1998 SOUTHERN AFRICA ECONOMIC ... - National Treasury

M O Z A M B IQ U E
g a s ,go l d ,titanium and non metallic minerals with a potential fo r
oil and diamonds, as well as deposits of rare metals and
g e m s t o n e s . P rospecting and exploration of the country ’s
mineral sources have been limited to date and offer gre a t
o p p o rtunities to inve s t o r s . R e c e n t ly, major deals have been
n e gotiated for the development of natural gas fields at Pande
and the exploitation of the Moatize coal fields. Close to ten
companies have signed agreements with the government for the
right of petroleum pro s p e c t i n g ,and there are curre n t ly thre e
large heavy minerals projects in the pipeline with fo re i g n
i nve s t o r s . The latter are like ly to start around 2001-2002.
Mozambique has some 57 m ha of fo re s t .Of this, 20 m ha are
rich in precious and semi-precious wo o d s ,with a technical fe l l i n g
potential of around 500,000m 3 per ye a r. Timber was a major
e x p o rt product prior to independence in 1975, but in re c e n t
times timber extraction has been limited to those species which
a re of higher technological or commercial value.
I n f r a s t r u c t u re
M o z a m b i q u e ’s infrastructure was gre a t ly damaged during the
war and it is now subject to extensive re h a b i l i t a t i o n
p ro g r a m m e s .A round 60 percent of the road network is in bad
condition and many of the rural roads are still dotted with land
m i n e s .Traffic on all the major railw ay lines linking the ports has
risen since peace returned to the country and rehabilitation of
the rail system commenced and port facilities we re improve d .
M aputo is one of the largest ports in A f r i c a ,and the ports of
B e i r a ,Matola and Nacala also have cargo facilities.
The national airline,Linhas A e reas de Moçambique services nine
Mozambican provincial cap i t a l s ,as well as regional destinations
such as Johannesburg and Harare.
Mozambique has considerable water re s o u rc e s ,including more
than 25 rive r s . The government has re c e n t ly taken up a
USD36m soft loan from the World Bank’s International
D evelopment Association to improve water serv i c e s
t h roughout the country. The water services are in dire need of
expansion and upgrading. It is estimated that about 25 perc e n t
of the population have direct access to safe water. T h e
government has shown a commitment to water re form and the
changes include privatisation of the management of water
s e rvices in Maputo and the provincial capitals Beira, Q u e l i m a n e,
Nampula and Pe m b a . The project will also seek to stre n g t h e n
M o z a m b i q u e ’s capacity to negotiate fair and equitable use of its
r i vers with its neighbours. Most of Mozambique’s rive r s , t h e
Z a m b e z i ,the Pungwe,the Limpopo etc originate in neighbouring
countries and their management of these rivers has a stro n g
impact on Mozambique’s water supply and management.
Mozambique possesses considerable re s o u rces for the
p roduction of energy : hy d ro - p owe r, c o a l , natural gas, b i o m a s s
and solar- e n e r gy, yet the country is a low energy consumer.
Despite this, less than 3 percent of the population have access
to electricity, and wood fuel is the most commonly used sourc e
of energy in households and in small scale industries. T h e
d evelopment of alternative sources of energy for the rural are a s
is being inve s t i g a t e d . and the country ’s first natural gas
exploitation project is about to commence. One of the largest
hy d roelectric plants in southern A f r i c a ,Cahora Bassa is situated
in Mozambique. It was originally built by the Po rtuguese to
s u p p ly electricity to South A f r i c a ,although it hard ly came into
use due to the civil war. After considerable rehabilitation of
transmission lines the plant is now supplying energy. Under an
a g reement between Hydroelectric de Cahora Bassa, which is
Po rtuguese ow n e d ,and Esko m ,the latter has a contractual right
to buy the entire current output of 2,000MW. Of this, t h e
Mozambican energy supplier EDM can acquire 200MW and
Z i m b a b we 500MW according to the contract.
The shortest and most cost effe c t i ve route to the sea for many
of the exports of landlocked Southern African countries is
t h rough Mozambique, with Maputo and Beira being the closest
p o rt s . During the war, h oweve r, the country ’s road and rail
t r a n s p o rt routes to its ports we re constantly targeted fo r
destruction by the rebel fo rc e s .M o z a m b i q u e ’s transport system
is thus the focus of many new infrastructural pro j e c t s ,the most
significant being the Map u t o, Beira and Nacala deve l o p m e n t
c o rridor pro j e c t s .
Mozambique has telephone, t e l e x ,f a c s i m i l e, e-mail and package
switching facilities in place. A cellular telephone network was
i n t roduced in the Maputo area in 1997.
E C O N O M I C O V E R V I E W
I n t ro d u c t i o n
Mozambique is now clearly showing signs of re h a b i l i t a t i o n ,w i t h
an impre s s i ve GDP growth of 6.4 percent in 1996 and 6.6
p e rcent estimated for 1997, and growing inflows of fo re i g n
d i rect inve s t m e n t .
When FRELIMO came to power at independence in 1975, t h e
p a rty inherited a country with low levels of skilled pro fe s s i o n a l s ,
administrators and managers.The new government adopted a
system of centralised control which by the early 1980s had
become unwo r k a b l e. Unsuitable economic policies, c o m b i n e d
with intensifying warfare with RENAMO rebels and a seve re
d ro u g h t ,caused the economy to collap s e.
During 1986, a decisive shift took place within the gove r n m e n t
and past strategies and ideologies we re abandoned in favour of
a more pragmatic ap p ro a c h .A greater emphasis was placed on
the role of the private sector,leading to the development of the
Economic Rehabilitation Pro g r a m m e. The chief aims of this
p rogramme are to re s t o re macro-economic balances, f re e
constraints on market activity and price signals, re s t r u c t u re and
privatise parastatal enterprises, foster private sector
d eve l o p m e n t , and to encourage the expansion of efficient
p roduction in agricultural and industrial sectors.
The exploitation of Mozambique’s many re s o u rces has
experienced setbacks, but the situation has changed for the
better in recent years and much-needed economic re forms have
been intro d u c e d .
Recent Macro-Economic Deve l o p m e n t s
A c c o rding to pre l i m i n a ry data, real GDP increased by 7.9
p e rcent in 1997, exceeding the targeted rate by 2.1 percent and
the figure of the previous year by 1.5 perc e n t . In fact,the grow t h
of production was evident in all sectors of the economy with (i)
agricultural production growing by 5.9 perc e n t ,(ii) industry and
f i s h e ry by 9.1 perc e n t , (iii) construction by 7 perc e n t , ( i v )
t r a n s p o rt and communications by 11.3 perc e n t , and (v) the
s e rvices sector by 8.4 perc e n t . Good weather conditions
(although seve re floods have occurred in the central and nort h
region of the country ) , combined with high levels of fo re i g n
assistance and increase in private investment linked to
p r i v a t i s a t i o n ,and low inflation seem to have been the main
factors behind the strong growth of the production in the
p e r i o d .
On the fiscal side, government reve nue and expenditure
i n c reased by 31.8 percent and 34.3 percent re s p e c t i ve ly in
nominal terms in the same period, and by 2.4 percent and 6.4
p e rcent as a percentage of GDP. The increase in gove r n m e n t
reve nue resulted mainly from the surge in the economic activity
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