Mozambique performs impressively in Investment Monitor’s 2022 Inward FDI Performance Index, which measures a country’s inward investment levels against its gross domestic product (GDP) using GlobalData’s FDI Projects Database, which tracks greenfield projects.
This means that Mozambique, with a score of 3.5, received more than three times its fair share of inward greenfield foreign direct investment (FDI) compared with what could be expected given its level of GDP. In that regard, Mozambique is performing exceedingly well in FDI terms. Based on this index, the country ranked first for inward FDI within the sub-Saharan Africa region ahead of established FDI hubs South Africa and Ghana, which recorded scores of 3 and 2.9, respectively.
Mozambique FDI fails to hit pre-pandemic levels in 2021
FDI peaked in Mozambique in 2019, with GlobalData’s FDI Projects Database recording 25 projects. Banco Comercial, a Portuguese-based financial institution, was by far the leading investing company, making 12 investments and opening new branches across the country. Inward FDI flows witnessed a steep decline in 2020, with project numbers dropping to eight. Despite rebounding in 2021 and recording ten projects, Mozambique failed to reach pre-pandemic investment levels.
At a city level, Maputo, the country’s capital, maintained its leading position in attracting the largest proportion of FDI in Mozambique in 2021. Additional projects were recorded in Balama, Macia, Marracuene, Cuamba and Beira.
Business and professional services was the leading sector for inward FDI in Mozambique in 2021, recording three projects. Only one business services project was recorded in 2019, with the same figure in 2020, showing a diversification in industries in Mozambique. Logistics investments ranked second with two projects in 2021, while the remaining market share was made up by multiple sectors including renewable and alternative power, financial services, metals and minerals and beverages, each recording one project in 2021. In contrast to previous years, Mozambique recorded no tourism, food, chemicals or coal, oil and gas projects in 2021.
Belgium-based Anheuser-Busch InBev, a multinational brewing company, made the largest investment into Mozambique in terms of capital investment and job creation in 2021. The company invested $180m (€173.52m) to open a brewery in Marracuene, creating 200 jobs. The new facility has an annual capacity of 2.4 million hectolitres, with the potential to increase this figure to 6.7 million. It is Anheuser-Busch InBev’s fourth and largest brewery in the country, with additional plants located in Maputo, Beira and Nampula.
Western Europe maintained its leading position for inward FDI in Mozambique in 2021, with four projects recorded. The Middle East and North Africa and North America ranked joint second with two apiece, while Asia-Pacific and sub-Saharan Africa recorded one project in 2021. At a country level, France and the US ranked joint first as the top investors in Mozambique, each recording two projects. Previously, France had made no investments in the country in 2020 while the US had made one. Additional inward FDI projects in 2021 were made by companies based in the UK, South Africa, Australia, Belgium and Kuwait.
Mozambique's unique appeal to investors
Mozambique attracts investors for several reasons. It offers lower costs, both for employment and land, an availability of natural resources, a large labour force and a strategic geographical position (sharing a border with investment hub South Africa). Moreover, the country has seven free trade zones that offer investors various tax exemptions and custom benefits based on location, sector and size of investment.
Despite holding so many attractions, Mozambique must also contend with some unappealing realities. The country has faced more than its fair share of political and military instability, contending with two civil wars in early 1990s. Nevertheless, in the years that followed its economy began to progress. Between 1993 and 2015, Mozambique recorded an average annual growth rate of 7.9%, which at the time was one the highest in the sub-Saharan region.
However, by 2015, FDI had slowed, mainly due to falling commodity prices and slow progress in the development of hydrocarbon projects. Moreover, the country has experienced significant increases in terrorist attacks following the discovery of large gas and natural resources, a factor that could make potential investors wary.
Mozambique’s natural energy resources – a blessing and a curse?
In 2010, US-based Anadarko discovered offshore gas in Mozambique's Rovuma Basin in Cabo Delgado province, while in 2011, Italy-based ENI also discovered reserves in the same region. Such exploitation of large natural resources by foreign companies has exacerbated unequal distribution of income and insurgent groups are leveraging upon local grievances, leading to a number of armed insurgencies in the Cabo Delgado region since 2017.
In addition, due to political instability and supply chain issues arising from the Covid-19 crisis, large-scale energy investment projects have been either delayed or suspended in Mozambique. In April 2021, France-based Total Energies suspended a $20bn investment in a liquefied natural gas (LNG) project in the north of Cabo Delgado province, while the US-based oil major ExxonMobil also delayed the giant Revuma oil field project to 2023. Although still in the pipeline, further delays on such mega-investments will make it more difficult for Mozambique to recover its pre-pandemic investment levels.
Having one of the world’s largest LNG reserves offers unique investment opportunities for foreign investors in Mozambique, provided the country can capitalise on its natural resources by overcoming political instability and ensure sustained and inclusive growth for its population.
The latest Mozambique Country Economic Memorandum assessed current growth and provided recommendations with respect to “making the best use of the non-renewable natural resource revenues, which includes putting in place an adequate policy and institutional framework well ahead of the revenue windfalls from the LNG sector and promoting growth in non-extractive sectors, accompanied by spatial transformation and improved agricultural productivity".
Despite the pandemic and subsequent economic difficulties, the World Bank’s economic outlook for Mozambique is quietly encouraging. The country is anticipated to grow at an average annual rate of 5.7% between 2022 and 2024 on the back of sustained demand and the resumption of giant LNG projects. In February 2022, Total Energies expressed its intent to restart its LNG development project in Mozambique. Additionally, the company is strengthening its position in the country through the acquisition of BP’s assets in logistics, retail and wholesale fuel business.
With interest from major global players and delayed mega-investments due to recommence, Mozambique's impressive FDI showing could get stronger still.