Mozambique’s Shift to Capitalism Is a Work in Progress

Gleaming new cars fill a showroom on Karl Marx Avenue, sparkling symbols of Mozambique’s rapid turn to capitalism from communism after a devastating civil war.

Formerly a poster child for strife-torn Africa, Mozambique is now hailed as a model of recovery and promise. The economy is averaging 10% growth annually, inflation is near zero and the government has privatized state industries and eliminated subsidies.

Despite that performance, everyone agrees the southern African nation has a long way to go.

Most of Mozambique’s 19 million people still live in straw huts and subsist on less than a dollar a day. They haven’t felt a ripple from a boom signaled by construction of tourist hotels along the Indian Ocean coast and multibillion-dollar industrial projects.

The former Marxist revolutionaries who run the government hope the prosperity will spread, but critics contend the country has gone too far in adopting noninterventionist economic policies.

The U.N. Development Program says the government should do more to boost earnings of the poor, but it didn’t suggest any specific actions in a recent report.

If anyone embodies the government’s about-face from Marxism to capitalism, it is Mario Machungo.

Now chairman of the International Bank of Mozambique, Machungo was a young activist for the Front for the Liberation of Mozambique, dodging Portuguese secret police and fomenting rebellion against colonial rule. When FRELIMO, as the movement is known, took power in 1975, Machungo became a Cabinet minister and then served as prime minister in 1986-1994.

In an interview, Machungo noted the new government faced daunting problems: The departing Portuguese had sabotaged the infrastructure. Few blacks were educated.

White-ruled South Africa and Rhodesia began backing right-wing Mozambican rebels, who waged a 15-year war that killed 600,000 people before it ended in 1992.

FRELIMO raised an army, imposed a centralized economy, even dictated what professions people should pursue.

“We needed strong hands to guide society,” Machungo said over cups of espresso. “We were criticized because that collided with personal liberties, but it was our only way out at the time.”

By the mid-1980s, rail and other services barely existed in the war-ravaged country, and most imports--especially oil--were beyond reach. The country had stagnated at the bottom.

“We said, ‘Look, we can’t continue to insist on a Marxist-Leninist model that’s not working. We need to bring in other actors--the private sector--because the state can’t handle it alone,’ ” Machungo said.

In 1986, Mozambique agreed to liberalize its economy in order to attract foreign companies, create jobs and build roads and other infrastructure.

The response was dramatic. In 1985, foreign investment totaled just $26 million. By 1998, the yearly total soared to $837 million.

Among the main development projects underway now:

* A $1.6-billion, natural gas-fueled factory to produce steel slabs for export. A principal investor is Enron Corp., a Houston-based energy company.

* A $1.3-billion aluminum smelter scheduled to open this year. Investors include Mitsubishi of Japan and Billiton of South Africa.

* A superhighway being built from the seaside capital of Maputo to southern Africa’s economic center, Johannesburg, South Africa.

Such projects are reviewed by the government’s Center for Promotion of Investments. Under the contracts, foreign companies usually are required to invest heavily in improving basic economic services and facilities, such as rehabilitating Maputo’s port.

If the economy keeps growing at current rates and the wealth is distributed evenly, Mozambicans’ income will double in just over seven years, the U.N. Development Program says.

The boom has already touched Josep Machagai, who as a young man left for neighboring South Africa’s gold mines to find work. Now 69 and suffering a lung ailment, he is a security guard at an apartment building. He sells cigarettes on an upturned cardboard box to make a little extra.

His two grown sons didn’t have to leave Mozambique to work. They are both construction workers, putting up houses, shops and restaurants.

“They’re working because the economy is doing well,” Machagai said. “I don’t know if it will continue, but for now my sons have a better life.”