Industrial sector is cutting jobs in Mozambique, study says

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Industrial sector is cutting jobs in Mozambique, study says

2:16 CAT | 30 Apr 2018

A report published by Eduardo Mondlane University in partnership with foreign universities shows that manufacturing industries are losing companies. Among the reasons are the debt crisis and currency devaluation.

The manufacturing sector in Mozambique is losing companies and those which remain are cutting jobs, according to a study conducted by Eduardo Mondlane University in Maputo in partnership with foreign universities.

The foreign debt crisis and a sharp devaluation of the currency in 2015 have made Mozambique’s macroeconomic performance “hit a critical point,” notes the Survey of Mozambican Manufacturing Firms 2017 .

The study was conducted by the Centre for Economics and Management Studies (CEEC) in Maputo, the Development Economics Research Group (DERG) at the University of Copenhagen, and the United Nations University World Institute for Development Economics Research (UNU-WIDER).

The survey, which covered 523 firms in the last year, notes that the average size of companies decreased from 20 workers in 2012 to 14 in 2017. The reduction of the workforce resulted in a total loss of 5,100 jobs in the 831 companies interviewed – 28 percent of those studied in 2012 had already closed their doors by 2017, the report said.

These closures over five years will have affected a further 4,300 jobs, the study adds. In all, 9,400 jobs have disappeared.

“Difficult conditions are also reflected in the perceptions of business owners about the performance of their companies,” the report said. Almost 20 percent of business owners “said they suffered heavy losses in 2016, almost three times more than in 2011”. In addition, they have difficulty securing raw materials, which “are often of poor quality or missing”, forcing production stops.

Few exports

Still, there are indicators that “demand for some products may slowly be returning”. The survey also concludes that productivity “increased from 2015 to 2016 for small and medium-sized enterprises, while declining for micro-enterprises”.

Exports are rare in the sample, with only 19 companies reporting export products. Most owners “blame the high costs of obtaining an export license as a reason not to do so”, the study said.

Another aspect of the sector mirrors the informality still reigning in the country’s economic activities. “Many companies still operate without a registration license” and “almost half of the companies are afraid of being closed by the authorities”. The main reason for this is the difficulty of conforming to laws.

“Access to credit is tightly constrained, mainly due to lack of information, high bank guarantees required and too-high interest rates,” the study adds.

Data collection took place between July and September 2017 in the main urban areas of seven provinces: Maputo City, Maputo Province, Gaza, Sofala, Manica, Tete and Nampula.