Mozambique: WB reports improved business but low productivity

The report, titled “Analysis of the Investment Climate in Mozambique”, points to the practices of informal competition, difficulties in accessing credit, crime and theft and deficiencies in areas such as energy and transport as the main constraints to growth. Moreover, competition between the formal and informal sectors is a big obstacle to business development in Mozambique. This is not the first time that the World Bank has shown concern over the informal sector in Mozambique.

In 2007, in a similar WB report, the Bretton Woods Institutions called for the government of Mozambique to become more vigilant of the informal sector's growth. Data from the Statistic National Institute (INE) indicates that the informal sector in Mozambique is driven by more than 90% of the economically active population in the country.

The World Bank report was based on a survey done in 600 companies, most of them in Maputo, but also in Nampula, Beira and Matola. In this survey, companies identified as the main obstacle to development, informal competition, followed by difficulties in accessing financial services, tax rates, crime, theft and disorder, transport, electricity and corruption. In a survey done six years ago electricity had come in second place (now sixth), but the crime, tax rates and transport rose in position.

The World Bank noted that the percentage of firms that have access to credit lines has reduced and says that over two thirds faced restrictions when requested funding, or have not asked, either because of "cumbersome procedures", "impossible demands" or "insufficient credit”.

Furthermore, the WB notes that there has been "considerable reconstruction of roads and ports, but the physical infrastructure, including a reliable supply of energy remains a constraint...[on] economic activity".

The incidence of crime in Mozambique has substantially increased the costs of economic activity, either directly, with the loss of equipment due to vandalism and theft, or indirectly, with the costs of hiring security companies. The World Bank has suggested that the Mozambican government "create a long term reform agenda, as well as continuously reform the economic legislation for the private sector, especially for small and medium enterprises”.