Politics and Society
Political unrest stifles economic growth in Mozambique
Investors are growing edgy at the current political unease in Mozambique and analysts say this will have a negative effect on the country’s economic growth, Problem Masau reports.
Published
9 years agoon

A country at the crossroads
Mozambique has been one of the fastest-growing economies in Africa over the last five years but re-emerging civil unrest is making investors nervous. Political tensions between the ruling party, Frelimo, led by President Filipe Nyusi, and the opposition, Renamo, led by Afonso Dhlakama, have escalated over the last few months.
In 2015, Dhlakama threatened to set up a secessionist “Republic of Central and Northern Mozambique” and he recently passed a Bill to set up “provincial municipalities” in the country’s parliament, the Assembly of the Republic. Since then, sporadic attacks have occurred in different parts of the country.
“The unrest in Mozambique is posing difficulties to the country’s economy and growth is likely to be slow and sluggish as investors size up their chances and the risks associated with the country,” independent economist Antonio Francisco told This is Africa.
Mozambique’s growth over the last five years was driven by the country’s extractive sector. Oil and gas are the country’s trump cards. Mateus Zimba, the Mozambique country manager for the oil producer Sasol, recently told The Guardian (UK) that “looking at the size of the gas in place, I think this country can’t be the same anymore.” He later said that the abundance of resources should be enough to change the country’s economic prospects.
“I hope coal and gas will give us enough independence to take control of our own destiny and look at foreign investment rather than foreign donations,’’ Antonio Francisco added. The World Bank, however, has indicated that with political unrest and commodity prices currently depressed, Mozambique faces fiscal worries as revenue generation, profitability and tax payments will decline. It is projected that the country’s economic growth will shrink to 5%, its lowest in five years.
The impact of political tensions on the economy
Amidst all this, Afonso Dhlakama has accused the ruling party of pillaging the country’s natural resources, which has unnerved investors. The Bank of Mozambique has said that fund managers are waiting for certainty in the country before they commit more funds.
“It’s a tight situation which has to be watched closely as our clients weigh their options and the associated risks. It is a country with opportunities and there is interest in mining, gas and retail but investors are being very careful,” Francisco said.
The escalating tension between Renamo and Frelimo has polarised the country once again and has led to thousands of people fleeing to Malawi. “If the situation deteriorates, it could have a negative impact on the economy, which could lead to problems on many levels,” Alerx Segura, the International Monetary Fund’s representative in Mozambique, told This is Africa. “It is obvious that one of the reasons for the exceptional economic results over the past 20 years is peace and political stability.”
The IMF had predicted Mozambique’s economy to grow by 6,5% this year. However, some independent think-tanks have revised the growth down to 4,3%. Despite the projected sluggishness and uncertainty in the country, Mozambique’s growth trajectory is still ahead of its neighbours South Africa and Zimbabwe.
South Africa is the continent’s second largest economy after Nigeria and, together with Zimbabwe, has been projected to register economic growth of 1,5% this year. South Africa and Zimbabwe are also major trade partners with Mozambique.
In the sub-Saharan Africa region, Mozambique is ranked 24th out of 46 countries that are economically free. However, Amadou Sy, director for the Africa Growth Initiative, did note that “the judiciary remains ineffective and vulnerable to political influence, and corruption remains pervasive in the public sector”.
“Much of the population is stuck in subsistence agriculture due to burdensome business regulations that inhibit entrepreneurship, and the rigid labor market exacerbates unemployment and underemployment,” said Sy.
Ray of hope
Despite major drawbacks, Mozambique has other advantages, such as the current boom in the construction industry, evidenced by the massive shopping malls and other infrastructure being built. The country has also adopted an ambitious development strategy structured along the Regional Spatial Development Initiatives Programmes (RSDIP) and Growth Poles (GP). These development strategies are aimed at enhancing the positive impact of limited financial resources as they seek to optimise investment in infrastructure.
Having said that, if the political impasse persists, Mozambique is at risk of losing the gains of the economic boom that saw investors flocking to the country.
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