WT/TPR/S/79 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. The economic reforms undertaken by Mozambique have affected all sectors of the economy.
Since the process of reform commenced in 1987, th e Government has reduced its involvement in most
economic activities and has progressively encouraged the emergence of a private sector.
2. The long period of positive economic growth has fuelled an optimism that has affected most
sectors.  This has been further fuelled by the widespread privatizations, which are almost complete,
with the exception of a few large parastatals.
(2) AGRICULTURE AND RELATED ACTIVITIES
(i) General
3. Since the mid 1980s, the Mozambican economy has undergone a fundamental transformation
that has seen the withdrawal of the Government  from direct involvement in production, processing
and marketing activities that can be performed by the private sector.  The Government has liberalized
the marketing of agriculture products, and input prices have been decontrolled.  Subsidies to the
agriculture community have been removed, and monopolies of cooperatives and marketing boards
have been eliminated.  The Government has retained, primarily, its policy formulationresponsibilities.  While there has been continuing improvement in agricultural production and in the
welfare of small-scale farmers, much potential production is lost as a result of sometimes devastating
climatic conditions, the remnants of the Civil War, which left a legacy of land mines in rural areas and
a rural road system whose previously meagre facilities remain largely destroyed, and a sparse
population for which the provision of basic services is very expensive and the ability to reach a
marketing locale is minimal.  Nevertheless, Mozambique's agrarian sector contributes about 80% of
the country's export revenues.
4. The major objective of Mozambique's agriculture policies is self-sufficiency and food
security.  Additionally, the Government believes that economic growth and poverty alleviation are
practically impossible to achieve without sustainable development in agriculture.  In 1999, the
Government commenced implementation of a five-year agricultural expenditure programme
(PROAGRI).  The programme rationalizes public expenditure in the sector and the role of theMinistry of Agriculture and Natural Resources (MANR), so as to improve the effectiveness of
government services delivery and regulatory functions.  There is a new emphasis on improving the
implementation of the agriculture laws, and enforcement of regulations, primarily at provincial
government level, reflecting government's understanding of the need to be closer to the people in
order to be effective.  The Government has also taken steps to address insecurity of land tenure andhas begun to reduce the backlog in unprocessed land-title applications.
5. PROAGRI is aimed at encouraging private sector  participation in the production and trade of
agricultural products while outlining the Government's role as one of providing support services,
market information, and regulatory regimes.  PROAGRI has eight com ponents:  institutional
development;  research;  extension;  support to agricultural production;  livestock production;  forestryand wildlife;  agrarian land;  and irrigation.
6. Most liberalization in the agriculture sector took place in 1997-98;  cashew nut liberalization
was completed in 2000.  However, there remains a tax on exports of raw cashew nuts and a variable
surcharge on imports of sugar.Mozambique WT/TPR/S/79
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7. Mozambique frequently suffers from heavy rains.  The most recent, in early 2000, became a
humanitarian disaster of international proportion.  While creating a major humanitarian tragedy, the
effect on agriculture was serious but not devastating;  most of the flooding was south of Maputo,
while most of the agriculture output is north of Maputo.
8. Mozambique has large tracts of uncultivated arable land.  Total arable land is 36 million
hectares;  around four to five million acres are under production.  There has been foreign interest ininvesting in large-scale commercial agriculture, main ly in cotton, copra, sugar, citrus, and maize.
9. As a result of the sectoral reforms, all inputs have been decontrolled.  As the availability of
subsidized fertilizer has been eliminated, the consumption of fertilizer has decreased with negative
impact on crop yields.  At the same time, the decline in the value of the metical, while gradual, has
raised the cost of fertilizer.  As a result, the Government has placed fertilizer production high on thelist of desired industrial products and is actively seeking international investment in this area.
10. The average applied MFN tariff rate for agricultural products (WTO definition) is 18.1%.
1
Using the ISIC (Rev. 2) classification, the average tariff on agriculture, hunting, forestry and fishing
(major division 1) is 16.8% (Table AIV.1).
(ii) Policy by product category
11. The production of traditional export crops shows a clear improving trend, despite annual
fluctuations largely influenced by climatic circumstances, incidence of pests and diseases, and
short-term price variations.  With only a small share of the international market, increased production
of these commodities would not affect export prices.  Mozambique's production of main agricultural
items is shown in Table IV.1.
Table IV.1
Agriculture production, 1996-98(Tonnes)
Description 1996/97 1997/98
Export crops
Sugar cane 278,939 368,675
Cotton 74,000 83,500
Cashew nuts 43,325 49,417
Copra 35,563 36,000
Tea 1,500 1,500
Food crops
Maize 256,346 270,222
Cassava 76,140 74,770
Vegetables 49,993 50,527
Beans 45,016 45,728
Rice 24,925 26,722
Table IV.1 (cont'd)
                                                     
1 Annex 1 of the WTO Agreement on Agriculture defines the scope of agriculture as HS Chapters 01 to
24 less fish and fish products (Chapter 03), plus selected items from Chapters 29, 33, 35, 38, 41, 43, 50, 51, 52,and 53.WT/TPR/S/79 Trade Policy Review
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Description 1996/97 1997/98
Crops for industry
Tomatoes 12,200 12,200
Mafurra 744 977
Tobacco 700 700
Source: Bank of Mozambique (1998), Annual Report,  Maputo.
12. Prawns are the major source of export earnings (Table IV.2).  Other major export crops
include cotton, cashew nuts, sugar, and copra (Table IV.2).  The major food crops are maize, rice,
cassava, beans and vegetables;  in several of these, Mozambique must rely on imports for dailysustenance.  The major industrial crops are tobacco, mafurra, and tomatoes.  Non-traditional export
crops include those whose availability depends on surplus production.
Table IV.2
Evolution of the main export products, 1997-98
(US$ million)
Description 1997 1998
Prawns 90.2 72.7
Cotton 22.2 22.4
Cashew nuts 14.1 19.1
Sugar 12.8 8.4
Copra 4.6 5.0
Citrus fruit 0.8 0.4
Tyres and tubes 3.3 3.4
Electricity .. 34.3
Bunkers 2.4 1.3
.. Not available.
Source : Bank of Mozambique (1998), Annual Report,  Maputo.
(a) Sugar cane
13. Sugar cane has the greatest potential among Mozambique's export crops.  The subsector is a
big employer, has potential links with other sectors, and has enormous export potential, particularlygiven the preferential  quotas offered in the U.S. market.  Indeed, Mozambique production has been
hard pressed to fill its quota in the U.S. market.  The Government has been focusing on expanding this
activity:  the success of its efforts is evident from the 32% increase in production in 1998, to 368,675
tonnes from 278,939 tonnes, in 1997.  The Bank of Mozambique attributes that growth to the
privatization of several sugar companies and an active rehabilitation programme.
14. In an attempt to accelerate rehabilitation of the local sugar industry, the Government raised
the variable import surcharge on sugar in September 1999 (Chapter III(2)(iii)).  The surcharge is
based on a reference price formula that is said to imply a nominal protection for the sector of about
60%.  The average MFN tariff levied on sugar products (ISIC 3118) in 2000 is 7.5%.
(b) Cashew nuts
15. The cashew nut branch presents an excellent picture of some of the problems faced by
Mozambican agriculture.  In 1999, 58,720 tonnes were  sold, of which 15,930 tonnes went to national
factories and 30,391 tonnes were exported em bruto .  However, cashew nut production is of lowMozambique WT/TPR/S/79
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quality;  as a result, factories are often unable to use what they have purchased, and the crop sold for
export does not bring high prices.
16. Cashew nut production reached a high of 214,000 tonnes in 1972, but has fallen dramatically:
in recent years, production surpassed 50,000 tonnes only in 1991/92 (54,014), 1995/96 (66,510) and
1999.  The decline reflected the devastation caused by the Civil War, and inattention to the necessary
upkeep.  As a result, especially of the latter, cashew trees have become old and non-productive.Efforts at replanting have lagged, and there is a net loss of trees annually.
17. The impact of the decline in this activity is felt heavily among the rural population, as cashew
nuts are grown by most farmers and are considered the most profitable crop.  Generally, the
small-scale farmer's central preoccupation is to ensure a sufficient food supply for the coming year,
and in this regard food crops take priority over cash crops.
18. The Government believes that revival in this branch could have a major positive effect on
reducing poverty throughout the country.  Its emphasis on privatization has, in this context, brought
mixed blessings.  On the one hand, individual farmers now have the ability to capitalize on the
commercial market:  cashew nut production is now completely private;  the last plantation and
processing plant were privatized in 1998.  On the other hand, in the wake of the processing plantprivatizations, there has been an increase of political pressure to provide protection to the branch.  The
primary impetus for this pressure is that processing plants with a capacity for over 60,000 tonnes have
now been returned to operation, and their capacity exceeds production in most years.
2  T h e  o n l y
export tax in Mozambique is on raw cashews (Chapter III(3)(ii)).  It is set at the beginning of the crop
year by the Ministry of Planning and Finance;  the tax was 18% in 2000.3
19. The Government commissioned a major international accounting firm to study the industry,
and its report concluded, among other things, that the export tax needed to be retained, but thatproducer prices  needed to be raised.
4  However, large amounts of raw nuts continue to be exported in
spite of the tax, indicating that the current policy is not working.  In fact, it is depriving small farmers
of additional revenue;  the beneficiaries are said to be the processors.  The report also recommended a
continual move toward liberalization, with clearly formulated long-term policy by the Government.
(c) Tobacco
20. The tobacco crop has largely been for domestic commercial production.  Formerly the crop
was exported, primarily to neighbouring Zimbabwe.  However, recent worldwide restrictions on
imports of tobacco and tobacco products have had a serious effect on plans for this crop.  Thus, the
Government and farmers are looking elsewhere for ag ricultural expansion.  Still, 700,000 tonnes were
produced in 1999.
(d) Cotton
21. The Government's Industrial Strategy Policy stresses the priority of supporting local industry
in order to increase domestic value added over fulfilling the large export potential.  Cotton has been
identified as offering great potential both to the textile industry, and for import substitution of edible
                                                     
2 This situation has led to (or has caused) the widespread view that Mozambique is losing considerable
value-added potential as a result of the low prices it receives for the export of unprocessed cashew nuts,
primarily to India.
3 Mozambique's National Assembly passed a bill at the end of 1999 raising the tax on exports of raw
nuts from 14% to 18-22% and offering domestic processors priority in the purchase of raw nuts.
4 Ministry of Industry and Trade (1997a).WT/TPR/S/79 Trade Policy Review
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oils, as well as for employment.  Cotton production increased from 19,106 tonnes in 1994/95 to a high
of 83,500 tonnes in 1997/98, before dropping to 77,846 tonnes in 1998/99.  An important factor in the
general increase has been a promotion programme within the family sector created by a cotton
marketing company.
22. Cotton is the only product for which there is a minimum producer price.  The price of cotton
from seed grades one and two, which are provided free to the farmers by the ginneries, is negotiatedbetween the ginneries and the farmers;  this price is subject to government approval.  As the purchaser
of last resort, the Government is committed to intervene if the price falls below the minimum price.
However, the Government has never bought any cotton under this policy.
(e) Tea
23. Tea production, at 1,500 tonnes, is not a major factor either in Mozambique's agriculture or
on the international market.  Nonetheless, it has been Mozambique's fifth largest export crop;  most of
the production is exported.  Tea was a very important export crop before independence and during the
initial years that followed.  The Civil War, however, devastated the main producing area, Zambezia
Province, and completely paralysed tea production and the related industrial processing facilities.
With peace, and the privatization of the tea growing and processing units, it is expected that thissector will regain its former strength.
(f) Food crops
24. The picture of Mozambique agriculture would be incomplete without some discussion of
crops grown primarily for local consumption.  In 1998, 270,222 tonnes of maize were produced, up
from 256,346 tonnes in 1997.
25. Mozambique is not self-sufficient in food production.  For example, approximately 85% of
rice needs are imported.  In addition, Mozambique received foreign assistance in donated food in1999, primarily from the United States but also from Japan, including 83,764 tonnes of wheat, 10,700
tonnes of rice, and 9,000 tonnes of cooking oil.  At the request of the Government of Mozambique,
delivery of this food was spaced out in order to minimize its downward effect on producer prices.
The proceeds from the sale of this food were available to the Government to use for development
projects.
26. Mozambique has created the Mozambique Cereal Institute (ICM), which is mandated to
perform the tasks normally undertaken by grain marketing boards.  Principally, it purchases grain for
export.
(g) Livestock farming
27. Livestock production is limited, although it has recovered gradually.  Cattle population, which
numbered 1.4 million in 1974, dropped to 214,000 in 1994, but expanded to 293,000 in 1995.
Small-holders own 75% of cattle, with only 45,000 families identified as livestock producers.  Tsetse
fly infestation and the shortage of water for six months of the year in parts of the country where
production might otherwise be possible have been major factors in inhibiting production.  The
Livestock Production component of PROAGRI focuses on the improvement of cattle breeds andinstitutional support for the provision of better livestock services.  As a result, Mozambique is
traditionally a net importer of meat and meat products.
28. In contrast, poultry production is on a more commer cial basis;  four producers have capacities
greater than 100,000 birds, and there are many medium-scale producers.  Poultry is the major sourceMozambique WT/TPR/S/79
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of protein both in the formal and informal markets.  Still, Mozambique is a net importer in this area;
imports of milk, eggs, meat, and other animal derived products totalled US$23.3 million in 1994.
(h) Fisheries
29. Mozambique's total fisheries catch was around 14,000 tonnes in 1999, down from almost
19,000 tonnes in 1998 (Table IV.3).  Seafood has been Mozambique's largest export for many years,
usually accounting for approximately 40% of total exports or at least US$70 million per year.Mozambican officials are concerned that this share is  too high;  they note that it compares with only
2% prior to independence.  Furthermore, Mozambique's fish exports might be seriously
under-reported, largely as a result of illegal activities by foreign fishing fleets.
Table IV.3
Fisheries catch, 1998-99
(Tonnes and US$ million)
Quantity (tonnes) Value (US$ million) Type
1998 1999 1998 1999
Small shrimp 9,159 8,000 79,688 69,600
Large shrimp 2,023 1,770 10,522 10,797
Lobster 364 163 4,109 1,639
Crab 240 120 767 372
Sea fish 3,786 933 4,013 1,866
Fresh water fish 3,211 2,832 3,532 3,398
Other 140 101 154 71
Total 18,924 13,919 102,784 87,744
Source : Mozambican authorities.
30. The value of exports in this sector has generally grown over recent years.  In 1999,
Mozambique exported 13,919 tonnes of fish, worth US$87.7 billion, a decrease of 15% from 1998.  In
terms of value, 92% of the total resulted from small and large shrimp (Table IV.4).
Table IV.4
Small shrimp catch, 1995-98(Tonnes)
Type/Use 1995 1996 1997 1998
Industrial 7,224 7,062 8,223 7,133
Semi-industrial 156 377 508 939
Artisan 140 418 874 384
Total 7,520 7,857 9,606 8,456
Source : Mozambican authorities.
31. In 1994, the Government issued a Master Plan for the fisheries sector.5  This plan included
efforts to better conserve, manage, and develop the sector on a sustainable basis.  The Fisheries Act
(1990) is the major legal instrument for fisheries policy.  Other instruments include the Regulation for
Sea Fishing (1996) and the Regulation of Inspection and for the Assurance of Quality of FishProducts (1998).
                                                     
5 State Secretariat for Fisheries (1994).WT/TPR/S/79 Trade Policy Review
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32. The Government has adopted a conservation policy.  Each year it determines an allowable
catch volume, and distributes quotas to registered fishing interests.  Those interests are divided among
four basic types:  industrial fishing, semi-industrial fishing, artisanal fishing, and subsistence fishing.
Most of the catch, and most of the quota, relate to industrial fishing.
33. The fisheries sector benefited from the country's privatization policy.  With only one
exception, all fishing and related activities are now in the hands of the private sector, and productionhas increased as a result.  Foreign participation is encouraged, and important joint ventures exist with
investors from Spain, Japan, Portugal, and South Africa.
34. The major destinations for shrimp exports are the European Union, Japan, and South Africa.
Salt-water fish are exported to the EU, while fresh water fish are exported regionally, primarily to
Zambia, Zimbabwe, and Malawi.  The Government is also trying to increase the availability of fishfor domestic consumption.
(i) Forestry
35. Mozambique has about 55 million hectares of forests and woodlands, about 40% of which is
classified as containing forests with commercial value.  While most of this land contains only random
and sparsely planted trees of interest, the existence of some species attractive in certain market nichesin Europe and Asia has led to an increase in exploitation.  At the same time, the Government is
considering the ecological sustainability of forest exploitation, as deforestation continues to be a
serious problem.
36. The Ministry of Agriculture and Natural Resources (MANR) is responsible for
implementation of forestry policy.  The overall goal of the policy is to enhance the contribution of the
forestry to the sustainable development of Mozambique and the conservation and management of its
natural resources.
37. The forestry industry, which was at one time co ntrolled by the State, has been completely
privatized;  despite the entrance of new operators in the field, the industry is operating at less than
50% of installed capacity.  MANR is responsible for the regulation of trade in forestry products.
Mozambique does not impose any restrictions on foreign direct investment in the forestry sector.
38. Mozambique is a member of the International Tropical Timber Organisation.  It is also a
member of the Convention on International Trade in Endangered Species of Wild Fauna and Flora.
(3) M
INING AND ENERGY
(i) Mining
39. Mozambique is rich in mineral deposits, but the mineral industry is not well developed.  It is
expected that Mozambique will promulgate a ne w mining law in 2001.  With support from various
sources, extensive prospecting activities have been undertaken in various parts of the country.
Geographic surveys cover nearly two thirds of the country, and large mineral reserves have already
been identified.  The main mineral deposits incl ude coal, natural gas, ilimenite, graphite, fluorine,
gold, marble, granite, precious and semi-precious stones, asbestos, bentonite, diamonds, apatilite, and
beilite.  Many of these remain to be exploited.
40. In Mozambique, minerals and other natural resources including land are the property of the
State, which controls their licensing.  This principle is written in the Constitution and reiterated in the
1986 Mining Law.  Under the Mining Law, which is administered by the Ministry of MineralMozambique WT/TPR/S/79
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Resources and Energy, mining activity may be carried out under five different types of licence:
(i) non-exclusive exploration licence;  (ii) exclusive exploration licence;  (iii) mining licence;
(iv) quarry permit;  and (v) small-scale mining certificate.  In addition, there is a precious metals and
minerals  commercial licence, which permits the licence holder to buy and sell gemstones, gold, and
other precious metals.
41. A mining sector tax regime, enacted in 1994, includes a variety of tax and other incentives to
compensate for the country's lacks of plant, equipment, and other goods, all of which have to be
imported, and the minimal domestic use.  Generally mining is an export-oriented sector.  The
incentives also reflect the lack of infrastructure in general, and in particular where most mineral
deposits are located.  Among the incentives is the exemption of import duties, taxes, and charges on
exploration and mining equipment and other materials imported during, and for the purposes of,exploration and mining operations.  Additionally, benefits available in export processing zones might
be attractive to downstream processing operations.
42. The Government's policy for this sector is to attract private investment to expand production;
to complete the rehabilitation mines for coal, marble, precious and semi-precious stones, and heavy
metals;  and to develop new mines.
6  A major limitating factor in attracting investment in many of the
current and potential mining sites is the inadequate rail system.  Although consortia of international
investors are looking at several important projects, almost all require significantly improved or new
rail and/or port facilities.  The Government's vision for the mineral sector for the next 10-30 years is
to have a strong, vibrant, well organized private-led sector.
43. Mozambique exported US$4.2 million of minerals in 1999, down 17.6% in value from 1998.
The largest export earners in 1999 were graphite (US$2.9 million), bauxite (US$0.6 million) and coal
(US$.0.4 million).  Other exported minerals were bentonite, gold, marble, and granite (Table IV.5).
44. Among the various plans for major investment in this sector, two could become important
developments:  titanium in Nampula and coal near Moatize.
Table IV.5
Exports of mining products, 1998-2000
(Tonnes and US$ '000)
Product Quantity (in tonnes) Value (in US$ '000)
1998 1999 2000a1998 1999 2000a
Graphite 5,558 4,084 3,000 3,890 2,858 2,100
Coal 17,903 20,502 52,500 317 363 929
Bauxite 6,133 7,883 8,000 442 567 576
Bentonite 6,192 4,160 3,740 292 202 176
Granite 1,998 738 2,000 162 59 160
Gold 0.0 8.0 8.0 0.0 100 100
Total .. .. .. 5,132 4,227 4,566
.. Not available.
a Estimates.
Source : Mozambican authorities.
                                                     
6 Ministry of Mineral Resources and Energy (1998b).WT/TPR/S/79 Trade Policy Review
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(ii) Energy
(a) Electricity
45. Mozambique is rich in hydropower resources, coal and natural gas and could become a major
source of electrical energy for the region.  The sector has the potential to be a major source of
economic growth through its generation of foreign exchange earnings and tax revenues, as well as for
the availability of electricity domestically.  At the present time, the most significant electricityproducer is the Cahora Bassa (sometimes referred to as Cabora Bassa) dam.  Much of the electrical
energy production is exported to South Africa and Zimbabwe (Table IV.6).  The exports to South
Africa and many of the internal distribution facilities were significantly damaged as a result of the
floods in 2000.
Table IV.6
Exports of energy by destination, 1998-99
(MWh and US$ '000)
Quantity(in MWh) Value (in US$ '000) Destination
1998 1999 1998 1999
ESCOM (South Africa) 629 5,257 2,705 22,606
ZESA (Zimbabwe) 3,457 3,234 33,532 31,371
Source : Mozambican authorities.
46. The Cahora Bassa dam currently produces 2,075 MW of electricity.  This project produces an
interesting trade anomaly:  electricity is exported to South Africa, which pays two cents per kWh,
while Mozambique has to import electricity from South Africa to supply Maputo (which is too far
from Cahora Bassa to be supplied in a cost effective manner), and pays four cents per kWh for itsimports.  Foreign investors are currently studying the possibility of a second dam, downstream from
Cahora Bassa.
47. Responsibility for managing the country's electrical power remains with the state-owned
Electricidade de Mozambique (EDM).  Although there has been discussion about a strategic private
investor for EDM, it still maintains a monopoly on the management of the national grid.Mozambique is a member of the Southern Africa Power Pool (SAPP).  Currently, the Ministry of
Mineral Resources and Energy is responsible for energy regulation.
(b) Petroleum
48. The liberalization of the petroleum branch is an important part of the efforts to increase the
efficiency of the economy.  Mozambique does not produce any petroleum;  all petroleum is imported
and is subject to customs and excise duties, with significant exceptions.  Some imported fuels are
resold for export;  in 1999, such sales earned US$4.1 million, most of which came from aviation fuel.There is no petroleum refinery in Mozambique.
49. Distribution of petroleum is in the hands of the private sector.  The Government still
maintains price controls, with prices  varying according to the world price.
(c) Natural gas
50. One of the most significant potentials for the Mozambique economy is in natural gas.
Significant offshore deposits have been identified and major efforts are under way to raise the capital
to exploit them.  Some of these effo rts also involve downstream investments.Mozambique WT/TPR/S/79
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51. Among the most important current plans are the offshore Pande gas field with reserves of
over 2.5 trillion cubic feet, and the Temane gas field.  Both projects are being considered in
association with other investment projects.  The Pande field is connected with a possible
direct-reduced iron and steel plant;  it might also spawn a pipeline to fuel other industries.  The
Temane project would involve a pipeline to a synfuels plant in South Africa.  Other exploration
projects are taking place, as is consideration for possible petrochemical and fertilizer investments.
(4) MANUFACTURING
52. Mozambique's manufacturing sector is underdevel oped.  It declined seriously as a result of
the Civil War, but is now recovering.  In 1999, industrial production reached
Mt 4,038 billion (equivalent to US$303.6 million), an increase of 7.2% over 1998.  The sector is
dominated by food processing, tobacco, and beverages;  textiles, apparel, shoes, and leather goods;chemicals, rubber, and plastics;  paper, graphic design, and publishing;  and light manufacturing.
These constitute 98% of total industrial production (Table IV.7).  Industrial production is concentrated
in a few major firms:  nine companies produ ce 56% of the total;  and two (Coca Cola and
Mozambique Beer (Cervezas de Mozambique)) produce 25.7%.
7
Table IV.7
Industrial production, 1998-99(Mt billion)
Sector 1998 1999
Food, drink, and tobacco 2,288.2 2,573.7
Textiles, clothing, shoes, and leather 377 467
Chemicals, rubber, and plastics 469.6 430.7
Paper, graphic arts, and publishing 379.9 394.7
Metal products, machines, and equipment 181.5 106.4
Base metals 34.9 16.4
Glass 24.1 39
Furniture 4.7 5.3
Other 4.9 3.0
Mining (salt) 1.7 1.5
Source : Mozambican authorities.
53. The Mozambique Government is seriously interest ed in expanding its industrial activity;  two
indications were the reduction of tariffs on imported industrial inputs in 1993 from 18% to 11%, and
the privatization of all state-owned manufacturing companies, many of them now owned, at least
partially, by foreign investors.  In 1997, the Government formulated an industrial strategy policy.  Animportant goal of that policy is to increasingly reduce the country's external dependence.  The
priorities are to (i) support the value-added use of natural resources, (ii) contribute to the balance of
external trade, (iii) contribute to the satisfaction of basic needs, and (iv) promote the development of
labour-intensive technologies.  Within these priorities, the trade-related goals are to pursue export
opportunities and import substitution particularly of basic and intermediate goods.
54. In the industrial strategy, priority is given to the food and agri-industry;  textiles, clothing, and
shoe industry;  metalworking and electro-mechanical industries;  construction materials;  fishing;
extractive industries;  and energy.
                                                     
7 Ministry of Industry and Trade (1999c).WT/TPR/S/79 Trade Policy Review
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0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0Chart IV.1
Tariff on manufactured products, by ISIC classification, 2000
Per cent
WTO Secretariat calculations, based on data provided b y the Mozambi que authorities. Source :Food products
Beverages
Tobacco
Textiles
Clothing
Leather products
Footwear
Wood products
Furniture except metal
Printing and publishingPaper products
Industrial chemicals
Other chemicals, incl. pharm.
Petroleum refineries
Rubber productsPetroleum and coal products
Pottery and chinaPlastic products
Other non-metallic mineral productsGlass and products
Iron and steel
Non-ferrous metals
Fabricated metal products
Non-electrical machinery incl. computers
Electrical machinery
Transport equipment
Professional and scientific equipment
Other manufactured productsTariff average for 
manufacturing
13.8
55. Perhaps the most important manufacturing activity is the development of the US$1.2 billion
MOZAL aluminium smelter project along the newly developing Maputo-Johannesburg corridor.Construction on MOZAL began in mid 1998, and completion is projected for late 2000.  MOZAL
employs approximately 8,000 workers during construction, and will employ around 1,000 once it
becomes operational.
8  The factory is located in an export-processing zone and qualifies for special
tax incentives.  The MOZAL project will require port facilities to handle the import of alumina and
the export of aluminium ingots.  It will also require a major electrical development to bring electricityfrom South Africa;  this is currently under construction.
56. Also envisioned is a US$2.5 billion project to  produce direct-reduced iron, most of which
would be used as feedstock for an associated steel plant;  both of these would be in Maputo.
                                                     
8 MOZAL is expect to reach full operational capacity of 250,000 tonnes per year by March 2001, when
its exports are likely to be worth some US$400 million a year, well in excess of Mozambique's total exports in1999.Mozambique WT/TPR/S/79
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57. The average applied MFN tariff on non-agricultural products (WTO definition) is 13.1%.
Using ISIC (Rev.2) classification, the average tariff on the manufacturing sector (Major Division 3) is
13.8% (Chart IV.1).
(5) SERVICES
58. The services sector is a significant component  of Mozambique's GDP, but has only recently
received serious attention.  Like most of the economy, it has benefited from privatizations.  TheMozambican Schedule of Specific Commitments under GATS is limited to banking and other
financial services (excluding insurance).
9
(i) Financial services
(a) Banks and financial institutions
59. A major part of Mozambique's effort to expand its economy has been attention to financial
services activities.  Mozambique has undertaken a major programme to privatize the entire banking
system;  the last state-owned bank was privatized in 1997.  This has significantly changed the banking
structure in the country, inspired a new management style, and encouraged competition.  With this
change, and with the introduction of new information technology, officials believe there has been a
noticeable improvement in the quality of client services.
60. A major accomplishment was the modernization of banking legislation with the
implementation of a new banking law in November 1999.  Since 1995, the number of financial
institutions has more than tripled, and the capital valuation has increased sevenfold.  In July 2000, the
sector comprised ten licensed banks, one investment  bank, four credit cooperatives, and four other
financial institutions.  Many of these institutions have branches throughout the country.  The
commercial banks hold 93% of all assets;  the largest four hold 68%.  While all banks have been
privatized, there is a minority government holding in two of the commercial banks.  Since the 1999
law, there has been a serious effort to encourage the creation of micro-finance institutions, particularly
in rural areas and other areas outside of Maputo.  The Bank of Mozambique also supervises these
institutions.
61. The Bank of Mozambique is responsible for supervision of banks and other financial
institutions.  In order to ensure the safety and soundness of the financial sector, the regulatory andsupervisory environment has been modernized in line with the Basle Committee's Core Principles for
effective banking supervision.  The Bank of Mozambique is responsible for assuring that officers and
key employees of financial institutions have sufficient, appropriate experience, and no criminal
record, and that the owners of such institutions have sufficient capital to minimize the chances for
bank failure or other related developments.  After reviewing the full application for a new bank, theBank of Mozambique makes a recommendation to the Minister of Finance, who makes the final
decision on whether to grant a new, or renew an old, licence.
62. In general, the Bank of Mozambique ensures that commercial banks and other financial
institutions conduct their business on a sound prudential basis and according to the various laws and
regulations in force.  It also supervises banking conduct and the licensing of financial institutions.
                                                     
9 WTO document GATS/SC/58 of 15 April 1994.WT/TPR/S/79 Trade Policy Review
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63. Foreign participation in the banking system is not only allowed but is commonplace.10
Participation can be as much as 100% ownership.  Currently, only one bank is 100% foreign
(Malaysian) owned.  There is no requirement for Mozambicans to sit on the Board of a foreign-owned
bank nor labour requirement forbidding foreigners from holding positions at various levels within the
bank, but there are requirements for the training of Mozambicans in various positions.
(b) Insurance services
64. The insurance industry is regulated by the General Insurance Inspectorate, whose duties are
made clear in a Ministerial Diploma of December 15, 1999 issued by the Minister of Planning and
Finance.  Mozambique law allows the right of establishment.  State-owned insurance companies have
been privatized;  the new owners include foreign investors.
65. There are four active insurance companies in Mozambique.  The total value of outstanding
insurance increased from Mt 92.4 billion in 1994 to Mt 297.8 billion in 1998.  In 1998, 3% of this
amount was for life insurance and the remainder for non-life policies.  The largest branches were
automobile (Mt 146.7 billion), fire (Mt 36.9 billion), air (Mt 34.3 billion), and work-related
(Mt 32.6 billion) insurance.
66. Reinsurance services are not currently available in Mozambique.  As a consequence, all
reinsurance is being placed outside the country, either with regional reinsurance entities or with
private reinsures.
(ii) Tourism, restaurants, and hotels
67. The Mozambican Government has recognized the role that tourism can play in economic
development and as a source of foreign currency earnings.  Believing that tourism had lagged its
potential and compared unfavourably with that of its neighbouring countries, the responsibility for
tourism was transferred into its own ministry in 200 0, having split away from the Ministry of Industry
and Trade.  The primary task is to promote Mozambique as a problem-free destination;  however,
efforts to do this have been minimal.
68. The tourism industry suffered badly as a result of the Civil War.  For example, wildlife parks
became deserted, as animals were either frightened away or killed.  Efforts to re-establish some
attractions, for example in the northern province  of Niassa, where there could be cooperation with
Malawi and Tanzania, are hampered by the continued existence of land mines.  Another problem may
be addressed with the success of SADC:  visas are difficult to obtain, and that difficulty deters
tourists;  the expected advent of a unified SADC visa system for Southern Africa by the end of 2000,
which will include exemption for 11 western countries, mostly European (the main source of tourists
in the SADC region), offers Mozambican authorities new hope.
69. There was a positive trend in the tourism industry over the period 1995-98.  However, in
1999, tourism indicators declined broadly:  the number of hotel guests declined 20.9%, from 225,654
to 178,576;  the number of guest-nights declined 44.4%, from 715,041 to 397,626, due to a 39.5%
decrease in the average length of stay;  and the receipts from hotels declined 7.6%, from
Mt 256.1 billion to Mt 236.7 billion (US$17.8 million).  The Ministry of Tourism does not believethat its statistics are comprehensive.  It estimates that over 60% of the tourists come from South
                                                     
10 Under Mozambique's GATS Schedule of Specific Commitments, any foreign bank or financial
institution may operate in the country as long as it abides by the domestic rules and regulations governinginvestment and operations of such institutions.Mozambique WT/TPR/S/79
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Africa, with Portugal the second largest supplier, and that the average length of stay is only 1½ to 2
days.  Tourism does affect government revenue directly, as there is a modest tourism tax.
70. Still, there is optimism about the future of the industry.  Regional projects with South Africa,
Swaziland, and Zimbabwe are under way, and over 50 proposals for new projects in Maputo alone are
under review.  Additionally, authorities believe th at when the MOZAL project becomes operational it
will attract increasing numbers of foreigners who will take advantage of new tourist opportunities.There are signs even in Maputo of new investment in tourist facilities;  and efforts to revitalize the
most significant wildlife preserves – Gorongosa National Park and the Niassa Reserve – have already
proved successful.
71. Travel agent services, of which about 35 are now registered, are not restricted to Mozambican
nationals.
(iii) Telecommunications
72. Mozambique's telecommunications branch is undergoing significant changes as the
Government increasingly recognizes that the telecom infrastructure plays a vital role in all aspects of
economic development, but particularly for export development and tourism.  At present, costly and
inadequate telecommunications services are a major handicap for economic development andconsumer interest.
73. The Ministry of Transport and Communications (MTC) is responsible for policy related to the
development of the telecommunications industry.  In 1999, the Government adopted a new
telecommunications law aimed at opening the te lecommunications market and allowing private
participation.  The law sanctions two main levels of effort:  a policy level and an operational level.  At
the policy level, there are primarily two actors:  the Government, represented by the Ministry of
Transport and Communications, who gives guidelines and enforces the law;  and aTelecommunications Regulatory Authority (TRA), originally created in 1992 but given more power in
the 1999 law.  The TRA is a quasi-governmental entity responsible for assuring a level playing field
for all.
74. At the operational level, Mozambique Teleco m (TDM), a fully owned government company,
is responsible for basic telecommunications services.  TDM's monopoly is intended to last until 2004.Limited privatization is expected in 2001, and the Government is already looking for a strategic
investor.  The Government is likely to keep a share in TDM for the foreseeable future, although it is
unclear how much and for how long.  The modalities  of privatization have yet to be worked out.
However, it is expected that competition will be allowed after five years.  Although TDM is not
subsidized by the Government, it runs at a profit.
75. For cellular service, there is currently one operator, run as part of TDM.  It is expected that a
second operator will be allowed, but will have to use TDM as a gateway and rent interconnection
space.  The price for this will not be determined by the TRA, but by negotiation.  The various rates
were to be established in the fall of 2000 by the Government.  The second cellular operator will be
required to have the same universal access responsibility as TDM's cellular provider.
76. A special Commission comprising an inter-ministerial group determines telecommunications
fees (tariffs).  For basic service, TDM proposes tariffs, and the Commission approves them.  For
cellular, in contrast, when competitive providers exist, the Government intends to let competition
create the pricing structure.  As TRA begins to gain experience under the new law, however, it is
expected that changes will occur.WT/TPR/S/79 Trade Policy Review
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77. Mozambique's telephone density is very low, but increasing annually.  It went from 0.34
telephones per 100 inhabitants in 1996 to 0.46 in 1998, well below the average for the Southern
African Development Community (SADC), wh ich is 3.4 telephones per 100 inhabitants.
Mozambique intends to increase teledensity to 1 by 2005, when the Government gives up its
exclusivity in this sector.
78. MTC is also responsible for managing the postal service.
79. Mozambique has not made any specific commitm ents in the General Agreement on Services
(GATS) with respect to telecommunications.
(iv) Transportation
80. Mozambique's transportation branch is under the responsibility of the Ministry of Transport
and Communications.  The Ministry recognizes that the country has much to do, given the vast sizeand relative under-populated country, the remnants of a Civil War that destroyed most of what existed
previously, and the effects of widespread floods, which destroyed much of what had been repaired
since the war.  It has sought foreign assistance for some of its needs, with some success, and is
embarking on a privatization process.
81. Although the Government is fully committed to privatization, it is having some difficulty
bringing that policy to bear on transportation.
(a) Land transport
82. Mozambique has an inadequate national road system.  Only 12,000 km. of the 30,000 km.
classified as road network was transitable in 1999.  Significant capital investment is needed to
improve the road network.  The Government's priority  in this area is to upgrade the condition of the
tertiary network in rural areas, while ensuring the maintenance of the whole network.  Private sector
providers control passenger road transport services for inter-city, urban, and rural routes.
83. One of the major development projects is known as the Maputo Corridor.  Key to this is a
US$300 toll road to reduce the travel time between Maputo and Johannesburg to about five hours.
This road is scheduled for completion shortly.
84. At independence, Mozambique inherited an operating rail system serving each of its five
major ports and servicing, among other interests, its land-locked neighbours.  Most of Mozambique'srailways are owned and managed by the Mozambique Railroad Company (CFM).  During the early
1990s, CFM was noted for both corruption and inefficiency.  Plans were made to decentralize its
activities, but CFM was put in charge of the process.  The result has been very disappointing for the
Government.  The problems have stalled plans by foreign investors that were dependent on rail and
port efficiency, and have slowed the development of the Maputo Corridor.  Over the next couple ofyears, however, there is scheduled to be major co rporate restructuring, and downsizing of CFM, as
well as the completion of full management contracting of all of CFM's remaining rail and port
operations.
85. In contrast, the Port of Beira, and the Mozambique Central Railway, which connects the port
with Zimbabwe, have been operating well, thanks partially to Dutch assistance.  However, the declinein the Zimbabwean economy has strongly reduced the demand on those resources.  Additionally, the
2000 floods damaged this rail line more seriously than any other.  CFM has now contracted out the
management of the rail line serving Nacala, which is vital to Malawi.Mozambique WT/TPR/S/79
Page 55
(b) Air transport
86. Domestic air travel is important for Mozambique because of the long distances between major
regions.  The Government has created a civil aviation regulator responsible for safety regulations and
rates.  A decree promulgated in 1998 lays down th e framework for competition in, and entry into,
domestic air routes.
87. Mozambique Airlines (LAM) is state owned, but in 1998 became a limited liability company.
It has exclusive rights through 2003 to serve the national trunk route.  Currently, it receives no
government subsidies and runs at a profit.  In 1997, attempts were made to bring in a strategic partner
for LAM, but tenders received were not acceptable.   The Government would still welcome a strategic
partner for LAM.  Due to the low international demand, competition is limited, and national carriers
of the countries being served usually share routes.  In the case of Mozambique, agreements to thateffect have been reached with Portugal, Ethiopia, and Mauritius, among others.  In the case of South
Africa, there are some routes that are only servi ced by South African carriers.  Code sharing is
allowed and is just beginning.  Cabotage is not permitted.
88. As a result of the poor land infrastructure, compounded by the danger of using the roads
during the Civil War, small operators began to offer services.  There are now over 15 of theseoperators, mainly operating charter flights.  A few of these, however, provide regular, scheduled
domestic flights.  Mozambique does not impose any restrictions on foreign entities establishing and
providing these aviation services.
89. There are three international airports (Maputo, Beira, and Nampula), five principal airfields
(Quelimane, Tete, Pemba, Lichinga , and Vilankulo) and several secondary airfields.  All are state
owned, but run on a commercial basis by Moza mbique Airports Company (ADM), a public
enterprise.  ADM is currently explor ing the possibility of privatization.
90. Mozambique is not a signatory to any international civil aviation convention, but is hoping to
join the Chicago Convention, and others, in 2000.
(c) Maritime transport
91. Mozambique's major ports were developed simultaneously with the railroads.  There are five
major ports (Maputo, Beira, Nacala, Quelimane, and Pemba).  All the ports are government ownedand, unless contracted out, run by a public company.  Foreign companies are running the ports of
Maputo, Beira, and Nacala under management contracts.
92. There are four national maritime freight companies, which together handled 121,400 tonnes
of cargo in 1999.  There is no maritime cabotage, and Mozambique ships must have 100%
Mozambican crews, subject to qualifications.  There are no rules on flag of convenience.Mozambique WT/TPR/S/79
Page 57
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