Although only 6 percent of the Mozambican labor force is engaged in the manufacturing sector, industry accounted for 18 percent of GDP in 1998. Major industries in Mozambique include food, beverages, chemicals (fertilizer, soap, paints), petroleum products, textiles, cement, glass, asbestos, and tobacco. Virtually all manufacturing is located in the major urban areas of Maputo, Beira, and Nampula.
The value of the manufacturing sector as a whole has increased impressively throughout the past several years. In 1995, for instance, the sector was valued at Mt2,059,608, whereas this figure more than doubled to Mt4,584,352 in 1999. The food-processing and beverage industries have been of paramount importance to this increase, with each respectively growing in value from Mt573,660 and Mt348,064 in 1995, to Mt1,189,610 and Mt1,604,142 in 1999.
As the U.S. Department of State's Background Notes on Mozambique points out, most manufacturing industries have either recently been privatized or are currently undergoing privatization under the guidance of the SAPs. While the World Bank and the IMF argue that privatization will lead to increased efficiency since enterprises formerly-dependent upon government subsidies will have to become viable competitors, Mozambicans generally lack the credit necessary to purchase such enterprises and replace their highly outdated equipment. Consequently, foreign firms rich in capital have taken over many enterprises, though they have not always been successful in revamping productivity. Indeed, the inability to increase the productivity of many manufacturing industries prompted several multi-national companies, including the Portuguese Barbosa e Almeida, which took over parts of the glassmaking industry, to recently sell shares back to the Mozambican government. On the whole, however, the record of foreign takeovers has been more or less positive for the investors.
In 2000, foreign direct investment (FDI) in Mozambique, which is mostly in the manufacturing sector, equaled $730 million. South Africa and Portugal, respectively accounting for 63 percent and 14 percent of all FDI, are the largest foreign investors. The United States, the Netherlands, and Hong Kong are also significant investors. Major U.S. firms with a strong market presence in Mozambique include Coca-Cola and Colgate-Palmolive.
A second development that has severely affected the manufacturing sector is trade liberalization. While liberalization may offer Mozambican industries increased access to foreign markets, it may also force them to compete with more efficient foreign counterparts in the domestic economy. The so-called recent "cashew wars" exemplifies this latter possibility. The metaphorical wars centered on the elimination of tariff barriers blocking the exportation of unprocessed cashews. Such tariffs have existed in order to ensure protection for industries involved in processing cashews—high tariffs on exportations of unprocessed cashews means that cashews will inevitably be processed before leaving the country. The World Bank, however, has argued that the cashew-processing industry is inefficient and that it must face competition from abroad. As part of its SAP, the World Bank forced Mozambique to begin phasing out tariffs in 1996, despite the protests of the government, the World Bank's major adversary in the cashew wars. The results of the liberalization process were disastrous. According to the Integrated Regional Information Network (IRIN), a United Nations humanitarian information unit, by 2000, half of the cashew-processing industry's 12,000 workers were laid off, while 10 of the largest cashew-processing factories were closed due to a lack of supplies. The cashew-processing sector, which, in 1987, accounted for 31 percent of Mozambique's export earnings and employed about 25 percent of the country's workforce, has diminished in annual productive capacity from an average of Mt200,000 during the 1980s, to a current low of Mt50,000.
Despite some natural reserves of coal and titanium, mining in Mozambique is negligible. The one exception is the massive Mozal aluminum smelter outside of Maputo, which reached a full production capacity of 250,000 tons per year in December 2000. Mozal, a subsidiary of the South African company Billiton, employs 1,000 Mozambicans and represents the country's largest economic project to date. Mozal has created beneficial spillover effects (positive links) in the Mozambican economy, mainly in the form of new port facilities needed to handle the import of alumina and export of aluminum ingots. Once more, however, the profits earned by Mozal are lining the pockets of foreigners rather than the Mozambican populace. In his book, Peace Without Profit , Joseph Hanlon maintains that many observers are referring to the escalating foreign domination of the economy as the "recolonization" of Mozambique. On February 13, 2001, workers at the Mozal smelter, angered at the superior terms offered to foreign managers, engaged in an illegal one-day strike.