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Mozambique Business Forecast Report Q2 2011
Business Monitor International, March 2011, Pages: 35
Economy To Surge In Spite Of Inflation Risks!
The scene is set for Mozambique to flourish over the coming years. The country boasts a relatively stable political climate, an improving business environment and plentiful natural resources, all of which will bode well for strong economic growth. Indeed, the Southern African country is increasingly prominent on the radars of international firms and investors, especially those interested in the extractive and agriculture industries.
That said, it will not be smooth sailing and there are several economic, political and business environment risks that could hamper or derail progress altogether. While many regimes around the developing world will have been watching the recent revolutionary events in Egypt with fear, Mozambique’s government must have been particularly alarmed. Hosni Mubarak was one of the world’s most ubiquitous powers, having been in power in Egypt for thirty years with the backing of significant global and regional powers, including the United States and Israel, almost to the bitter end. His political demise is a crucial event, signalling that a critical mass of disaffected people can indeed effect seismic political change in Africa
On the economic side, inflation risks pose the biggest threat to broad stability and these could stem from various sources. With food making up a large share of Mozambique’s consumer price basket and bread an important part of Mozambican diet, inflation is susceptible to wheat prices. Supply-side shocks in the grains market are almost impossible to predict but can never be ruled out.
Oil prices are another risk to headline inflation, with Mozambique being an energy importer. At the time of writing, oil was trading at around the US $100. With the situation in the Egypt still uncertain and the possibility remaining of contagion into the rest of the Middle East, there are risks that oils price could spike sharply higher. A s for the business environment, deficient infrastructure is perhaps the biggest constraining factor with transport bottlenecks due to inadequate port facilities a particular concern. The authorities are cognisant of this, and have committed increasing the handling capacity of the port of Maputo to 12mn tonnes a year this year; a record 8.7mn tonnes passed through the facility in 2010. BMI’s Shipping team notes that this is just the beginning of planned expansions for the port, which is looking to capitalise on Mozambique’s projected growth in coal exports and economy at large.
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