HomeOpinion & AnalysisColumnistsIs Mozambique trending or trading?

Is Mozambique trending or trading?


There has been good news coming out of Mozambique of late which has made the country trend on the foreign investment dashboard. It has been reported Mozambique is one of the fastest growing economies in Africa, since the mid 1990s. But its people remain poor.

The good news ranged from the acquisition of the Cabora Bassa hydroelectric power facility from Portugal which gave Mozambique ownership of the electricity producing company.

The recent discovery of offshore oil deposits in the northern part of Mozambique which is currently being explored by an American company is likely to transform Pemba, a place known to have among the best beaches in the world.

This is one of the best things to happen in Mozambique in recent history. Coal mining, the prevailing peace which has attracted an invasion by the Asians and plans by a Brazilian pharmaceutical company to establish a mega anti-retroviral drugs project complete the story.

From 1995 to 2007 the total foreign direct investment in Mozambique amounted to $1,8 billion and the government was targeting $4 billion by 2011.

When one looks at this picture, it is easy to conclude that Mozambique is both trending and trading. In fact, it reflects quite positively on the gross domestic product (GDP) at macro-level given the history of the country. But still Mozambicans are not feeling all these developments.

The story of poverty and crisis in Mozambique has been a sad one. From infrastructure destruction by the Portuguese at independence to the civil wars which threatened to tear the country apart. Instead of focusing on development, the government was forced to acquire debts to finance a war.

When the country gained independence in 1975, its economy was predominantly agriculture-based, with little industrial development. seventeen years of civil war subsequently ravaged the country, leaving it one of the poorest, most debt-ridden countries on the African continent.

Since then Mozambique has fiddled with economic policy adjustments such as tax incentives and a relaxed share-holding quota system in order to attract foreign investment. Until the recent Asian stampede, nothing seemed to be working for a country which rates among the poorest in the world.

From the surface the current stampede by foreign investors signals the rise of a giant, a country endowed with so much in natural and mineral resources. And indeed Mozambique is trending.

Chinese and Indian investors mean business and their interest includes everything and anything that meets raw material needs of the colossal appetite of their growing manufacturing industry.

I remembered a conversation with a Mozambican colleague who complained most of these big companies were not bringing any development to Mozambique. He said in addition to tax incentives, foreign companies bring their own staff leaving the cleaning jobs to locals.

Instead of investing in infrastructure development as we have known of mining companies, they are constructing temporary houses which last less than a decade.

He sees Mozambique benefiting nothing apart from having a positive GDP on paper while the majority of people are languishing in poverty. In fact the majority of people are not part of or aware of these developments.

I remembered some observations by Jim ONeil in his book The Growth Map, Economic opportunities in the BRICS and beyond.

ONeil makes startling observations the new hunger for resources is more brutal than the previous colonial regime in the sense that colonialism at least left some traces of infrastructure and economic development while the current trends are more exploitative and corrosive.

Like the former colonial powers, they (Chinese) go to Africa to sign agreements, but it is not obvious the reason they do so is because they care about Africa.
It is the case today China and its investors are more concerned with China than its external responsibilities.

There we have it. Perhaps what we call a Look East policy to the Chinese is an invitation to come and exploit us as much as they wish, as long that makes the British and Americans angry.

To confirm ONeils argument, none of the multinational company in Mozambique seem interested in anything more than getting the raw materials and ships them to their destination.

The Americans too have copied from their Asian friends.

In fact they have suffered a lot as jobs were transferred to China lured by cheap labour. This has backfired both politically and economically, hence they brought their own American workers in Mozambique.

While I may not be aware of the Mozambican strategy to capitalise on this stampede for resources, I still think there are opportunities to embrace investment for its future gains.

Chinas success over the past 30 years should teach Mozambique policy makers that it is possible to transform peoples living standards if there is a proper long terms strategy.

Western multinationals first went to China to take advantage of its cheap labour as they saw a chance to increase profitability through lower costs. But what first brought them into China market is not what is keeping them there now.

The cost of labour has been going up significantly in China and as wages rise, the labour cost advantage of manufacturing is eroding. What is now keeping them in China are the huge markets created by high employment which has triggered high consumption.

Recent trends in economic development are driven by three factors; growth in employment, which depends largely on growth in the working-age population, growth in the capital stock, or the accumulated capital available for investment; and technical progress, a measure of productivity.

Education is perhaps the most important variable in driving the working population to higher productivity. Classical development theory suggests that as countries develop, they raise their productivity performance which has an influence on their consumption capacity.

As income and consumption increase, poverty levels go down.

It is time to wake up Africa.

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