Friday, September 11, 2015


A report written by UK based company Fathom Consulting warns that the Mozambican economy is likely to be hit by the slowdown in Chinese economic growth.
In recent years China has seen growth rates of above eight per cent and has used its strong economic position to invest in the African continent and purchase its raw materials. In addition, Africa has provided a useful market for Chinese goods.According to Fathom Consulting, “for China, Africa provides many of the raw materials that are required to fuel its economic growth engine. Africa also provides a consumer-hungry market for its goods, with exports to Africa rising by nearly 15 per cent in the 12 months to 2014. This outstripped export growth to Asia, Europe and the United States”.
The report continued, “for Africa, China’s demand for its raw materials and the inflow of foreign direct investment has provided a source of additional income. More recently, as wages in China have risen, Chinese manufacturers have outsourced production to Africa. This has provided both employment for Africans and the opportunity to master new skills”.
China’s trade with Africa has risen from just ten billion US dollars in 2000 to 220 billion dollars today, which is more than three times the value of trade that the United States has with the continent.
However, since June shares on the Chinese stock market have plummeted and the government has devalued the national currency, the renminbi. These are symptoms of fears of deep, structural problems in the Chinese economy.
There has already been a serious knock-on effect - figures produced in July show that there has been a forty per cent fall in the value of Chinese imports from Africa compared with a year ago.
Fathom Consulting has carried out an analysis of links between 19 African countries and China, and ranked them according to how exposed they are to China’s slowdown. According to this analysis, Mozambique is the eighth most vulnerable country.
The three most vulnerable countries are Zambia, South Africa and Liberia.The author of the report, Oliver White, told AIM that Zambia and Liberia were particularly exposed as foreign direct investment from China amounted to 7.5 per cent of domestic output. He added, “Zambia’s exports total thirty per cent of its GDP, whilst the figure for Liberia reaches 43 per cent”.Liberia is particularly under threat, as exports to China are the equivalent of almost 14 per cent of GDP.White explained that Mozambique is also closely linked with China, with exports to China equal to nine per cent of GDP and the country’s exports totalling thirty per cent of GDP.However, the country is less exposed than Zambia or Liberia because foreign direct investment from China only amounts to two per cent of GDP.Quantifying the effects of all these factors, the report forecasts that growth in sub-Saharan Africa will drop to three per cent this year and 3.5 per cent next year.
Resultado de imagem para consulting Mozambique is a member of the Southern African Development Community (SADC) and it will be affected by problems in neighbouring South Africa, Zambia and Malawi, all of whom are higher ranked in the report. And if the world tips back into recession this will be a major factor in the country’s future prospects.Mozambique’s economy proved very resilient in the face of the world recession of 2007 and the sluggish growth rates in many countries since then. According to the World Bank, Mozambique’s GDP growth has averaged 7.4 per cent over the last two decades.Until the current doubts about the Chinese economic outlook, it was expected that Mozambique would continue with this impressive record. Speaking in parliament in July, Prime Minister Carlos Agostinho do Rosario said that Mozambique was on course to meet its target of annual growth of 7.5 per cent.In May, the International Monetary Fund reported that “over the medium-term, Mozambique is expected to remain one of the most dynamic economies in the continent, with rates of growth that could average eight per cent over the 2016-19 period”.

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