Foreign businesses in Mozambique’s emerging market face a unique set of challenges and opportunities. Despite the country’s significant investment potential, the business climate poses distinct challenges. The Central Bank has created a stable, albeit weak, macroeconomic environment and there appears to be high-level political commitment to attracting large-scale investments. However— this masks a bureaucracy that remains largely unresponsive to the needs of the private sector, especially small-to-medium-sized enterprises.
The slow pace of conducting business is a major challenge, mainly due to the lack of human capacity in areas necessary for business, and the top-down, hierarchical decision-making process can hinder market efficiency. Additionally, the labor market is rigid, and well-educated workers are scarce, with Mozambique ranking 181 out of 189 countries on the United Nations’ 2019 Human Development Index.
On the other hand— Mozambique presents various opportunities for foreign businesses, particularly in the energy and mineral sectors. The country possesses abundant mineral reserves, and the government has programs designed to encourage foreign direct investment (FDI), with FDI largely concentrated in the infrastructure and mining sectors.
The energy sector, including natural gas and oil, offers significant investment opportunities, and U.S. and French-led international investments in this sector are expected to create significant exports once the security environment permits these foreign businesses and their investments to go forward.
Mozambique offers an attractive low-cost manufacturing hub and gateway to serve regional African markets for foreign investors. It provides access to major seaports and improving transport links to landlocked neighbors. A young, growing Mozambique population also signals expanding foreign businesses and their consumer demand over time.
Political instability and security threats in parts of Mozambique also dampen investor appetite given operational risks. Recent militancy in the north of Mozambique has compounded challenges for such foreign businesses. Building economic resilience depends on restoring stability and government effectiveness.
Overall, Mozambique has unrealized potential across foreign businesses such as agribusiness, tourism, resources and other industries. But converting opportunities into sustainable ventures hinges on better governance and nation-building to improve fundamentals for business.
