Post-independence Industrial Development, 1975-86: Central Planning Economy

In 1975, Mozambique was the eighth largest industrial producer in subSaharan Africa (SSA) (Biggs etal. 1999). Manufacturing value added was above 10 per cent of GDP, and including mining, water, energy, and construction, the industrial sector was the main GDP contributor. Mozambique had developed one of the largest hydropower plants in Africa (the Cahora Bassa Dam), and the manufacturing sector had diversified within a context of highly effective protection.

Shortly after independence in 1975, the new Mozambican Government adopted a series of nationalist and socialist policies. Besides taking over top government positions, Mozambicans progressively occupied most of the medium-level positions in public administration and in major enterprises. There was basically a massive exodus of Portuguese settlers out of Mozambique, and these were replaced by Mozambicans and expatriates. The latter were called cooperantes, and came mainly from other socialist countries, African countries, and Western countries with a similar ideology.

The third and fourth Frelimo Congresses (Frelimo 1977, 1983) outlined the basic industrial strategies to be pursued by the new government of Mozambique. The congress resolution stated the following main objectives for the industrial sector, to:

• • set up appropriate bureaucratic structures for steering industrialization, following a centrally planned model. This includes preparing a 10-year industrialization plan;
• • turn abandoned private companies into state owned ones;
• • ensure the satisfaction of people's needs in terms of food, hygiene products, and other household goods, clothes, footwear, and fuel/energy;
• • provide raw materials, fuels, and means of production for all sectors, particularly for agriculture;
• • contribute to balance of payments stability;
• • improve skills and build a pool of technical manpower.

In line with Congress decisions, during 1980-3 the government allocated about 58 per cent of total investment funds for agriculture and industry, both defined as priority sectors for satisfying people's needs (DNE-CNP 1985).

The global social product (GSP), an indicator of the material product of a country, increased from 71.1 billion meticais in 1975 to 83.7 billion in 1981, at 1980 constant prices. During 1975-84 agriculture and industry contributed on average 76 per cent to GSP (DNE-CNP 1985). Hence, at a first glance initial investment strategies seemed to have paid off. Major contributors to growth of the manufacturing sector included: petrol, rubber, metal works, textiles, oil, soaps, and fisheries.

Gains from the third Frelimo congress were, however, short lived as in 1983 the country suffered a major drought. On top of this, the government failed to mobilize the much needed international funds for sustaining its ten-year development plan for 1980-90. Internal war was spreading throughout the country, besides increasing a rural-urban exodus and expanding the informal market.

The fourth Frelimo congress, in 1983, took place amid increased social tension and discontent. The congress resolution stressed the need to ensure provision of basic goods, again through investment in agriculture and industry as the main drivers for structural transformation. It called for greater emphasis on import substitution and the development of small and medium enterprises (SMEs). To open up space for other actors, in 1984 it introduced the first generation of liberalization measures in Mozambique, removing government control over prices of selected goods, including vegetables. It also encouraged government retreat from retail businesses.

The fourth Congress policy objective for the manufacturing sector aimed at '[i]ncreasing industrial production by 12-15 per cent from 1980 to 1985, focusing on growth within textiles, fisheries, metal works, mechanic constructions, metallurgic and ship maintenance'. Particular focus was set on improving capacity utilization. It was the first time since independence that the ruling party officially considered private investors a relevant partner.

The fourth Congress decisions and the significant state interventions turned out to be insufficient to circumvent the internal conflicts' destructive toll. By the mid-1980s the industrial sector was operating at 10 to 30 per cent of its capacity. Average labour productivity had declined by more than 60 per cent. The agricultural sector was reduced to subsistence level. Production of tea, cashew, cotton, and sugar, the country's main exports at independence, dropped to 30 per cent of the 1980s levels, while exports declined to one-third of pre-independence levels (Castel-Branco 2002).

The combined effects of a reduced supply of raw materials, limited demand for final goods, and the failure of the export oriented agricultural sector left the country near collapse. War and natural disasters added to the problem through the sabotage of infrastructure and disruption of road networks. Colonial era logistics, learning expertise as well as market intelligence broke down, after the massive exodus of skilled labour that followed independence and the destabilization from civil war. These factors and the collapse of the central planning economy led to a declining/stagnant economic performance, reaching in 1986 its lowest GDP level since the late 1960s.