Africa Extractive Industry: Mineral resources to boost Mozambique economic recovery this year

Greater economic growth this year will be driven by exploration of mineral resources, such as coal, which is expected to register a substantial increase due to increased prices, increased demand from Indian companies and the efforts of the companies themselves in 2015/2016 to improve efficiency, according to Economist Intelligence Unit (EIU).

The EIU said that Mozambique’s economy should recover slightly in 2017 with growth of 4.2%, after recording the lowest growth in 16 years in 2016, with a rate of 3.6%.

The production of titanium oxide will also increase, with, for example, Kenmare Resources exploring heavy sands deposits in Moma, Nampula, seeking the economic benefits of rising prices on international markets.

In strictly domestic terms fiscal austerity will continue, along with difficulties in obtaining foreign currency and high inflation that will help reduce domestic demand. The EIU also noted that financial volatility and political risk will drive a further drop in investment.

While 2017 should be the year in which Mozambique’s economy will resume higher growth, the growth that the EIU expects from 2018 to 2021, with an average of 5.1% in real terms, will be far below the average of 7.3% recorded during the decade of 2005-2015.

The EIU analysts said in the report, to which Macauhub had access, that fiscal austerity will continue to limit the development of construction and service companies focused on public works, but there may be some investment by companies operating in both these sectors.

The gradual expansion of cash crops will be the basis of the growth of the agricultural sector, despite being held back by the fact that it is based on small farms.

The EIU also expects that by 2021, the last year covered in this document, there will be great development in projects of exploration of natural gas deposits in the Rovuma basin, “given the technical complexity of such projects and the fact that the international credit market is relatively limited.” (source: Macauhub)