak of 977 million dollars in 2007. Hotel attendance has risen by 15 percent annually since 2005. It is one of Mozambique’s major foreign exchange earners.

Heavy Industry and Construction:

Inadequate infrastructure implies continued construction for the near term. New buildings and transport facilities, including roads, are set to boost demand. However mining sites stall as they wait for delivery of structural steel products, says a local investment executive. Heavy industry and construction are easy ones in Mozambique because the demand is simply a by-product of the booming energy sector and growing consumer base. Some local optimists believe growth is set to be an easy upward trend for Mozambique. But realistically, without more foreign investment, it could also stall.

Telecommunications:

Mozambique was one of the first countries in the region to reform its telecom sector. As of December last year, mobile penetration was estimated at 62 percent, fixed lines at 0.3 percent, and internet usage hovering around 8.2 percent according to market research. The lower internet and fixed-line penetration mean that investors who invest in those areas could be guaranteed good returns.

 

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Conclusion

Mozambique is rich in natural resources such as gold, bauxite, graphite, marble, high-quality iron ore, and coal. Top Ten Sectors to Consider for Investment in Mozambique include Agriculture, construction, tourism, real estate, energy, Hospitality, telecommunications, logistics, and manufacturing.

 

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