Mozambique’s economy has since been severely affected by civil war and natural disasters, as well as by a shortage of educated labor and foreign currency. This has led, among other things, to a large debt burden and trade deficit.
The economic problems led Mozambique, with the support of the International Monetary Fund, to introduce an economic re-adjustment program in 1987 with the aim of increasing the efficiency of the economy through liberalization and privatization. For a large part of the population, the re-adjustment program initially caused considerable financial strain. From a national perspective, the program seemed to have the intended effects, and the late 1990s were characterized by increasing economic growth. The peace agreement that set the stage for the civil war in 1994 was not least important in this trend.
In 2000, the positive development of a major flood disaster, which devastated large parts of the infrastructure and hit the agricultural sector, was severely broken. Aid efforts from the outside world and foreign investment led the country to recover, and for over a decade Mozambique experienced strong economic growth. However, Mozambique is still one of the world’s poorest countries.
Agriculture is Mozambique’s most important industry in terms of employment. However, the consequences of civil war and drought cause agricultural production to fluctuate widely. The main forage crops are cotton, sugar and cashew nuts. The most important food crop is cassava, but corn, bananas, rice and coconuts are also grown for self-catering. However, the country is not self-sufficient with food. It depends, among other things, on infrastructure deficiencies, which prevent transport from the fertile northern parts of the country.
Agricultural policy after independence was characterized by an investment in a collective village-oriented agriculture. In 1976, more than 1,500 villages and several agricultural cooperatives and state-owned large farms had been formed. Most state agriculture, however, has proven to be uneconomical, and the need to increase production from smallholder farmers has meant increased cutting and privatization of state agriculture and increased support for smallholder farmers.
The flood disaster of 2000, which left some 1 million people homeless, hit the agricultural sector hard.
The forest industry has developed along the railroad from Harare in Zimbabwe to Beira and in the rainier Zambéziia district. Exports from the forest industry mainly consist of sawn timber and timber for the construction industry and are mainly directed to South Africa. The majority of felling is used as firewood.
Fishing has become increasingly important for Mozambique’s economy. Not least, shrimp fishing is very important, and shrimp are among the country’s most important export goods. Mozambique has worked with South Africa since the early 1980s to develop the fishing industry. The country has also signed development agreements with Italy and Japan. Several countries in the EU have purchased fishing rights in the country.
Mozambique has large mineral deposits, but the extraction was limited for a long time as a result of the civil war. Coal is mined at Moatize near Tete, iron at Cassinga and a larger yet untapped deposit at Namapa. Gold deposits are found in the drainage area of the Revue and Chua rivers and bauxite deposits near Tete. Mozambique also has large deposits of tantalum, but only a limited amount is exported. New deposits of manganese, graphite, platinum, nickel, uranium, asbestos, iron, diamonds and natural gas have also been reported.
In 2000, the operation of the large Mozal aluminum smelter began just outside Maputo. The smelter is the largest foreign investment made in Mozambique and was financed by South African and Japanese companies as well as with loans from the World Bank.
Mozambique’s commercial energy supply comes mainly from the hydroelectric power plant at the Cabora Bassa dam and a coal power station in Maputo. As a result of an agreement from the 1980s, almost all electricity produced is exported cheaply to South Africa, but through several large power plant projects and plans to renovate the power grid, a larger proportion will stay in the country, while Mozambique will be able to become a major electricity exporter to several countries. However, for the majority of the population, firewood is still the most important source of energy. In parallel, investments are being made in the extraction of natural gas, coal and oil. A 1,000 km long gas pipeline extends from the Pande and Temane gas fields in the province of Inhambane to South Africa.
Although the state encourages the spread of industry to Beira and its northern parts, nearly half of Mozambique’s industrial companies are located in Maputo or its vicinity. However, during the early 1980s, the industrial base expanded somewhat through the growth of, among other things, the textile industry and the brewery industry.
The industrial sector, like many other sectors, was adversely affected by the fact that many educated Portuguese left the country at independence, the lack of raw materials and spare parts, and transport disruptions due to the civil war. After the end of the war, the industrial sector was privatized. The aluminum smelter Mozal, which accounts for much of the country’s exports, is of great importance.
Mozambique’s trade and current account balance is characterized by large deficits. The civil war was one cause (including reduced exports and tourism and costs of importing military equipment). Other factors include occasional falling world market prices for important export goods as well as a reduction in Mozambican labor in the South African mining industry.
According to Countryaah, exports are dominated by aluminum, shrimp, cotton and sugar. Imports are dominated by machine parts, vehicles and fuel. Dominant export markets are India, the Netherlands and South Africa, while South Africa, China and the United Arab Emirates are the most important importing countries. Trade with neighboring countries such as Malawi and Zimbabwe is also extensive.