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Mozambique Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI) in Mozambique ( per 2025)

Mozambique continues to stand out as a significant destination for Foreign Direct Investment (FDI) within Southeast Africa, attracting investors due to its abundant natural resources, strategic geographic location, and ongoing government initiatives aimed at improving the investment climate. This update provides an overview of recent FDI trends, key sectors for investment, challenges hindering growth, and government efforts to enhance accessibility for investors.

Recent FDI Trends

In 2023, Mozambique witnessed FDI inflows totaling approximately USD 2.68 billion, marking an 11.21% decrease from the USD 3.02 billion recorded in 2022. Despite this decline, FDI levels remain considerable and continue to play a vital role in the economy. For context, FDI comprised 13.79% of Mozambique's GDP in 2022, a notable drop from a peak of 32.75% in 2021. This fluctuation reflects the volatility in FDI influenced by both global economic conditions and project-specific factors.

As of the first quarter of 2024, Mozambique attracted USD 650.5 million in FDI, exceeding the previous year's quarterly performance. This influx included USD 51.5 million in shares and participations, alongside USD 599 million in capital supplies and commercial credits, signaling sustained interest from investors in the region.

Analyzing the broader picture from 2019 to 2023, Mozambique secured over USD 10 billion in FDI across various sectors. Economic reforms such as tax reductions and visa exemptions for 29 countries, introduced in 2023, have significantly contributed to this investment climate.

Key Investors

The United Arab Emirates has emerged as the top investor in Mozambique over the past five years. Other notable investors include the Netherlands and Italy, with emerging interest from India, particularly within the LNG sector, highlighted by a USD 4.7 billion loan for the Cabo Delgado LNG project.

Challenges

Despite the potential for growth, FDI inflows have shown inconsistency due to factors such as the sovereign debt crisis, governance issues, inadequate infrastructure, and ongoing security challenges in northern Mozambique, especially in Cabo Delgado. Additionally, natural disasters and a contractionary monetary policy have hampered economic performance, with GDP growth reported at only 3.2% in the first quarter of 2024, falling short of the 5.5% annual forecast.

While substantial reforms have been enacted, smaller investors often face bureaucratic hurdles and a beleaguered judiciary system, which can deter their participation in the market. In contrast, larger investors typically receive more government support and attention.

Government Efforts

The enactment of the 2023 Investment Law (No. 8/2023) signifies Mozambique's commitment to enhancing its FDI landscape by introducing new tax incentives and facilitating easier land use rights transfers. Although implementing regulations were still pending as of early 2024, these changes aim to create a more inviting investment environment.

The Agency for Investment Promotion and Exports (APIEX) plays a crucial role in facilitating FDI, offering tax and customs benefits, particularly within free trade zones. Additionally, visa requirements for investors have been relaxed since 2017, reducing the minimum investment threshold for an investment visa from USD 50 million to USD 500,000. Overall, measures aimed at accelerating economic activity, including reductions in VAT and the introduction of visa exemptions, have contributed to bolstering investor confidence in Mozambique.

Summary

In summary, Mozambique's FDI landscape in 2025 reflects both promise and challenges. While the country attracts significant investment due to its rich natural resources and government reforms, it must address the persistent issues—such as security, governance, and infrastructural shortcomings—to cultivate a more favorable and consistent investment climate. By continuing to implement strategic reforms and engage with the international investment community, Mozambique can sustain its growth trajectory and enhance its status as an investment destination in Southeast Africa.

Key Sectors for Investment in Mozambique

Key Sectors for Investment

Mozambique's FDI is heavily concentrated in resource-based and infrastructure-related sectors. Here's a breakdown of the key areas attracting investment, explained simply:

  1. Energy (Oil, Gas, and Renewables) – 40% of FDI (2019–2023):
    • Why It's Popular: Mozambique has massive natural gas reserves (Africa's third-largest, with ~180 trillion cubic feet), especially in the Rovuma Basin. Liquefied Natural Gas (LNG) projects are a major draw.
    • Recent Updates: The Mozambique LNG project by TotalEnergies, paused due to security concerns, is set to resume by mid-2025 with a USD 20 billion investment. India's ONGC Videsh holds a 30% stake, aiming for 3 million tonnes/year by 2027.
    • Other Projects: Investments in renewable energy and electricity production/distribution (6.6% of FDI in 2022) are growing, driven by demand for sustainable energy.
    • Why It Matters: These projects create jobs and boost exports, but they require huge upfront investments and stable security.
  2. Mining – 78.9% of FDI in 2022:
    • Why It's Popular: Mozambique is rich in minerals like graphite, coal, and gemstones, making mining a top sector for investors.
    • Recent Updates: The mining sector continues to dominate FDI, with investments from countries like Mauritius and the UAE. Coal and graphite projects are expanding due to global demand.
    • Why It Matters: Mining brings in foreign currency but can harm the environment if not managed well.
  3. Tourism – 18% of FDI (2019–2023):
    • Why It's Popular: Mozambique's 1,600-mile coastline and proximity to South African markets make it ideal for tourism, including resorts and eco-tourism.
    • Recent Updates: Visa exemptions and lower VAT for tourists have spurred investment in hotels and services, especially in Maputo and coastal areas.
    • Why It Matters: Tourism creates jobs for locals and promotes cultural exchange, but it needs better infrastructure like roads and airports.
  4. Industry and Manufacturing – 15% of FDI (2019–2023), 2% in 2022:
    • Why It's Popular: Manufacturing is growing as companies set up factories to process local resources, like food or textiles.
    • Recent Updates: The Limpopo Valley Agribusiness Economic Zone, approved in 2021, encourages industrial agriculture and processing.
    • Why It Matters: Factories provide steady jobs and reduce reliance on imports, but they need reliable electricity and transport.
  5. Agriculture and Agribusiness – 31.5% of GDP contribution in Q1 2024:
    • Why It's Popular: Mozambique's fertile land supports crops like sugarcane, cotton, and cashews, with potential for smallholder farmer integration.
    • Recent Updates: The Sustenta program, backed by a USD 500 million World Bank loan, aims to create 200,000 jobs by linking farmers to supply chains. The U.S. Millennium Challenge Corporation's Compact II (under development) will invest in rural agriculture in Zambézia Province.
    • Why It Matters: Agriculture employs many Mozambicans, but it needs modern tools and better roads to reach markets.
  6. Transport, Storage, and Communications – 8.5% of GDP, 1% of FDI in 2022:
    • Why It's Popular: Mozambique's long coastline and ports make it a transport hub for southern Africa, with opportunities in logistics and telecom.
    • Recent Updates: Investments in ports, roads, and rural transport infrastructure are growing, supported by the U.S. Millennium Challenge Corporation's focus on Zambézia.
    • Why It Matters: Better transport helps goods move faster, but poor roads and ports remain a challenge.
  7. Services and Construction – 14% and 5% of FDI (2019–2023):
    • Why It's Popular: Growing urban areas like Maputo need services (e.g., banking, retail) and construction for buildings and infrastructure.
    • Recent Updates: Investments in services like trade and repair (8% of GDP in Q1 2024) and construction projects are rising, driven by urban demand.
    • Why It Matters: These sectors support city growth but depend on stable policies and financing.

The 2023 Investment Law in Mozambique:  Overview

Introduction

The 2023 Investment Law (No. 8/2023) represents a significant step by the Mozambican government aimed at fostering a more inviting atmosphere for foreign companies and individuals looking to invest in the country. This law reflects Mozambique's commitment to enhancing its Foreign Direct Investment (FDI) landscape, which in turn creates a more favorable environment for foreign investors to introduce funds, establish businesses, and support various projects, including factories, mines, and tourism resorts.

Key Features of the 2023 Investment Law

Tax Breaks and Incentives

One of the major highlights of the new law is the introduction of tax reductions and exemptions for investors. This means that companies can expect to pay lower taxes on their profits or imports. For instance, a company that builds a factory may receive significant tax breaks for a number of years. Such incentives make it financially easier for investors to initiate or expand their projects, encouraging them to select Mozambique over competing nations.

Simplified Land Use Processes

Access to land is crucial for many investment projects, including agriculture and tourism developments. The 2023 Investment Law streamlines the process of transferring land rights, enabling investors to acquire access more swiftly and with reduced paperwork. This aspect is particularly important in Mozambique, where land disputes and bureaucratic delays can significantly hinder project progress.

Clearer Investment Regulations

The law outlines straightforward guidelines governing foreign investments, specifying what investors must do to qualify for various benefits. This clarity aims to diminish confusion and enhance transparency in investment processes, which in turn fosters confidence among investors regarding the safety of their financial contributions.

Support for Diverse Projects

This investment framework is tailored to encourage investment in critical sectors such as energy (notably gas projects), mining, tourism, agriculture, and infrastructure. Special benefits are offered for investments in these areas, while the law also aims to facilitate participation from smaller investors, ensuring that not only large corporations benefit from these reforms.

Significance for Foreign Direct Investment

The implications of the 2023 Investment Law are substantial. By providing tax incentives and simplifying rules, Mozambique positions itself as an attractive destination for foreign direct investment. This could potentially lead to billions of dollars flowing into projects that create jobs and stimulate economic growth. Clear and equitable regulations enhance investor confidence, assuring them that their investments are protected against corruption and bureaucratic red tape.

Furthermore, increased foreign investment can catalyze the development of various industries, resulting in the enhancement of infrastructure such as roads and electricity supplies, as well as improved wages for the local workforce. To compete effectively with other African nations vying for FDI, Mozambique requires contemporary, supportive legislation. The 2023 Investment Law aids in establishing Mozambique as a viable competitor against countries like Kenya and South Africa.

Challenges Ahead

Despite the promising features of the law, certain challenges must be addressed. As of early 2024, some detailed regulatory guidelines necessary for implementing the law were still pending finalization, which creates the possibility of delays for investors eager to enter the market. Additionally, larger corporations may disproportionately benefit from tax incentives compared to smaller local businesses, which could lead to greater economic inequality.

Moreover, the law alone does not resolve all existing challenges. Issues such as inadequate infrastructure—characterized by poor roads and limited electricity—and security concerns in regions like Cabo Delgado could still pose significant risks to potential investors.

Summary:

In essence, the 2023 Investment Law serves as a welcoming gesture from Mozambique to foreign investors, signaling a serious commitment to economic growth by encouraging foreign capital, particularly in pivotal sectors like gas, mining, and tourism. While the law lays a solid foundation for attracting investment, addressing persistent infrastructural and security challenges will be crucial to realize its full potential. If you seek more specific details on particular aspects of the law or its effects on different sectors, feel free to ask!