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Mozambique Trade Agreements

Trade Agreements: Unlocking Mozambique's Economic Potential

Mozambique's strategic position in Southern Africa, combined with its abundant natural resources and diverse agricultural output, makes it a valuable player in regional and global trade. To harness its potential fully, the country has entered various trade agreements aimed at enhancing market access, reducing tariffs, and driving economic growth. These agreements not only facilitate trade but also integrate Mozambique into broader economic networks. This article explores the key trade agreements in which Mozambique participates, analyzing their impacts, recent developments, and the challenges that remain.

SADC Free Trade Area (FTA)

Launched in 2008, the SADC Free Trade Area (FTA) represents a vital framework for trade among its 16 member states, including Mozambique, South Africa, Zimbabwe, and Malawi. The FTA eliminates tariffs on 85% of intra-regional trade, significantly enhancing Mozambique's trading capabilities within the region.

The impact of the SADC FTA on Mozambique is profound, as it facilitates about 40% of the country's exports to South Africa, including critical products like aluminum and electricity. Additionally, this agreement supports transit trade through major ports such as Beira and Nacala, which handle 32% of Zimbabwe's cargo and 7% of Malawi's TEUs, respectively. The SADC Trade Protocol streamlines customs processes, harmonizes trade policies, and prohibits unfair trade practices, contributing to a reduction in trade costs by an estimated 10-20%.

In recent developments, SADC's 2023 memoranda signed in Beira aimed to coordinate corridor investments. The plan is backed by the World Bank's $500 million Southern Africa Trade and Connectivity Project, which focuses on enhancing the rail and road networks associated with the Nacala Corridor, further boosting infrastructure needed for trade.

African Continental Free Trade Area (AfCFTA)

In January 2023, Mozambique ratified the African Continental Free Trade Area (AfCFTA), a landmark agreement designed to create a single market for 1.4 billion people across Africa, representing a collective GDP of $3.4 trillion. The agreement aims to enhance intra-African trade by reducing tariffs and promoting economic integration.

The importance of AfCFTA for Mozambique lies in its potential to expand market access beyond the boundaries of SADC. A notable milestone occurred in April 2025, when the first shipment from Mozambique to Kenya under the AfCFTA framework was realized, marking an important achievement for small and medium enterprises (SMEs). Projections suggest that the AfCFTA could boost intra-African trade by 52% by 2030, increasing Mozambique's agricultural and mineral exports significantly.

However, there are challenges to unlocking the full potential of the AfCFTA. High customs duties and non-tariff barriers, such as slow clearance processes, pose obstacles that may hinder the effective implementation of the agreement, highlighting the need for regulatory reforms to streamline trade.

EU-SADC Economic Partnership Agreement (EPA)

The EU-SADC Economic Partnership Agreement (EPA), signed in 2016 and applied by Mozambique since February 2018, is another crucial trade agreement. This partnership grants duty-free access to the European Union for most Mozambican products under the Everything but Arms (EBA) arrangement, removing tariffs on 97.8% of imports from SADC EPA states, including Mozambique.

The EPA has enhanced Mozambique's export capabilities, particularly in coal, titanium, and agricultural products. Markets such as the Netherlands, Portugal, and Poland have become significant destinations, contributing approximately 15% of Mozambique's total export revenue. The EPA effectively replaced the earlier 1999 EU-South Africa Trade, Development, and Cooperation Agreement, thereby expanding market access for Mozambican goods to Europe.

Ongoing negotiations for a deeper EPA could further enhance Mozambique's trade relations with Europe, though progress has been hindered by the need for regulatory alignment.

African Growth and Opportunity Act (AGOA) and Generalized System of Preferences (GSP)

Under the African Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP), Mozambique benefits from duty-free access to the U.S. market for a variety of products, including apparel made with third-country fabric. This arrangement has the potential to support exports of cotton, sugar, and apparel to the United States, although Mozambique's trade volume with the U.S. remains relatively low, with imports totaling $113 million in 2018.

The assistance provided by the USAID's Trade and Investment Hubs aims to strengthen AGOA compliance and boost the competitiveness of smaller enterprises. However, limited manufacturing capacity restricts growth in apparel exports, leaving agriculture as the dominant sector.

Bilateral Trade Agreements

Mozambique has also entered into several bilateral trade agreements that further enhance its trade framework:

  • The Malawi Agreement (2005) updates a colonial-era agreement, granting preferential access for Mozambican goods like sugar and cotton while facilitating Malawi's use of Nacala Port.

  • The Zimbabwe Agreement (2004) reduces tariffs on agricultural and mineral trade, supporting Zimbabwe's ferrochrome exports via Beira Port.

  • A U.S. Memorandum of Understanding (2019) promotes trade in agribusiness, energy, and infrastructure, encouraging U.S. investment in Mozambique's LNG projects.

These bilateral agreements highlight Mozambique's proactive approach to fostering international trade relations, enabling deeper economic ties with its immediate neighbors and beyond.

Conclusion

Mozambique's trade agreements play a critical role in enhancing its market access, reducing tariffs, and driving economic growth. By integrating into regional and global trade networks through mechanisms such as the SADC FTA, AfCFTA, and EU-EPA agreements, Mozambique aims to solidify its position as a trade gateway in Southern Africa.

While there are opportunities for growth, challenges such as high customs tariffs, non-tariff barriers, and the need for diversification remain pertinent. Continued investments in infrastructure and regulatory reforms will be essential for Mozambique to fully leverage these trade agreements and foster sustainable economic development. As the country navigates its path forward, these strategic partnerships will be vital in achieving long-term economic stability and growth.