- Agro-business has emerged as one of the most promising fields, whether for small or large enterprises, due to the chronic shortage in food production in the nation.
- The estimated 70% gap in energy access in Mozambique creates a market that is drawing more attention from renewable energy investors
- Financial markets are showing promise of good returns, including forex and cryptocurrencies
The World Bank projects Mozambique will grow by 5.7 percent between 2022 and 2024 driven by increased demand post-pandemic and the start of LNG production. This is expected to stimulate other sectors including extractives, services and boost exports.
Analysts agree that transportation and logistics, energy, ICT, capital markets, agribusiness, banking, insurance, and textiles provide enormous potential for commercial success in Mozambique.
Pedro Correia, Country Manager of Flying Submarine, says a number of sectors are ripe for investment and growth due to the changing business and regulatory environment.
Yet, there is a particular context in which each of these industries is positioned as one of the pillars of the disruption expected for the nation, both in terms of company profitability and the precise structural disruption expected in the economy.
The estimated 70% gap in energy access, for example, creates a market that is drawing more attention from renewable energy investors.
According to economist and president of the Association of Economists of Mozambique (AMECON), Pedro Cossa, financial, energy and agricultural sectors share the potential of being within the reach of national investors in addition to having a sizable domestic and international consumer market.
Agro-business has emerged as one of the most promising fields, whether for small or large enterprises, due to the chronic shortage in food production in the nation – which imports everything it consumes – and the population growth rate of close to 2.5% per year.
Poultry farming, for instance, has increased significantly from 6000 units a decade ago to 100,000 units annually. This level is extremely close to covering domestic consumption and already gives producers hope for exporting soon.
The production of bananas is another excellent present asset. It obtained 40 million dollars in exports from just 22 of the Bananalândia chain enterprises, which employ around 2500 people, in 2021.
Despite being relatively new, macadamia nut production is also lucrative and exposed to global markets that it has significantly increased the interest of both domestic and foreign investors (primarily Dutch and South Africans), who are dispersed across various production sites from the north to the south of the country.
Mozambique is witnessing an increase in programmes designed to boost the prospect of the agribusiness sector, with a focus on GAPI-SI, which alone invested 500 million meticais in financing in 80 districts in 2017, over 300 small businesses benefited from support in various fields, and others in 2017.
The projected 70% electricity availability gap in Mozambique creates a market that is attracting the appetite for investments in renewable energy sources. The timing is right since the global community’s imposition of the energy transition phase in the guise of environmental balance dominates the context. With the advent of numerous private suppliers, some of which are EDM’s partners, the public corporation Electricidade de Moçambique (EDM) is currently experiencing something akin to an end of its monopoly.
Although they are small businesses with 10 to 50 people, according to experience, the renewable energy companies profiled by E&M in the Special section on Green Energy invest between US$500,000 and US$1,000,000 annually (depending on the size of the project). Also, they develop progressive payment facilities that range around 300 and 700 meticais monthly for durations of up to two and a half years since they provide energy (mostly solar) to the poorest communities. Despite this, they claim significant financial gains since the market is still untapped.
Ernst & Young, Partner Advisory consultant, Bruno Dias, is of the opinion that while investing in transportation and logistics is expensive, there is plenty of space for expansion because the gas industry chain is already exhibiting signs of development in Cabo Delgado.
Banking and Capital Markets
The Mozambique Stock Exchange’s (BVM) market capitalization, which increased from 61.8 billion to 126 billion meticals in 2021, is one indication that the capital market is expanding quickly and represents an opportunity for investment that should be considered.
Salim Valá, the Chairman of the Board of the Mozambique Stock Exchange (BVM), spoke about the potential for profitable investments in this market about the shares, bonds, and commercial paper that are traded on the stock exchange.
Valá also mentioned the potential for investment diversification, tax benefits, and the subjective prestige of owning stock in major businesses and/or ambitious initiatives. In other words, everyone may start their own business and invest in successful ventures that promise substantial returns.
“The Mozambique market already provides this actual prospect, even though BVM is small and has limited liquidity and depth. Yet we need not lose focus of the reality that in the coming 20 years, it has lots of opportunities to develop, innovate, and expand, according to PCA for BVM.
Regarding risks, Valá advises potential investors in the capital markets to educate themselves before proceeding about topics like the behaviour in the future of the markets for stocks and bonds, purchasing listed shares, keeping track of the execution of their order, fines in the occasion of disinvestments, important trends of publicly traded companies, etc.
In Mozambique, banking is a lucrative economic opportunity as well as a route of financing, similar to the capital market.
The premise that the banks continue to display solid balance sheets even during times of crisis serves as evidence for this. For instance, the net assets of the Mozambique banking sector increased by 1.48% and 11.43% between December 2020 and June 2021, in the middle of the pandemic, to reach 797.9 billion meticais. It is also the reason why novel banking companies have joined the market recently, like Access Bank, which acquired BancABC, and the Banco nico (now Nedbank).
ICT, logistics, and transportation
Dias sees plenty of room for growth in the gas and supply sector because Cabo Delgado’s gas industrial chain is already demonstrating signs of progress in this area. The primary barrier in this case, which is also connected to the eventual rise in food production, is the lack of mobility infrastructure, specifically roads, thus the government is urged to play a role in promoting the development of this crucial link.
ICT is the wave of the future, and one need only consider the support they offer for effective services across the board, including fresh funding in start-ups that are revolutionising business and society.
According to Patrcia Marques of EY, “there is still not much of a demand for services of this sort in Mozambique, yet it will start to be. The staff of new technology technicians is expanding as a result, and we are ready to satisfy the market’s increasing demand.”
The consultancy firm is upskilling young computer scientists presently engaged in significant projects both domestically and abroad. This is done with an eye on the changing dynamics of corporate activity.
What about the SME Sector?
All available publications advise potential small entrepreneurs to consider operations such as beauty services, graphic services (graphic design company to provide pamphlets, digital ads, posters, and other visual media for small and medium-sized businesses), entrepreneurial and business services (sought after by people who want to start them but do not have the time or patience to deal with bureaucracy), accounting services, cleaning services, and so on.
However, recent phenomena among youthful Mozambicans should be noted. They are beginning to show interest in, and even invest in, the latest financial markets with really good returns, including forex and cryptocurrencies, which are controversial due to security risks and a lack of regulation, and are thus discouraged by the Bank of Mozambique.
According to Joo Gomes, leader of Jason Moçambique, structurally, it is necessary to add other elements to the development equation which will make trade the key to change.
“If there are successful initiatives in Mozambique or Southern Africa, one must locate them, closely examine them, and draw lessons—even if this necessitates engaging in industrial espionage, which entails being aggressive and gathering information at any costs. Investments must be made for the long term rather than only for the now,” says Gomes.
The key, according to Joao Gomes, is to be able to connect the three pillars of large business: agriculture, transformation, and export. How? By pursuing the comparative advantage that comes from nature, enhancing it with knowledge, and then exporting, as Ethiopia is doing, for instance, by producing and exporting a natural good that is totally out of the box – flowers.