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Paper short abstract:

This paper incorporates information on the business interests of 800 politically powerful individuals in Mozambique to discuss whether business groups containing politicians are economic "paragons" or "parasites".

Paper long abstract:

The growth of market economies in Asia and Africa over the last thirty years has generated a robust literature on the structure of business groups in developing countries and the nature of their linkages with the state. What are the important economic and political variables that contribute to different characteristics of business groups, and ultimately whether they become economic "paragons or parasites" (Khanna and Yafeh, 2007)? How have political connections between the state and business promoted or deterred the growth of domestic capitalists? How have political connections undermined or improved firm profitability?

To answer these questions, this paper relies on information regarding the business interests of around 800 former and current politicians in Mozambique starting from the moment of independence in 1975 until 2016. It not only identifies the sectors in which politicians have invested, but also their effect on the Mozambican economy. Although it provides evidence that crony capitalism is alive and well in Mozambique, it also distinguishes several cases where the education and expertise of particular politicians offer just as convincing an explanation for their presence in a sector as their political connections. Future work needs to consider more carefully the sectoral and cross-national variation in the impact of state - business connections.