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In this paper, we investigate the ways in which climate stressors and economic changes related to liberalisation alter the local vulnerability context. Household and key informant data from two villages in Mozambique are analysed. First, we explore how changes such as increased market integration, altered systems of agricultural support, land tenure change and privatisation of agro-industries may affect factors important for response capacity, including access to local natural resources, employment opportunities, and household labour and capital. Next, we investigate how people related to the market while coping with the 2002-2003 drought. The study reveals that there had been an increase in informal trade and casual employment opportunities; however, market relations were very unfavourable and as the drought intensified, smallholders were locked into activities that barely secured economic survival and which sometimes endangered long-term response capacity. Only a few large-scale farmers had the capital and skills necessary to negotiate a good market position in urban markets, thus securing future incomes. Inequality, social sustainability, vulnerability and natural resource use are all closely linked in the savannas. Hence, both climate change adaptation policies and sustainability measures need to target vulnerability context and the social and environmental stressors shaping it.