Since 1995 the Government has made substantial progress toward privatizing state-owned enterprises. Privatization has been a key factor behind the reduction in inflation and the acceleration of growth. Once predominantly under state control, economic activity is now conducted primarily through the private sector: state-owned enterprises now account for less than a fifth of industrial output, down from more than two-thirds in 1990. Outside the privatization program, the Government undertook the deregulation and concessioning of activities and state-owned enterprises. This process included the ongoing concessioning of railways, ports, and port services owned by CFM (the national ports and railways company) and the concessioning of water delivery in five major cities (Maputo, Beira, Pemba, Quelimane, and Nampula). Deregulation was the appropriate first step toward improving service quality and plugging the unsustainable drain on public finances. In other words, deregulation was chosen as a short-term substitute for privatization, based on the urgent need to reduce pressure on the budget from financially insolvent state-owned enterprises.

Privatization legislation includes Decree No. 21/89, which regulates the sale of state owned assets through a public tender and establishes the administrative procedures for these sales. Law No. 15/91, regulated by Decree No. 28/91, establishes norms for the restructuring, transformation, and reshaping of the state enterprise sector, including its privatization, and Law No. 27/91 creates the Inter-Ministerial Commission for Enterprise Restructuring (CIRE). Ministerial Diploma No. 87/92 attributes UTRE, the Technical Unit for Enterprise Restructuring within the Ministry of Planning and Finance, with the function of coordinating body for the restructuring of large enterprises. Further decrees were passed until April 1994, including Decree No. 30/91, Decree No. 3/93 and Decree No. 4/94, whereby the Council of Ministers identified enterprises to be restructured under Article 14 of Law No. 15/91. In addition, Decree No. 24/88, with the alterations of Decree No. 13/93, relates to the conversion of the country's external debt either into FDI or other applications, as mentioned in the Decree. Assets of companies to be privatized can also be acquired through recourse to external debt conversion, so long as this intention is referred to in the investor’s bid proposal.

The privatization process is undertaken by the Technical Unit for Enterprise Restructuring and the relevant ministries, in the case of small and medium-sized enterprises.

The Government’s privatization and restructuring program (which included concessions to the private sector and liquidation) had restructured and privatized majority shares of more than 1,200 companies by June 1999. The program was implemented on three fronts. The first front was the privatization and restructuring of large enterprises. The Unidade Técnica de Restruturação Empresarial (UTRE) was set up to oversee the privatization and restructuring of about 20 large-scale enterprises. Privatization of these enterprises progressed slowly at first, but it accelerated after 1995. With the exception of the national airline, all of the enterprises in the original privatization list were either restructured or privatized by early 1999. (Because of the lack of acceptable bids, the Government converted the airline into a limited liability company, with the intention of selling the state’s shares on the stock exchange.) Of the original enterprises, majority shares of more than 85 large companies were privatized. Of the original 20 enterprises, which were themselves a result of enterprise consolidation during the years of central planning, 85 enterprises resulted which were either restructured or privatized under UTRE’s program. The state retained shares in virtually all of the large-scale companies that were privatized. The second front was the privatization and restructuring of small and medium-sized enterprises. A program targeting an initial set of 222 enterprises was virtually completed in 1999. This stage of the reform left the Government with majority ownership in only 33 companies: 10 public enterprises owned 100 percent by the Government and 22 companies in which the state holds 51-95 percent of the capital. On a third front, the Government privatized the majority of shares in the two banks, Banco Comercial de Moçambique (BCM) and Banco Popular de Desenvolvimento (BPD).

As the bulk of state-owned enterprises has already been privatized, there are currently no plans for additional major sales.

Privatization: Eight Lessons of Experience; Africa Recovery: Privatization Pluses and Minuses in Mozambique; UTRE: Privatizations in Mozambique.