With economic reforms in the 1980s, the opening up of political space and the end of war in the early 1990s, Mozambique embarked on a decentralisation process. As in other sub-Saharan Africa countries, the impact of the decentralisation reforms on local development and the strengthening of democracy has been modest. How can this be explained? This chapter addresses this question analysing how institutional dynamics shaped their results. The main argument is that the nature of the political system shaped reform results, in the context of institutional dynamics. Of these, those linked to state capacity and independence from private interests, stand out. Reforms are implemented according to group interests, particularly political parties’ interests, which capture the state and use them for maintaining and bolstering political power. Rather than being a means of improving the provision of public goods and strengthening democracy, decentralisation reinforces state control and panders the elite. Probably the biggest challenge facing decentralisation, this makes it a fundamental issue in any reform, within the context of strengthening democracy and promoting local development.