Portuguese Mozambique - Economy

Economy

Since the 15th century, Portugal founded settlements, trading posts, forts and ports in the Sub-Saharan Africa's coast. Cities, towns and villages were founded all over East African territories by the Portuguese, especially since the 19th century, like Lourenço Marques, Beira, Vila Pery, Vila Junqueiro, Vila Cabral and Porto Amélia. Others were expanded and developed greatly under Portuguese rule, like Quelimane, Nampula and Sofala. By this time, Mozambique had become a Portuguese colony, but administration was left to the trading companies (like Mozambique Company and Niassa Company) who had received long-term leases from Lisbon. By the mid-1920s, the Portuguese succeeded in creating a highly exploitative and coercive settler economy, in which African natives were forced to work on the fertile lands taken over by Portuguese settlers. Indigenous African peasants mainly produced cash crops designated for sale in the markets of the colonial metropole (the center, i.e. Portugal). Major cash crops included cotton, cashews, tea and rice. This arrangement ended in 1932 after the takeover in Portugal by the new António de Oliveira Salazar's government - the Estado Novo. Thereafter, Mozambique, along with other Portuguese colonies, was put under the direct control of Lisbon. In 1951, it became an overseas province. The economy expanded rapidly during the 1950s and 1960s, attracting thousands of Portuguese settlers to the country. It was around this time that the first nationalist guerrilla groups began to form in Tanzania and other African countries. The strong industrial and agricultural development that did occur throughout the 1950s, 1960s and early 1970s was based on Portuguese development plans, and also included British and South African investment.

In 1959-60, Mozambique's major exports included cotton, cashew nuts, tea, sugar, copra and sisal. Other major agricultural productions included rice and coconut. The expanding economy of the Portuguese overseas province was fuelled by foreign direct investment, and public investment which included ambitious state-managed development plans. British capital owned two of the large sugar concessions (the third was Portuguese), including the famous Sena states. The Matola Oil Refinery, Procon, was controlled by England and the United States. In 1948 the petroleum concession was given to the Mozambique Gulf Oil Company. At Maotize coal was mined; the industry was chiefly financed by Belgian capital. 60% of the capital of the Compagnie de Charbons de Mozambique was held by the Societe Miniere et Geologique Belge, 30% by the Mozambique Company, and the remaining 10% by the Government of the territory. Three banks were in operation, the Banco Nacional Ultramarino, Portuguese, Barclays Bank, D.C.O., British, and the Banco Totta e Standard de Moçambique (a partnership between Standard Bank of South Africa and mainland's Banco Totta & Açores). Nine out of the twenty-three insurance companies were Portuguese. 80% of life-insurance was in the hands of foreign companies which testifies the openness of the economy.

The Portuguese overseas province of Mozambique was the first territory of Portugal, including the European mainland, to distribute Coca Cola. Lately the Lourenço Marques Oil Refinery was established by the Sociedade Nacional de Refinação de Petróleo (SONAREP) - a Franco-Portuguese syndicate. In the sisal plantations Swiss capital was invested, and in copra concerns, a combination of Portuguese, Swiss and French capital was invested. The large availability of capital from both Portuguese and international origin, allied to the wide range of natural resources and the growing urban population, lead to an impressive growth and development of the economy.

From the late stages of this notable period of high growth and huge development effort started in the 1950s, was the construction of Cahora Bassa dam by the Portuguese, which started to fill in December 1974 after construction was commenced in 1969. In 1971 construction work of the Massingir Dam began. At independence, Mozambique's industrial base was well-developed by Sub-Saharan Africa standards, thanks to a boom in investment in the 1960s and early 1970s. Indeed, in 1973, value-added in manufacturing was the sixth highest in Sub-Saharan Africa.

Economically, Mozambique was a source of agricultural raw materials and an earner of foreign exchange. It also provided a market for Portuguese manufacturers which were protected from local competition. Transportation facilities had been developed to exploit the transit trade of South Africa, Swaziland, Rhodesia, Malawi, and Zambia, agricultural production for export purposes had been encouraged, and profitable arrangements for the export of labor had been made with neighboring countries. Industrial production had been relatively insignificant, but did begin to increase in the 1960s. The economic structure generally favored the taking of profits to Portugal rather than their reinvestment in Mozambique. The Portuguese interests which dominate in banking, industry, and agriculture, exerted a powerful influence on policy.