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The Manufacturing Sector in Mozambique

The Manufacturing Sector in Mozambique

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The manufacturing sector in Mozambique is fairly incipient. It currently contributes about 9 percent to GDP and 0.8 percent to employment. It has shown stronger growth in the last few years: average growth rate of 5.1 percent between 2013 and 2015 with a high of 8.5 percent in 2015, higher than the GDP growth rate of 6.6 percent.

The sector is mainly comprised of micro companies, with few small and medium sized firms and are mainly involved with low technology intensity. Large firms are mostly dominated by foreign companies and are generally more capital intensive.

Significant subsectors are metals, chemicals, construction, industrial products and services, forestry, paper and packaging sectors, textiles, paint, soap, food and drink products, furniture and wood products, leather and shoes.

Like the agriculture sector, manufacturing faces a number of challenges such as competition with South African imports, unreliable electricity and a costly and bureaucratic business environment. As much of the production in the sector involves imports, i.e. most manufacturing companies process imported goods (e.g. by processing imported steel coil to make roof sheets) or require imported complementary goods such as packaging, products processed domestically are often more expensive then imports.

Interest rates on loans are prohibitively high, financial products offered are often inflexible. MSMEs often quote lack of access to financing as a key barrier to their development.

By contrast, private equity, which often results in value addition to businesses, offers strategic management support, productivity improvements, identification of growth opportunities and promotion of business sustainability, offers a more flexible financing tool that could help alleviate the current financing gap as well as providing technical support to businesses.

The Potential of the Manufacturing Sector

Although the manufacturing sector is still underdeveloped, Mozambique has several advantages that give the sector a favourable outlook. Mozambique has good transport linkages to South Africa (the Maputo Corridor), Malawi and Zambia (the Nacala Corridor), Zimbabwe, Malawi, Zambia and DRC (the Beira Corridor), competitively priced supply of labour and a wealth of natural resources that present opportunities for processing.

In addition there is little domestic competition in most manufacturing sub-sectors, and close proximity to higher income African countries like South Africa, Tanzania, Zimbawe, Zambia, Malawi and Swaziland. The future development of the gas and other extractives industries also offers many opportunities for the manufacturing sector, offering a guaranteed source of demand for large quanitity orders of goods and services.

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