Index trend
Previous Quarterly Editions
Expropriation Risk: 68 68 68 68 ►Political Violence Risk:59 58 58 58 ►Terrorism Risk:43 41 42 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: Relationship with the ‘global rules-based order,’ or ‘liberal international order.
Under the leadership of President Filipe Nyusi (2015 –), Mozambique has been absent from international discussions and debates. The country tends to take pragmatic positions, sometimes aligning with the West, sometimes with Russia and China, and occasionally promoting the BRICS partnership (an intergovernmental organization comprising Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates). Mozambique appears to hedge its bets rather than side with any specific agenda.
Maputo’s international and diplomatic presence is kept feeble by its generally weak state capacities. It has a small economy, is highly indebted and is heavily dependent on Western donor financing. Mozambique lacks “bargaining chips” that could be used as diplomatic leverage, limiting its ability to influence international debates. Additionally, the Frelimo party leadership, which constitutes both the political and economic elite, has completely abandoned the ideological fervor that once aligned it with forces seeking to challenge the Western-dominated global order during the Cold War.
There are also other reasons for its passive stance. Over the past decade, the Frelimo leadership has faced intense pressure to address two domestic armed conflicts, corruption scandals, international debt and a weakening economy, while its popularity and legitimacy have been declining. As a result, it has focused on domestic matters rather than the international stage.
During the commodity export and extractive industry boom (2002 – 2014), China and other new actors provided the state with large-scale financing and investments. During this time, President Armando Guebuza's leadership distanced itself occasionally from Western power and its international order; however, since Nyusi took office in 2015, Chinese and other financiers have mostly withdrawn, resulting in a partial return to dependence on Western financing.
A final reason is Nyusi's international inexperience and inability to articulate coherent and independent foreign policy. An example is his “neutral” position regarding the Russian war on Ukraine. He has received both Russian and Ukrainian foreign ministers. Nyusi and Mozambique prioritize pragmatism, seeking concessions, favors or financing in exchange for diplomatic support. Ultimately, their focus is on immediate domestic problems.
During the 1990s and early 2000s, Mozambique was held out as a Western “donor’s darling” due to its seemingly firm dedication to democratic peace and for playing by the rules of the “Washington consensus.” For at least 15 years, however, the Frelimo elite has abandoned its previous commitment to democratization and good governance. The regime has rigged elections, harassed the opposition and manipulated institutions to retain power through blatantly authoritarian tactics.
If the international rules-based order collapsed, Frelimo would likely consolidate into a fully authoritarian regime; however, it would remain, as it always has, dependent on resources from external patrons to maintain power. Its first bet would be to offer political support to whichever international patron (be it China, Russia or Western powers) is willing and able to cushion Frelimo’s regime. In return, it would offer access to the country’s rich raw materials. The political direction of the regime would also depend heavily on the politics of the regional powers, maneuvering between the more powerful states, such as South Africa, Rwanda and Tanzania, and perhaps even Zimbabwe. An international order with no rules or illiberal rules would leave Mozambique even more vulnerable to exploitation by its international patrons.
In the long run, such a scenario would threaten Mozambique's territorial integrity. Historical divisions between the center and northern regions and Maputo, where the current Frelimo elite originated, could lead neighboring countries to exploit these regional divisions and capitalize on the state's weaknesses to seize the abundant natural resources in the north and center provinces.
TREND ►
Mozambique’s constitution embraces multiparty democracy and the rule of law and establishes the state as the custodian of all land and resources; however, legal changes, regulations and controls can resume state control over land and concessions from private investors when politically expedient. Nevertheless, 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 political violence risk is constant. The first risk is the war in the northern province of Cabo Delgado, which has been running since 2017. Islamist insurgents are fighting against government forces, who are aided by thousands of allied troops from Rwanda and the Southern Africa Development Community. The latter is expected to withdraw in June. After a yearlong lull, the insurgents launched an offensive in early 2024, displacing tens of thousands of people. This contradicts government claims of victory.
The social conditions that underpin the insurgency suggest that there is fertile ground for recruitment and expansion to the rest of the north. A negotiated solution seems unlikely currently.
The presidential and parliamentary elections in October 2024 can be expected to produce upheaval, with party-political and widespread anti-regime reactions. The risk of post-electoral violence and political instability is significant.
The Frelimo party-state machinery has been steadily manipulating the electoral playing field in their favor, including by sowing divisions within Renamo; however, Frelimo has yet to present a candidate, and only six months remain until the elections. This reflects deep divisions within the party and the challenge of finding a candidate who can gain some popular legitimacy. As a result, Frelimo may resort to using even more force to install a new president. This could lead to political chaos and cause certain factions of Renamo, Mozambique’s largest opposition party, to break away and renew military activities in the central provinces. Renamo fought Frelimo in the civil war (1977 – 1992).
The local elections in October 2023 were marred by electoral fraud committed by Frelimo, which fueled frustration caused by economic and social hardships. This frustration resulted in the largest nationwide street protests the country has ever seen. Although the demonstrations were mostly peaceful, the riot police forcibly suppressed them. Given the high stakes of the upcoming 2024 elections and the expectation of more fraud, there is a real possibility of further riots. Post-electoral street violence could lead to severe instability, particularly when combined with economic grievances.
A final possibility, though unlikely, is that Frelimo factions attack each other by mobilizing supporters through regionalism, ethnic or other identity cleavages. Both Renamo and Frelimo are deeply divided.
The government has primarily responded militarily to the northern insurgency, using its own inefficient security forces and militias. Since July 2021, they have received military support from Rwanda and the Southern Africa Development Community (expiring in mid-2024).
However, the government has struggled to address the underlying issues of the conflict or challenge powerful vested interests that control land and resource extraction opportunities in Cabo Delgado.
While social and political stability remains poor, the military campaign against the insurgents will only keep them in check; they cannot extinguish the rebellion. The terrorism threat is unlikely to spread nationwide in Mozambique, although it could potentially reach the neighboring Muslim-dominated provinces of Niassa and Nampula.
Present legislation provides various mechanisms to convert foreign currency into Mozambican metical and for the central bank to regulate currency accounts. Legislation has been de facto relaxed to attract major foreign investment. Mozambique is dependent on foreign trade and aid, so exchange transfer risks will remain relatively low — though corruption and red tape could mean risks for smaller foreign enterprises. There is no or minimal risk that Mozambique will become subject to trade sanctions. International actors would first threaten to withhold development aid before imposing sanctions.
Public debt stood at 111.6% of GDP at year-end 2022 but fell to 92.4% by early 2024, according to the International Monetary Fund. Yet, Mozambique’s debt is the second highest among the least-developed countries after Sudan. Fitch Ratings retains Mozambique’s credit rating in the range of substantial risk (CCC+). Without any prospect of immediate revenue from LNG beyond small windfalls from the start-up of production of the floating LNG factory offshore Cabo Delgado, or from strong economic growth, Mozambique will continue borrowing to meet public expenditure.
The chances of solid fiscal discipline are also weakening, given the forthcoming 2024 elections that will likely spur extravagant spending to bolster Frelimo’s electoral chances. Finally, the development of the insurgency in the north may force further public lending to finance counterinsurgency activities.
