Mozambique’s natural resources remained largely underdeveloped during the 1980s, but, with greater political stability after the peace accord of 1992, investment increased dramatically in a wide range of resource-development projects. The Tete highlands in the west-central region have large bituminous coal reserves at Moatize. Although exploration for oil has been disappointing, the development of large commercially viable natural gas fields at Pande and Temane in Inhambane province has been successful.

Key metallic resources include high-quality iron ore and the rare and important mineral tantalite (the principal ore of tantalum), of which Mozambique has what may be the world’s largest reserves. Gold, bauxite (the principal ore of aluminum), graphite, marble, bentonite, and limestone are mined and quarried, and sea salt is extracted in coastal areas. Other development efforts have focused on the production of heavy mineral sands in Zambézia province and on a project to mine ilmenite (a major source of titanium) at Moma in Nampula province. Mozambique’s other mineral deposits include manganese, graphite, fluorite, platinum, nickel, uranium, asbestos, and diamonds. Foreign investors have expressed interest in expanding the development of these deposits, especially since the Mozambique government has made foreign investment more attractive.

On the strength of its resources, Mozambique should now be Southern Africa’s most important energy producer and exporter. The country’s postindependence security problems, however, undercut production in everything but refining of imported crude oil near Maputo. The centerpiece of Mozambique’s energy potential is the Cahora Bassa Dam on the upper Zambezi. Financed and constructed by an international consortium at the close of the colonial era, it was designed in cooperation with South Africa’s national power company to produce electricity largely for South Africa, not Mozambique. Upon the completion of the dam in 1974, less than one-tenth of its electrical capacity went to Mozambique, with the rest transmitted to South Africa’s industrial heartland. At the beginning of the 21st century, most of its capacity was still exported, primarily to South Africa. Portugal long held the majority share of ownership in the company that operates Cahora Bassa. After much negotiation, an agreement between Portugal and Mozambique that increased Mozambique’s share of ownership to 85 percent was implemented in 2006. Portugal agreed in 2012 to relinquish its final share of ownership over the next two years.

The entire national electrical grid was targeted by Renamo during the years of political conflict, frustrating efforts to make the best use of the country’s hydroelectric potential and forcing cities to build and improve self-contained facilities. The country was able to repair much of the national electrical grid in the years after the conflict, and at the beginning of the 21st century almost all of Mozambique’s electricity was generated by hydroelectric power. In addition to the Cahora Bassa installation, there are two privately run dams on the Revuè River that produce hydroelectric power.

Manufacturing

In 1975 Mozambique’s industrial and manufacturing sector was typical of much of colonial Africa, being based largely on minimally processed raw materials for export (shrimp, tea, sugar, cashews, citrus, copra, coal, and cotton) combined with processing and light manufacturing of commodities for local consumption. There was a sharp increase in the local manufacturing capacity from the late 1950s to the early 1970s in response to consumer demand from the burgeoning urban population. The limited development of heavier industry, such as the metalworking and railway equipment sector, was linked to trade, service, and transportation agreements with neighboring countries.

Although much of Mozambique’s skilled labor and managerial class left the country at the end of colonial rule, industrial production increased modestly until the early 1980s, when manufacturing and construction ground to a virtual halt. By 1990 industrial production had declined by almost two-thirds. Internal conflict interrupted the supply of raw materials from within the country, and soaring debt and diminishing exports combined to strangle Mozambique’s ability to import spare parts and other materials necessary to sustain production. Sabotage and power outages exacerbated the situation.

As the country’s overall social and economic climate improved in the early 1990s, industrial development resumed. Although production levels for the cement industry have not returned to those reached in the late 1970s, other industries are expanding. An ammonia plant opened in the center of the country in the late 1990s, and a car assembly plant began operation in 2000. A key factor in Mozambique’s economic growth was the opening of an aluminum smelter near Maputo in 2000. It is one of the world’s largest smelters of aluminum, which has become an important export for Mozambique.

Finance

The Banco de Moçambique issues the national currency, the metical (plural meticais). In 1978 Mozambique nationalized most of its banking assets, but by the mid-1990s the banking sector had been privatized. Mozambique borrowed heavily so that it could fund development, alleviate its shortage of foreign exchange, and, eventually, import basic necessities such as food; by the 1990s debt service was consuming one-fourth of annual foreign exchange earnings. In 1984 Mozambique agreed to join the World Bank and International Monetary Fund (IMF), and in 1987 the government adopted reform programs as a condition for new loans and grants. Owing to Mozambique’s success with economic reform programs, as well as the considerable amount of money it spent on debt servicing, Mozambique benefited from several debt-forgiveness plans beginning in the 1990s and continuing into the early 2000s.

Private and international investment were encouraged in the new economic climate, and by the end of the 1990s and into the 21st century the economy was benefiting from a huge growth in foreign investment. There is a stock exchange (Bolsa de Valores de Moçambique) in Maputo. The state monopoly on insurance ended in 1991.

Trade

Mozambique’s most important exports by value include aluminum, shrimp, and cotton, whereas its most important imports by value include fuel, machinery and spare parts, and food products. South Africa is the country’s major trading partner. Other partners include the countries of the European Union and Asia. Mozambique’s highly unfavorable balance of trade slowly improved during the 1990s and early 2000s.

Services

Mozambique’s pleasant climate, beautiful beaches, and Indian Ocean islands made it an attractive vacation destination for neighboring Rhodesia (now Zimbabwe) and South Africa prior to independence. However, tourism was ruined by the continuing political insecurity that came with the end of colonial rule. With the peace settlement of 1992 and the transition to majority rule governments in Zimbabwe and South Africa, tourism rebounded to the point that more tourists visit Mozambique now than before independence in 1975. Game reserves are being rehabilitated, and Mozambique has developed transnational parks and conservation areas with Swaziland and South Africa.

Labor and taxation

During the colonial period men often left to take paying jobs in neighboring countries, and women remained behind to grow cash crops as well as crops for domestic consumption. Although women produced a significant portion of the agricultural products, they did not receive equal pay and rights. The Organization of Mozambican Women (Organização da Mulher Moçambicana; OMM) was founded by Frelimo in 1973 to mobilize women around issues of interest to them. After independence many women moved to the cities to take advantage of new economic opportunities.

Mozambican workers, including women, were guaranteed the right to form trade unions and the right to strike in the 1990 constitution. Numerous trade unions developed, many of which participated in the Organization of Mozambican Workers, a group that has openly criticized the free-market policies of the government.

Government income is derived from taxes on income and goods and services and from customs duties. Mozambique’s tax system was significantly reformed in 1996 and has been modified since then. Such modifications have included the introduction of a value-added tax in 1999 and enhancements made to tax collection and enforcement methods in 2001.