Joel Almeida • Founding Partner, of Forvis Mazars joel.almeida@forvismazars.com
Mozambique, a country rich in natural resources and with significant economic potential, faces considerable challenges due to political instability. Companies operating in the country must be prepared to navigate this volatile environment. This analysis addresses the main points of attention for companies, identifying both the challenges and the opportunities that may arise.
Contextualising instability
Political instability in Mozambique is rooted in a combination of factors, including internal political tensions and economic crises. These elements create an environment of uncertainty, which directly affects investor confidence and company operations.
Causes of instability
Among the main causes of political instability in Mozambique are political tensions between different groups, armed conflicts (often motivated by rivalries) and the struggle for scarce natural resources, such as water and minerals. These factors increase unpredictability in government policies and make it difficult to create a stable environment for business.
Impact on investment
Political instability results in a significant reduction in investor confidence, negatively affecting the flow of foreign investment into the country. Without the necessary security, investors hesitate to place their capital in Mozambique, which can lead to an economic slowdown and limit growth opportunities for local companies.
Consequences for companies
Companies in Mozambique face various operational challenges due to political instability, including security risks, difficulties in planning for the long term and obstacles in obtaining financing. This uncertainty can lead to redundancies and job losses, exacerbating the problems of unemployment and social discontent.
Without the necessary security, investors are hesitant to place their capital in Mozambique, which can lead to an economic slowdown and limit growth opportunities for local companies
Economic scenario for 2025
Political instability in Mozambique is a growing concern that could significantly affect economic and investment conditions in the country by 2025. It is essential that companies understand the economic projections in order to adequately prepare for the future.
GDP growth
Projections for GDP in 2025 suggest moderate growth, reflecting a gradual economic recovery. However, political instability poses significant risks to these projections and could affect investor confidence and, consequently, economic growth.
Inflation rate
The inflation rate forecast for 2025 will be a crucial indicator of economic conditions and the purchasing power of the Mozambican population. Inflation is a growing concern, as political instability can lead to price rises, reducing consumers’ purchasing power and affecting market demand.
Unemployment rate
Political instability can lead to a significant increase in the unemployment rate, negatively affecting the economy. Companies face operational difficulties in times of instability, resulting in redundancies and job losses. This can generate a vicious cycle of economic insecurity and social discontent.
Sectors at risk
Some sectors of the Mozambican economy are more vulnerable to political instability than others. Identifying which sectors could face the greatest challenges and which could benefit, even in times of uncertainty, is essential for companies operating in the country.
Vulnerable sectors
Sectors such as tourism, agriculture and manufacturing often face instability due to political factors. Tourism can suffer from insecurity and a negative perception of the country, while agriculture and manufacturing can face logistical and production challenges. These vulnerabilities can result in significant losses.
Sectors benefiting
Some sectors, such as technology and security, can thrive during periods of political uncertainty. Technology companies, which offer solutions for crisis management and security, can find growth opportunities as demand for these services increases. In addition, the security sector may expand due to the growing need for protection in an unstable environment.
Energy sector
The energy sector is fundamental to Mozambique’s economic development, influencing various industries and the quality of life. However, political instability can cause delays in energy projects and generate uncertainty in investments, affecting the sector significantly. The security of energy sector operations is a critical concern, especially in unstable and challenging environments.
No sector is exempt from reinventing itself in the face of crisis
Agriculture sector
Agriculture is vital to the Mozambican economy, providing food and jobs for many. Political instability can jeopardise agricultural production and food distribution, affecting food supply and security. Agricultural companies need to be flexible and adapt their strategies to cope with changes and guarantee the continuity of production.
Conclusion
To summarise, companies in Mozambique should be aware of political instability and its possible repercussions in 2025. Preparation and adaptation are essential for companies to survive in an uncertain environment. Analysing economic projections and sectors at risk can help companies develop effective strategies to face the challenges and take advantage of the opportunities that arise.
To thrive in this context of uncertainty, companies must invest in strategic planning, risk diversification and innovation. With a proactive approach, it is possible to turn challenges into opportunities and ensure a more stable and prosperous future for business in Mozambique.
