Create the Chain

Mozambique’s industrial and retail sector, although strong toward the end of the colonial period, fell into decline following independence. It was particularly hard-hit by the war of the 1970s and 1980s, which destroyed much of the country’s infrastructure and led to sharpdrops in many development indicators, reducing the available human capital. Since the end of the war, the government has worked actively to encourage industrial investments to take advantage of the country’s cheap electricity, abundant natural resources, and strategic location on shipping lanes between Europe and Asia. And though industry remains a small part of the economy, the sector has seen growth in recent years, particularly in the agri-industrial and FMCG segments.

Manufacturing now accounts for around 10% of GDP, a figure which has fallen in recent years as the extractive sector has taken on a greater role in the economy. In 2012, the industrial sector brought in around $2.74 billion. The lion’s share of this came from the Mozal Aluminum Smelter, one of the largest industrial investments in Mozambican history. The Mozal smelter is jointly owned by BHP Billiton, which operates it, and the Mitsubishi Corporation of Japan, which is a minority shareholder. The aluminum produced by the Mozal smelter accounts for around 48.9% of industrial production, or around $1 billion annually. This translates to around 4% of Mozambique’s overall GDP.

ALUMINUM

The Mozal smelter has dominated Mozambique’s industrial output since it first opened in 2000. The construction of the smelter was seen by the Mozambican government as a way of leveraging the country’s advantages to help kick start industrial development following the end of the civil war in 1992. The smelter, located in Matola, a suburb of Maputo, uses the cheap electricity available from the Cahora Bassa Dam and easy access to Port Maputo to undertake the energy-intensive process of converting imported bauxite into aluminum for export. During its initial years of operation, the smelter added more than 7% to Mozambique’s GDP.

The Mozal smelter has also contributed to the downstream economy, demonstrating how the government’s strategy of attracting “megaproject” investments can translate into more diversified economic growth over the longer term. As Danie Murray, Asset President of the Mozal smelter explained to TBY, “around 12-15 companies are actually providing services to Mozal. In terms of local spending, Mozal spends between $120 million and $180 million per year in the local service industry.” Additionally, in a major milestone, Mozal reached an agreement in early 2013 with Bahrain’s Midal, a major manufacturer of cables. Midal is in the process of setting up a factory next to the smelter that will use Mozal’s aluminum to produce cables. Currently, all of Mozambique’s aluminum had been destined for export, so the Midal project represented a significant step in moving up the value chain.

FOOD, BEVERAGE, & FMCG

Apart from aluminum, the remainder of Mozambique’s manufacturing sector is dominated by food products, beverages, and processed tobacco. The food processing industry has seen a boost in recent years, as part of a concerted government effort to reduce food costs and improve nutrition. As Minister of Agriculture José Pacheco explained in an interview with TBY, “We can only achieve effective food security through economically viable activities. Therefore, we focus on agri-processing initiatives with foodstuffs and other products.” The government has also created a National Committee for Food Fortification, which is working to encourage the food processing industry to include greater amounts of micronutrients in processed food products in Mozambique.

Beverages also make up 13% of Mozambique’s industrial production. Cervejas de Moçambique (CDM), owned by SAB Miller, is one of the largest companies in Mozambique, producing a number of Mozambican brand beers. CDM is a significant player in the Mozambican industrial sector, employing around 1,100 people and controlling 92% of the beer market. In addition to beer, the soft drinks market has seen a number of new entrants in the past few years as major Portuguese companies with experience in the Angolan market, such as Refriango (Blue) and Sumol+Compal look to take advantage of the growing consumer base in Mozambique.

Tobacco accounts for an additional 7% of industrial production, with British American Tobacco (BAT) another major player in the economy. Mozambique is both a major grower of tobacco and a major producer of tobacco products. However, at present, almost all of the processed tobacco products produced in Mozambique are destined for domestic consumption. As Crispin Achola, Country Manager of BAT, which has a 90% market share, explained to TBY in an interview, “today in Mozambique we have one factory with a capacity of 3.5 billion cigarettes. We estimate the Mozambican cigarette market to be at just slightly over 3 billion. The current factory is geared exclusively to domestic supply. Approximately 95% of my portfolio is produced right here, and the remaining 5%, comprising premium brands, is purchased from South Africa. We are largely self-sufficient in terms of production for the domestic market.”

SPECIAL ECONOMIC ZONES

An important element of Mozambique’s strategy to promote the development of the industrial sector has been its use of special economic zones (SEZs) and industrial free zones (IFZs). These zones are managed by the Cabinet for Economic Zones and Accelerated Development, known as GAZEDA. GAZEDA was founded in 2007 to coordinate and develop all activities related to SEZs and IFZs and to certify and approve projects to take place within these zones.

GAZEDA currently manages three main zones: Belulane IFZ, Manga-Mungassa SEZ, and Nacala SEZ. Although development within these zones is not completely tax free, it comes with a number of tax benefits, including reduced income tax, VAT, and excise, provided that the companies operating in the zones meet certain requirements.

Belulane Industrial Park (BIP) and Export Processing Zone, located in Matola, a suburb of Maputo, is the country’s first and most important economic zones. It was initially created to support the Mozal aluminum smelter, which sits at the center of BIP. So far, almost 90% of businesses in the zone are there to support Mozal. However the government is now working to improve the management structure of the park to make it easier for business to set up there. Of the 700 hectares set aside for BIP, only 50 have been used. The park boasts a strategic location with direct access to the Port of Maputo and to the N4 highway, which leads to Johannesburg.

Further north, outside of Beira, Mozambique’s second city, is the Manga-Mungassa SEZ, which was established in May 2012. Manga-Mungassa sits 12 kilometers from the Port of Beira and occupies around 217 hectares of land. The zone is being managed by a private operator, a Chinese company called Dingsheng International Investment, which has agreed to invest $500 million in developing the zone.

In Northern Mozambique lies Nacala SEZ, which is being developed as part of a broader program of investments in Nacala that will see the port city transformed into a logistics hub for the region. The city’s seaport, airport, and rail connections are all being upgraded. Within the SEZ, two IFZs have been set up, totaling around 500 hectares. These are about 10 minutes from the seaport and 20 minutes from the airport. Given that Nacala will have a direct rail connection to the country’s mining region, the government hopes to promote investments in heavy industrial sectors such as metalwork and fertilizers. There are also plans for an investment project to develop an oil refinery in the area, which would act as an anchor to promote further investments in petrochemicals.

Finally, the government recently approved plans for a new SEZ in the Mocuba district of Zambezia province. This would aim to support further development of the agri-processing sector and spur continued growth in the central region of the country.