Armando Inroga, Minister of Industry and Commerce speaks to Upper Reach about the importance of agriculture to the nation’s economy and in the fight against malnutrition. He also discusses the push to develop the cabbage industry, the effects of regional integration and the value of Mozambique’s human capital.
Since we cannot just focus in mineral resources, it is necessary to invest in industry and commerce. What is your vision of this new commercial and industrial reality that a consolidating Mozambican economy is experiencing?
In the last 15 years, Mozambique has been growing at an average annual rate of 7.5%, with the primary sector of this growth being agriculture. Assuming that the structure of the economy for agricultural production allowed this growth, which is still taking place without the existence of mineral resources, it was foreseeable that Mozambique would remain with these rates, even though the existing international financial crisis has reduced the volume of acquisitions of the national industry, of MOZAL (the weight of the reduction in the volume of exports of MOZAL largely affects the contribution of the industrial sector in the overall national economy).
There are two things which ensure agriculture will remain being the object of attention for the government: within the scope of the Quinquennial Program of the government, we are envisioning that for 2010-2014, agriculture will continue to be the priority sector for development; and it would be with this that the country would have an internal economic integration to promote development. In 2011 we established a Strategic Plan for the Agriculture Sector that aims to ensure economic growth from agro-business and family farming, combined with commercialization, for us to develop the food industry.
Currently, one of the biggest components of Mozambique’s exports comes from the food industry, and we believe it is possible to alter the structure of the economy, focusing on the capacity of the agricultural sector. This vision was made with last year’s approval of three instruments for the structured management of agriculture:
The spatial/geographic mapping of the Mozambican territory, which allows us to know which types of crops go well with the nature of the soil and in which regions of the country.
The Development Plan of Improved Seeds was created by the government to insure that agriculture turns into an intrinsic part of development and sustains that economic growth.
A plan for the establishment of the fertilizer industry was also developed because Mozambique remains a country in southern Africa that utilizes fertilizers the least and because the improved seeds cannot cover the needs of the population due to the scattering of families. For us to have a strong food industry, we need to have products of quantity and quality available in the local market for the future.
We started to offer capacity in tomatoes, rice, corn, and several other types of crops which make it possible to build the units to support this agricultural sustainable growth which began in recent years.
As the Minister of Fisheries says, often times producers do not have the capacity to decide when to sell, because they do not have the infrastructure to store the products and wait when prices fall.
Without a doubt. Beyond this vast availability of food production boosting the industrial sector, Mozambique has 2700kms of shoreline and a very large coastal production of 12 miles in the Mozambique Canal, especially of shrimp, which is highly demanded by the international market.
We see the integration of these primary sectors in the development of the national economy and, consequently, the answer to the discovery of new sectors in the mining industry, like coal, through a mechanism to make the economy work, which through the industry allows the support of agriculture and fishing.
For the fishing sector, the development of cold preservation allows, through conservation, fish to cover the seasonality of the demand (there is a period of capture and another, by law, of recess): during the recess period, traditionally, the price of fish goes up to cover this impact. We have developed a strategy that allows for the conservation of fish, so that we do not have seasonality and consequently we have equal and stable prices.
Furthermore, the management of the internal capacity for the canned fish industry will reduce the transaction cost, allowing then a greater mobility of fish –it is easier to transport canned fish in containers than fresh fish. And so, the rehabilitation of Beira port constituted a very important point of that strategy, which we designed to maintain the price and for the conservation of fish.
For our agro sector, we have developed a chain of silos and warehouses in which we will have 89,000 tons of goods (cereals, mainly) available; the distribution of these silos throughout the country, is specially done in the eco-agro region where there will be a great potential of agricultural production. Cuabo, in Cabo Delgado, Malema and Ribaué in Nampula, Lichinga and Cuamba in Niassa, Alto-Molócue, Milange and Mocuba in Zambézia, Angónia in Tete and Nhamatanda and Gorongosa in Sofala are the points where the storage silos will be built.
These will allow us to have, as a consequence of the terrestrial distribution and as a function of those eco-agro regions where there is great levels of cereals production, conservation of the family sector production, which will help to reduce the level of food insecurity and thus allow us to have a strategy and implement a reduction in the levels of chronic malnutrition. Normally, in these situations in countries like Mozambique, there are regions with high levels of agricultural production where there are also high levels of chronic malnutrition, because there is no diversification in the diets.
We are developing an industry in order to reduce chronic malnutrition. Products like salt, oil, cattle, wheat and corn began to be fortified in 2012. The level of strategy for developing the industry is such, to help with the physical development, psycho-technical and social of those people.
Besides being an industrial project, it is a project integrated with the Ministry of Health, because chronic malnutrition carries an increase in health costs, not only due to the physical debility of the ill, it involves education and social action, which takes care of the elderly though the “Basic Basket” program, and agriculture, which has to produce sufficient quantities to be processed because without this it will not be possible to develop the food industry.
In our vision, agriculture continues to be the center of development for Mozambique. The industry continues to be the driving force and dynamic sector because it allows the markets to have access to their products.
The agriculture and fishing sectors will bring dynamism to other sectors, infrastructure and services, such as the cabbage industry. With a long coastline, we have all the potential to secure that our cost placed on the markets of any region of the country is low, transported by sea. Last year we made a huge investment in the acquisition of vessels in order to develop the cabbage industry. At present, these vessels are validating the routes and the operating costs, in order to be able to starting this year, have the production of other provinces in Maputo and vice versa.
The long-term prices will go up due to the appreciation of local currency, in line with what happened to countries in similar conditions to Mozambique in what refers to the discovery of mineral resources, and it is necessary to look for ways to combat this coming situation. What challenges will the appreciation of the currency bring to the industrial sector?
Mozambican monetary policy is currently restrictive, which means that what the objectives of macro-economic stability (low interest and exchange rates) have been doing with the money supply continues to maintain a macro-economic equilibrium and there have not been great exchange rate fluctuations, which would create shocks for market players (both import and export).
But Mozambique continues to have a trade balance deficit: the volume of imports in relation to exports continues to be high and we have in our trade balance, manufactured industrial products (equipment and vehicles). In a limited way, we have certain basic food products that largely alter the exchange relation when in certain periods of the year there is an increase in prices that forces the economy into a foreign exchange imbalance. We do not have the internal capacity to meet the demand for food products, forcing us to import.
Currently, we have agriculture as the base and the industrial sector as the driver and that is what the government focuses on. I believe that if the scale of volume production grows in a combined way with the creation of storage systems, conservation of food products, a basket of national products will build up which would allow price systems to be transparent and would allow the availability of products to be effective. We have a reduction in food prices over time, because there are no idling periods in production.
Today there are locations in the country where there is vast production, but due to the lack of means to access them, and because the distribution system that takes that production to the market is not efficient, we have rotting food; however, in the circumstances where we are building silos, storage and stock market, there will not be this situation of rotting foods, which means that all that is produced will directly enter the market for sale, and indirectly through the stock markets which will conduct the transaction between retailers and the auction.
As this is the mechanism we have structured to have prices and products available in a transparent way, we believe that the prices of food products will decrease. In the family context, the consumption of food products is the largest: low-income families use 75%, or more, of their income towards food products. If prices of these products were low, the proportion spent on food products would be lowered by nearly 40% for example, and so they will use their income for other things which will lead to an improvement in their life conditions, being these housing, education, health and other things that still do not constitute the focus of those families.
Even having a large volume of exports coming from mineral resources and even with pressure towards an appreciation of the metical, we will have a way to contain this appreciation: since our population is very young, nearly 40% are 18 years old or younger, the government will continue to invest in the social aspect of the country, in education through technical institutes, professional vocation centers, training systems and in health.
This social investment is of great importance, because Mozambique imports a large portion of modern technologies of knowledge and training, and will make rates remain stable and the economy maintain sustainable growth rates over time.
What is Mozambique’s strategy for regional integration, in SADC, Southern Africa, and because of a basic need of other countries?
Mozambique is turning into the entry port for those countries which do not have access to sea, on one hand as foreign investment for this region and on the other hand as an alternative for the population of development in these countries. In the first years of independence of Mozambique, the infrastructure of development corridors in Mozambique were all made to answer to the needs of the region.
In the scope of regional integration, this year Mozambique continues to lead the SADC. In August, it will transfer the presidency to Malawi. We are conscious that a free trade zone in the region will push the volume of inter-African transactions. If Mozambique is to contribute to the region, we have to focus on the sectors which SADC hopes us provide, being these power supply and logistic services, associated to the development corridors (Beira, Nacala and Maputo ports).
The state has an investment to be made in those corridors in order to answer to that regional necessity to be connected to the sea. Mozambique continues to make the effort so that the period of time of the management of trade volume associated with ports and railways is minimum in order to Zimbabwe, Zambia, Swaziland, South Africa and Malawi have access to the sea in a fast and efficient way.
There are projects for the construction of certain ports: one in Titchubanine with the purpose of securing a volume of exports to South Africa, Swaziland, Zimbabwe and Botswana. An equal investment is to be designed and done in Porto da Beira: the construction of two new ports, in Savane and Macuzi – which have all the potential of deep waters (which do not need dredging) that will enable the flow of production from Zimbabwe and Zambia but that it will also be used, largely, by Malawi. In Nacala, it will be possible to have 6 ports in the region that will handle all the flow of production from Zimbabwe and Malawi which is secured by that offer of logistic services with the purpose of import/export.
It also must be mentioned the creation of dry-ports.
A port is only efficient when the time spent in it is minimum so that it is possible to have the goods available for the users at the point of destination in a useful time. If a port takes 13 [days] in order to handle the shipment, it becomes useless.
One of the strategies we thought about developing is the creation of dry-ports so that goods can be there and with all the support services, it becomes possible to have a port management at the minimum possible time. We are to design the criteria so that the time spent by goods at ports is minimum and companies, which are the largest importers, can feel comfortable with the port related services existent in Mozambique.
Speaking of mineral resources, the president of the ENH spoke to us about the potential of the Palma area, about the development up and downstream of gas, etc. what is the development plan for these areas and what opportunities will it being to foreign investors?
The region of Palma has a very low population density index in relation to other points; the most populous provinces are Zmabézia and Nampula; as a consequence of this, the development on an industry, both upstream and downstream, of gas will lead to the relocation of many people towards those regions in order to secure the development of those.
Which is easy in a country like ours, which is socially integrated at the conscious level about the Mozambiqueness in relation to the territory – people live at will anywhere in the country – the development of the north polo, en Mocímboa da Praia, will create a source of incoming academically trained population, with a high technical level and specialization in certain areas, development of automotive industries, of transport, education and health, with high standards from the go, because that region is virgin in terms of this kind of investment.
Moreover, the gas industry has, all downstream, an enormous potential for the development of a petro-chemical industry. We are a country with a low index of fertilizer utilization and we believe that with gas we will become, almost immediately, one of the largest fertilizer exporters. As a consequence, the cost of fertilizers in the domestic market will be very low and the families that live from the agriculture, will have high levels of agricultural productivity which will lead to the migration of individuals being no longer needed. This means we have all the potential for the integral development of the country with social stability; the internal mobility of the young workforce, and the elders who will always live from the agriculture, will have larger sources of income due to an improvement of seeds and the usage of fertilizers.
We believe that the downstream gas industry will not exist solely with this development of the fertilizer and oil-chemical industries, and we hope that foreign direct investment will be present for these. Because they are new to the country, we largely have small and medium-sized businesses and because of that any company of big dimensions that come to contribute towards the integrated growth is welcomed.
What is the right message that has to get to the world, and especially to international firms that can add value to the Mozambican economy, about the legal formalities, the achievements of the last years in terms of the accessibility, credit and red tape reduction?
We are to make, at the public administration level, big reforms for the improvement of the business environment which although not reflected in the “doing business” indices, they are reflected in the operability of the mechanisms of the business environment. We did all the surveying for the industrial licensing, commercial and of services because we verified that one of the fundamental factors for the improvement of the business environment was the alteration of the legal processes, and not the normative aspects. We practically have concluded all the instruments which make it possible to do the licensing and operation of a business in Mozambique.
Furthermore, we found that the mechanism, because it is still manual, had to be electronic and this year we are introducing an integrated platform of services to the citizen which is an electronic “one-stop shop” in which the person will not need to have a direct contact with the state. This mechanism will accelerate the creation of businesses and will allow for two mechanisms of licensing to exist: the simplified mechanism, which is done at certain hours and is already working; and one for high-risk industries, such as the food industry (where a preliminary inspection is needed), which will also be possible to do in a short time span.
For the improvement of the business environment we have an investment law that considers fiscal benefits if investing in Mozambique. The protection of the capital of foreign direct investments (any investor who wanted to withdraw the invested capital is authorized), we also allow the repatriation of dividends, everything to facilitate doing business.
We believe that in this region, Mozambique is one of the countries whose legal nature allows in an open way to invest with confidence that the conditions for the protection of such investment are created.
In the last 20 years, the population has been recovering its autonomy and self-esteem. How would you like to see the industry in the next 10 years in order to contribute toward this creation and consolidation of national identity?
There are three things that are indispensable for the advancement of Mozambique in the coming years: the continuing focus of the development based on our human capital – if we continue to make the individual the center of attention of government activities, people will have the capacity to achieve self-fulfilment, as entrepreneurs or as employees, to have the capacity to answer to his or her functions. The maintenance of this level of macroeconomic stability, which allows for confidence to exist in the markets – to invest in the country and know that there will not be a loss of the value of ideas throughout time (this makes it possible for citizens to design, with perspective, their personal life, and for businesses to have certainty that the market does not fluctuate and can grow in a sustainable way throughout time). And the most important, which is to maintain the vision that small and medium-sized enterprises are the ones that make the economic integration possible because they are the ones that cover the largest number of employees.