Mozambique is a Portuguese-speaking country located in southern Africa along the Indian Ocean. With a surface area roughly the size of Texas and Louisiana, the country’s coastline is over 1600 miles long extending from Tanzania to South Africa, or roughly the distance from Miami, FL, to Portland, ME. The economy continues to suffer due to the economic slowdown from the COVID-19 pandemic and, more recently, the war in Ukraine, which has resulted in rising fuel and bread prices. GDP contracted by 1.3% in 2020 due to the pandemic, but rebounded for 2.2% growth in 2021. According to the World Bank, growth is expected to accelerate in the medium term, averaging 5.5% between 2022 and 2024, mainly reflecting expected gains from increased mining activity and new natural gas production.

Traditionally, GDP has been dominated by the agriculture, construction, and financial sectors. Although the informal agriculture sector employs approximately 70% of the population, it only contributes around 25% of GDP, reflecting inefficiencies, lack of economies of scale, and low value-added processing. This and an underdeveloped industrial sector have limited its participation in the African Growth and Opportunity Act. However, the Government of Mozambique continues to identify agriculture as a priority sector and seeks to develop it through a $500 Million loan from the World Bank called the SUSTENTA initiative meant to transform small holder farmers into sustainable producers. Additonally, the government is embarking on its National Program to Industrialize Mozambique (Programa Nacional Industrializar Moçambique; PRONAI), initiative to move the country up the value chain through selective import substitution and parks for industry and agroprocessing.

The Government of Mozambique has programs designed to encourage foreign direct investment (FDI). Currently, FDI is largely concentrated in the infrastructure and mining sectors. Mozambique possesses abundant mineral reserves of coal, copper, aluminum, gold, gemstones (notably rubies), iron, and critical minerals including graphite, vanadium, titanium, tantalum, lithium, rare earth metals. FDI investment slowed dramatically beginning in 2015 largely due to a drop in commodity prices, especially coal and aluminium. The Government is interested in growing the mining sector by increasing extraction of critical minerals important to the global energy transformation and eventually moving into mineral processing, starting with steel production. The Government of Mozambique has also made tourism a key development sector and includes the country’s pristine beaches and vast parks with diverse wildlife among its natural resources.

Several megaprojects are projected to be the key drivers for the Mozambican economy in the next five years and will provide both direct and indirect business opportunities. The most significant opportunities are the construction of separate onshore LNG plants by separate consortia led by Total S.A. and ExxonMobil/ENI, valued at $23 billion and over $20 billion, respectively. Exploration activities by ExxonMobil, ENI, and others will provide further opportunities in the oil and gas sector. Terrorist activity in the Cabo Delgado region since 2017 has delayed the development of the country’s large-scale, onshore, export-focused liquid natural gas (LNG) projects, although a smaller-scale floating LNG platform will commence production in 2022.  

In June 2019, Mozambique and the United States Department of Commerce entered a Bilateral Memorandum of Understanding on Commercial Relations and Priority Projects to help facilitate trade and investment in the areas of agribusiness, energy, infrastructure, fisheries, financial services, and tourism —the first ever negotiated between the two countries.

South Africa is Mozambique’s largest trading partner. China, India, the Netherlands, and Portugal are also important trading partners. U.S. and French-led international investments in the energy sector are expected to create significant demand for U.S. exports once the security environment permits these investments to go forward. Because of their investment in the oil and gas sector, both countries may be among the largest investors in Mozambique in the next decade. Because Mozambican natural gas projects are targeting their exports to Asian and European markets, these may become major importers. Mozambique is dependent on donor support for governement spending and development needs. The largest bilateral donor of development assistance is the United States, with over $500 million in annual development assistance.  The United States Millennium Challenge Corporation (MCC) aims to sign a second Compact with Mozambique in 2023.  The World Bank and Africa Development Bank (AfDB) are the largest financiers of infrastructure development.

Similar to other emerging markets, Mozambique has a very weak electrical infrastructure that is concentrated in urban locations but sparse throughout rural areas. Its limited transmission capacity separates the country’s northern and central grids from the southern grid. In some areas, it is common for industry and business to rely on backup generators for long periods of time due to intermittent power supply. However, Mozambique also has the largest power generation potential in the SADC region, largely in opportunities for future hydropower development. It is planning to grow its power generation capacity by adding natural gas, other fossil fuels, and renewables to its energy mix. One of the most successful infrastructure projects in Mozambique, the Cahora Bassa Hydroelectric Dam, has a 2075MW capacity. It is in Tete Province on the Zambezi River and supplies power to Mozambique, Zimbabwe, and South Africa. Mozambique has strong potential for hydroelectric and thermal power generation, as well as solar and wind along its lengthy coastline. However, the underdeveloped power grid and bureaucratic hurdles make the development of power projects difficult and time consuming. The Government of Mozambique has committed to full electrification of the country by 2030. This effort includes large generation, transmission, and distribution projects.

Although less than a quarter of the population has access to internet, the COVID-19 pandemic played a crucial role in accelerating Mozambique’s digital transformation. As in much of the world, the ICT sector became an alternative means for ensuring continuity in economic development by supporting business, health, education, and social activities while urban Mozambicans observed social distancing requirements. These activities created demand for complimentary solutions including data storage, cloud computing, and cyber security.

The transportation sector is expanding, driven by major investments in ports and road infrastructure. There are three major ports in the country: Maputo in the south, Beira in the center, and Nacala in the north. These ports define the three east-west transportation corridors in the country through which Mozambique connected the interior of the continent with the Indian Ocean. Geographically, Nacala Port is considered one of the best deep-water ports in East Africa; it is operated by the state-owned enterprise CFM. The other two ports, Maputo and Beira, are operated by Dubai Port World and Cornelder, respectively. The far northern ports of Pemba and Palma will require substantial upgrades in order to provide logistics support for oil and gas projects. Infrastructure and construction project development remain bright spots of economic activity in Mozambique despite the general economic slowdown.

Basic Economic Statistics:

• Total Population in 2021: 33 million
• Real GDP growth 2021: 2.2%
• Nominal GDP in 2021: $16.1 billion
• GNI per capita in 2020: $460
• Total Exports in 2020: $3.5 billion
• Total Imports in 2020: $6.4 billion
• Total Imports from U.S. in 2021: $190 million
• Exchange rate (November 2022): MZN63.83 equal $1
• Average Inflation Rate (August 2022): 12.1%
• Commercial Bank Prime lending rate (November 2022): 22.5%

Mozambique’s Trade with the U.S. and the World