The regional context:

Mozambique’s development program has hardly been affected by the slowdown in global growth and world trade over the past two years because its growth has been driven by strong internal investment in new export-oriented projects. Over the next few years, it has many opportunities to develop its metals industries for export and its ports and rail facilities to provide services for the regional market in southern Africa. In that respect, a resolution to the current problems in neighboring Zimbabwe would help Mozambique to develop those regional transportation facilities that could support the Zimbabwe economy.

Like any African country, Mozambique’s challenges go deeper than absolute poverty, low income, falling trade shares, low savings and slow growth! They also include high inequality, uneven access to resources, social exclusion, and insecurity.

The environment for investment protection in Mozambique

The policy strategy currently pursued by Mozambique is explicitly intended to improve conditions for foreign direct investment (FDI). However, the environment for foreign investments protection in Mozambique is still inadequate to attract high quality and efficiency-seeking investments and the incentive framework continues to suffer from a number of deficiencies.

An investor in Mozambique is of course faced with many of the bureaucratic and infrastructural hurdles usually encountered in developing countries. One major bottleneck for many investors, especially the smaller ones, is the country’s limited administrative capacity. Administrative handling of queries and requests often reveals the deep roots socialism has put down in public-sector culture. With external donor assistance, the Government has now undertaken various red-tape analyses to identify unnecessary administrative difficulties and the ways in which they might be solved.

The increasing importance of FDI in Mozambique

Mozambique is a good example of a least developed country in which the basic constraints on development are being gradually removed by a decisive and reform-minded Government which commands popular support. The sustainability of these efforts depends to a large extent on the tangible results they produce in the main areas of the economy. The Government is aware of this and in general committed to continuing on its current path. It is also aware that private-sector participation and, in particular, foreign direct investment with its unique combination of tangible and intangible assets, is indispensable to economic growth. In sum, Mozambique is developing as a major investment location in Africa, as shown in the following paragraph.

The importance of FDI in the SADC region and  Investment climate  Mozambique is confirmed by the following facts:

– Global flows of foreign direct investment reached a record US$ 1.3 trillion in 2004

– Mergers and acquisitions accounted for 85% of this amount

– Developing countries in total received about US$ 240 billion

– Africa received US$ 13 billion, of which about US$ 5 billion flowed into the 14 SADC countries

– Of the US$ 5.5 billion, Mozambique received US$ 1.5 billion, SA – US$ 760 million, Angola – US$ 735 million

– South Africa is the largest source of FDI in the SADC, accounting for up to 43% of Africa’s US$1.3 billion outflows, and accounting for up to 85% of total FDI in all other SADC countries in 2000.

– Large South African companies, long denied the opportunity to invest substantially offshore due to exchange controls, have increasingly sought out opportunities for expansion in SADC, Africa and beyond.