Brazilian capital puts Mozambique on list of top African receivers of foreign investment

15 July 2013

Mozambique should rank among the top ten on the list of African countries that attracted the most foreign direct investment (FDI) in 2012, due above all to Brazilian capital, indicates Portugal’s BPI bank.

In its most recent report on the Mozambican economy, BPI notes that net FDI from abroad nearly doubled last year, rising from US$2.7 billion to US$5.2 billion, most of it for major projects.

“The ability to draw foreign investment and the exploitation of natural resources were decisive in raising the economy’s growth potential,” the BPI report adds.

Last year 83 percent of net FDI, equivalent to 35.7 percent of GDP, was absorbed by the extraction industry sector, with about 76 percent earmarked for major projects, the text continues.

Those large projects account for more than half of goods exports. Aluminium from the Mozal factory continues to be the main export product, though coal’s share has been rising quickly.

“The exploitation of natural resources in Mozambique, mainly coal and gas, has become the main factor of interest for FDI and has justified the sector’s extraordinary expansion, supporting the economy’s high growth rates,” the report states.

In 2011 Mozambique ranked 14th on the list of countries attracting the most FDI. But according to BPI, last year it “may have entered the ranks of the top ten African economies” that attracted the most foreign investment, a list drawn up annually by the United Nations Conference on Trade and Development.

Brazil was a the top of investors list last year, accounting for 25 percent of the total, followed by the United States of America with 18 percent and Australia and Italy with 12 percent each.

Those capital inflows go mainly to mining projects. Standing out in Brazil’s case is Vale’s coal project in Moatize.

The ability to attract investment is associated to the “abundance of natural resources” and also to tax incentives for major investments, with VAT payment exemptions for capital goods and lower taxes on business activity.

The report explains that the industrial free trade zones also offer advantages that attract investment. Companies operating in such zones do not have to pay certain taxes and duties and benefit from a special framework meant to support infrastructure development and use.

This year BPI forecasts accelerated growth of 8.4 percent for the Mozambican economy. The extraction industry will be the most dynamic sector, achieving a growth rate of 18.6 percent, due to increased production at the Moatize and Benga mines, among others.

According to the IMF, Mozambique will be among the world’s 15 economies with the highest real growth until at least 2018.

The Fund also predicts that public spending and revenues will continue to rise in the next few years, during which official aid is expected to fall due to the global economic slowdown. (macauhub)