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Last Updated: Tuesday, 13 April, 2004, 11:05 GMT 12:05 UK
Mozambique transforms its economy
By James Whittington
BBC World Service business reporter in Maputo, Mozambique

Maputo - capital of Mozambique
Mozambique's GDP growth has been in double digits since 1996
Mozambique has emerged from being the poorest country in the world, virtually destroyed by civil war, into one of the top destinations for foreign investment in Africa.

The nation's latest big investment project is a hi-tech $1.2bn ($660m) gas plant, situated in the middle of bushland in the south of the country.

Seven weeks ago it started collecting gas from beneath the ground and pumping it down a pipeline into the region's economic powerhouse: South Africa, just 500 kilometres away.

The project is owned and run by the South African energy company Sasol.

Because of the location, the construction of the site was difficult, but the reaction of the local population has been positive because they are eager to see some development in the area.


Looking around the capital Maputo, the effects of the civil war and past economic isolation are obvious from the pot holes in the road and the shabby buildings.

There are still communist slogans in Portuguese from the country's Marxist past but these days Mozambique has embraced globalisation.
It sends out a signal that it is possible to invest in Mozambique
Prime Minister Luisa Diogo

The government has privatised the port and boasts of its ability to attract big foreign investors such as Sosol and BHP Billington, which has built a $2bn alluminium plant just across the bay.

Mozambique's Prime Minister Luisa Diogo, who also looks after the finance and planning ministry, told the BBC's World Business Report how much foreign investment has come into the country over the past two years.

"More than $6bn - and Mozambique has been classified as one of the three major destinations for investment in Africa," she said.

Statistics show that the country's worth is about $4bn. How does it cope with such a massive investment?

"It helps improve our gross domestic product growth," she explained.

"Since 1996 Mozambique has been growing by double digits."

As for the impact of these large companies on ordinary people and the local economy, Ms Diogo said their success encouraged other investors to look favourably at the country.

"It sends out a signal that it is possible to invest in Mozambique," she said.


But her enthusiasm is not shared by everybody.

Some say that the special tax holidays and special treatment given to big foreign investors should also be available to other businesses and small and medium-sized projects.

One critic of the government is Abdul Majid Ozman, the chairman of local bank MBCI.

"The mistake will be if we assume that investment on mega-projects is going to solve the country's problems," he said.

"The ratio of investment required to create a job in the mega-projects will be around $1m for one job, while a small or medium-sized project the creation of one job is around $50,000," he said.

"It would have been better if the $6bn investment had been spread over 1,000 projects rather than three or four big ones."

Even so , despite widespread poverty - especially in rural areas - most people believe that things are slowly getting better.

There used to be a popular anti-capitalist slogan which said: "Kill the crocodile while it's still young."

That approach helped to kill the economy, but suddenly the baby crocodile is being allowed to grow.

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