The Business Strength Index Report, recently presented by the Confederation of Mozambican Economic Associations (CTA), indicates that, between Q1 and Q2 2021, the profit of the Mozambican business sector registered a slight improvement, from -753 MZN/Un to -619 MZN/Un, reflecting the timid recovery in revenue volume by 3.1%, from 12.471 MZN/Un to 12.862 MZN/Un, associated with the reduction in production costs by about 0.44%, from 13.360 MZN/Un to 13.301 MZN/Un.

According to the IRE Report, the improvement in profit was essentially due to the combined effect of increased revenue and reduced production costs. The increase in revenues of the business sector in Q2 2021 compared to Q1 is justified, on the one hand, by the relief of restrictive measures that had been enacted throughout Q1 as part of efforts to contain the spread of the new wave of the COVID-19 pandemic and, on the other hand, by the beginning of the agricultural marketing campaign and the season for exports of various products, such as Shrimp, Cotton, Cashew nuts, among others.

Taken together, these factors have contributed to increased revenue generating capacity in the corporate sector, with a focus on the transportation and industrial sectors that have benefited greatly from the relief of the pandemic restrictive measures of COVID-19, as well as the agricultural marketing effect that results from their connection with the agriculture sector.

Meanwhile, the reduction in production costs in Q2 2021 was essentially due to the effect of the significant appreciation of the metical against the dollar, by about 20%, that was seen throughout Q2.

"This currency appreciation trend was reflected in the reduction in the cost of imported raw materials, slightly easing the cost structure of production units, especially those in the industrial sector," the report reads.

However, according to the business sector, rising interest rates, which contributed to higher financing costs, limited the more pronounced reduction in costs.