Index trend
Previous quarterly editions
Expropriation Risk: 68 68 68 68 ►Political Violence Risk:58 58 58 57 ►Terrorism Risk:41 42 44 44 ▲Exchange Transfer and Trade Sanction Risk: 63 63 63 63 ►Sovereign Default Risk:83 83 83 83 ►
Overall Risk Temperature: 68 (Medium high) TREND ►
Special topic: Gray zone aggression
Degree to which the country relies on outbound gray zone action to achieve its strategic objectives1 = Not at all5 = Gray zone action is a core tactic
1
Impact of inbound gray zone attacks on the country1 = Negligible impact5 = Significant impact on economic growth and/or political stability
3
Gray zone aggression was a major issue during Mozambique’s 16-year post-independence war. First, the Rhodesian and then the South African apartheid regimes supported guerrillas in Mozambique (Renamo, the National Resistance Movement) to destabilize the Mozambique Liberation’s (Frelimo’s) nascent independent state. However, after the fall of apartheid, Mozambique has had no known foreign enemies, be they states or non-state entities. Whereas the war with Renamo resurfaced in brief episodes between 2013 to 2019, this was an entirely domestic affair, based on significant disagreements over the post-war settlements in the 1990s.
Then, from 2017, jihadist insurgents started to attack civilians and state interests in the northern province of Cabo Delgado. It is now known that most fighters are Mozambican, and their grievances have roots in the domestic political realities of Mozambique; it was therefore, and remains, a thoroughly Mozambican affair. However, also since the beginning, it seems clear that foreign jihadists, especially Islamic State (IS), have seen opportunities in Mozambique to further their religiously motivated cause. The publicly stated support of IS for the insurgents in Mozambique (popularly nicknamed as the al-Shabab) arguably is overt warfare against Mozambique, rather than gray zone aggression.
Yet there are examples that fall within gray zone aggression related to the war in the northern provinces. The national and foreign fighters operate as rather ragtag armies, and their most important financial and material backing is domestic, coming from rather local support. However, there have been constant rumors that they receive financial backing from external powers, and it is possible that they do indeed receive some backing in the form of finance, logistical support and diplomatic assistance from foreign actors in cahoots with elite players in Maputo who have an interest in the prolongation of the war.
It has been speculated frequently that there are financially astute forces in the Middle East that may have supported the insurgents, also utilizing the networks of jihadist groups emanating from the Middle East. If they have any material (as opposed to religious) interest in Mozambique, it would be that they are interested in two things. One is controlling the flow of Mozambique’s significant natural resources, such as natural gas, rare minerals, precious stones and exotic flora and fauna. The other is the interest in controlling the smuggling route of narcotics (especially heroin) through Mozambique. It has long been assumed that criminal organizers with strongholds in South and Central Asia and the Middle East have made alliances with top elite families in Maputo with top political connections, to weaken Mozambique’s ability to monitor the smuggling routes through its territory.
Together, these forms of gray zone aggression against Mozambique constitute serious threats to the stability and integrity of Mozambique as a state.
TREND ►
Mozambique’s constitution embraces the rule of law and sets down the state as the custodian of all land and resources, but legal changes, regulations and controls can be used to resume state control over land and concessions from private investors when politically expedient.
This rarely happens to foreign investors if they have strong backing from major players. For smaller foreign enterprises, expropriation risks will be related to corruption rather than hostile politics. The current political climate makes sustained risks to Western-based investors quite unlikely. It is, however, possible that local conflicts could result in attempts at expropriation of companies based in other parts of the world.
The political violence risk is constant. The first risk is the war in the northern province of Cabo Delgado, running since 2017. Currently, a negotiated solution is not in prospect.
A second risk is possible military confrontation: The government-Renamo peace agreement may fail, especially if the Renamo leadership cannot negotiate any perceived benefits or power for Renamo loyalists and its old militant wing, with Frelimo inflicting regular humiliations on Renamo. Yet Renamo remains both militarily and politically weak.
The presidential and parliamentary elections in October 2024 increase the risk of political violence. The elections are widely assumed to have been rigged, with the top leadership of Renamo negotiating some benefits in return for a resounding win for Frelimo, the state-bearing party. The frustration of such a deal-making may spill over into violence — especially from disgruntled factions of Renamo.
The third area of political violence risk is the massive popular frustration due to generalized economic and social hardship and to the distrust in Frelimo. When and if political opposition leaders decide to channel this anger into a language of regional discontent in Mozambique’s center and north, this largely youth expression could turn into political violence.
In Maputo, such protests against hardship are likely to be hefty but short-lived episodes of street unrest, without clear political leadership. In the center and north, such street protests may eventually connect with the insurgency already going on.
Mozambique’s government has primarily responded militarily to the northern insurgency, using the country’s own rather inefficient defense and security forces, and since July 2021 with support from Rwandan and Southern Africa Development Community forces.
The military campaign against the insurgents is likely to keep them checked but undefeated. For now, the insurgency seems unlikely to spread out of Cabo Delgado, but it cannot be ruled out. The insurgents have carried out their attacks mainly against civilian populations and government agencies in the northern Cabo Delgado province only, and significant attacks against foreign people or infrastructure have not taken place since 2021.
Recent new legislation against money laundering can create delays in cross-border transactions. There is no or very small risk that Mozambique will become subject to trade sanctions, as the international actors in Mozambique would always threaten to withhold development aid before sanctions.
Mozambique’s overall macroeconomic situation is dire, although it has somewhat stabilized during the past few years. According to International Monetary Fund (IMF) figures, economic growth is down from 4.3% in 2023 to an expected 3.6% in 2024, which is only slightly above population growth. Some 63% of the population live below the official poverty line.
Public finances remain strained by the dangerously high public debt levels. In recent years, the government has managed to reduce foreign debt, which now stands at $10 billion. This is about 66% of GDP, down from almost 100% in 2020. However, while government has paid off external debt, it has done so with domestic debt, so that in total public sector debt remains at 100%. There is no or little room for increasing the uptake of loans from the small domestic financial sector, and so this avenue for financing public expenditure is close to its limit. With little hope of a rapid increase in the revenue from taxes — in particular as increases from the offshore gas income keep being delayed — the government will find it increasingly difficult to service its foreign debt.
At the same time, expenditure is difficult to control, with huge costs of the security operations in the north of the country, as well as patronage for the regime’s clients in connection with this year’s elections. The tendency of the ruling regime in Mozambique to encourage or allow the taking on of debt among public enterprises in less-than-transparent ways comes with a constant hazard of more “debt bombs” being detonated.
These and other difficulties have resulted in the risk rating agencies maintaining Mozambique’s rating as with substantial risk (typically, at CCC+). On the brighter side, Mozambique currently enjoys good terms with the IMF, which reduces the risk of an immediate default.
