Economic Linkages in Mozambique and the We-Fi

Like many developing countries, now and then, Mozambique receives large capital inflows, mainly in the extractives sector. As the World Bank reports, “the country stood up as one of the largest recipients of FDI inflows in Africa and the extractive sector has been the main driver of economic growth”. However, Mozambique remains among the most unequal countries in Sub-Saharan Africa, with a Gini coefficient at 0.54 in 2014/2015

Mozambique’s non-inclusive economic development model has been driven by foreign direct investment (FDI) in extractive-led /capital-intensive sectors, with limited linkages to the local economy, hindering the country’s ability to reduce inequality. On top of that, economic growth in the country was also disrupted by a series of natural disasters and a health and debt crisis.

However, despite the challenging outlook, Mozambique faces, at the same time, a unique transformative opportunity. According to the World Bank, the discovery of large offshore gas reserves in Cabo Delgado province prompted massive FDI that is projected to raise exports of Liquid Natural Gas (LNG) and fiscal revenues significantly by the mid-2020s. Their estimates show that the development of these projects can generate over US$ 60 billion of FDI.

In this context, the World Bank is involved in a project that aims to strengthen economic linkages to the extractives sector for micro, small and medium enterprises (MSMEs) in targeted areas. Its three components are:

i. Increasing economic linkages through a regional focus

ii. Enabling linkages through national level’s market access, coordination, and reforms

iii. Project management

On the other hand, aligned with We-Fi Program Pillar 1: Strengthening Entrepreneurial Ecosystems, Pillar 2: Access to Finance, and Pilar 3: Access to Markets, the We-FI program Mozambique focuses on enhancing women-owned/led SMEs’ access to markets and finance. As can be seen, there are interesting complementarities between both projects. If things go as planned, Mozambique has a tremendous future ahead!