40th Anniversary of independence marks beginning of new era

Celebrating its 40th anniversary of national independence in 2015, Mozambique ushered in this landmark year by welcoming a new president, Filipe Jacinto Nyusi, to office in January. Mozambique’s fourth president takes over at a time when the country – one which has experienced rapid economic expansion over the past 20 years – is confronted with a developmental crossroads.

The country has emerged as one of the world’s fastest growing economies in recent times, with foreign investors showing interest in Mozambique’s untapped oil and gas reserves. Progressive government reforms, meanwhile, saw the country rise 15 places in the World Bank’s Doing Business rankings 2014. Yet, while President Nyusi has set out his stall to improve the business climate in the country further still, he’s all too aware of the great challenges that stand in the way of the country’s continued progress: fighting poverty and maintaining peace.

“Today’s enemy is poverty,” said the president at an official lunch to commemorate Independence Day on 25th June. In order to fight it, Nyusi has highlighted three priorities for the period ahead: unity, peace, and dialogue.

Mozambique has been battered by civil war since its independence from Portugal in 1975, and although a peace deal in 1992 ended 16 years of civil war, tension with former guerrillas has persisted. “Without peace, everything we are able to do will be in vain,” said the president. “[Dialogue] does not cost money at all: it only requires listening, and being able to hear.”

Preserving political stability is undoubtedly top of the President’s agenda, however, so too is the state of the economy.  Although economic growth is strong (GDP expanded by 7.6 per cent in 2014), the local currency, the metical, is losing value, external debt is high and foreign-exchange reserves are dwindling.

Carlos Henrique, President of ACIS (Commerce, Industry and Services Association of Mozambique), is hopeful, though. “There is a lot of enthusiasm that things can get better with the new administration which we think is more business-friendly than it was last year,” he says. Mr Henrique cites the Minister of Lands and the Minister of Finance as people who come from the private sector and know how to better negotiate with companies for greater investments in the country.

Over the past decade, Mozambique has seen its annual GDP grow at an average rate of 7 per cent. Fuelled by oil and gas discoveries, improvements in infrastructure, and greater foreign direct investment, the World Bank predicts it will continue to grow at a 6.5 per cent rate in 2015, above the African average of 4 per cent. GDP is expected to expand 8 per cent annually through 2018 as money continues to pour into the promising hydrocarbons sector.

However promising Mozambique’s oil and gas reserves might be, agriculture remains Mozambique’s bedrock, providing work for most of the population. Other sectors, including mining, which accounted for 40 per cent of GDP gains in 2013, as well as financial services, communications, construction and commerce, are growing fast and demanding yet more investment.

One crucial factor that attracts such investment is the country’s geo-strategic location for global trade. Mozambique has 1,670 miles of coastline on the continent’s eastern seaboard, serving as a gateway to southern Africa. Via its three international ports and network of airports, it provides easy access to five landlocked nations and as a member of the Southern African Development Community it can give access to a potential 250 million consumers.

As industry in Mozambique continues to expand, three domestic companies that are in prime position to take advantage as the country faces its various economic opportunities and challenges are Kudumba Investments, Macro Segurança and Hidroeléctrica de Cahora Bassa. More specifcally, these three companies operate in three areas vital to Mozambique’s future development: trade, security and energy.

Trade facilitation
A Mozambican company with international certification, Kudumba Investments is contracted by the government to provide infrastructures, equipment, maintenance and training to all staff using non-intrusive inspection systems, such as customs, tax, authority, national police, and various stakeholders.

The company operates in the ports and airports of Maputo – the capital city, Beira and Nacala with centres capable of training 500 people a year.

Stephanie Baaklini, CEO of Kudumba, has been doing business in the country for 10 years. According to her, Mozambique’s stability was strong enough not to feel the effects of the global economic crisis. “We feel very safe and supported [by Mozambicans] and will continue to invest here. The development achieved [by the government] is very perceptible,” says the CEO. Over the last decade, the biggest changes Ms Baaklini has seen are related to transparency, doing business, and law. “Things are safer and easier, and from a legal standpoint things are clearer,” she says.

Ms Baaklini also believes her company is doing its bit to help the country. “By assembling our equipment in ports and airports or land borders we think we are doing our part for the country’s development process. The training of our staff to work with technology and understand the equipment, is contributing towards development,” she says. “We are using the most advanced equipment on the market.”

Considering that 70 per cent of the goods in southern Africa pass through Mozambique, non-intrusive inspection is very effective in speeding up the import and export process. According to Ms Baaklini, “since we started investing on border security, trade has increased which can be seen in the increase of imports, exports and transit from South Africa, Malawi, and Swaziland to Mozambique and from Mozambique to the rest of the world.”

In addition to the growing economy, the arrival of large quantities of coal and the recent discovery of gas reserves will cause exports to increase considerably. It is a challenge for Kudumba and its CEO is aware of the task at hand. “It will depend on what the government sets as priority,” she says, “but it is safe to say that there are at least 10 borders to equip in the next 2 or 3 years.”

Ensuring security
Macro Segurança is a 100 per cent Mozambican private company for security services. It is only three years old, but in order to meet high quality standards, it relies on the long experience of its human resources, especially the president of the company, João Facitela Pelembe. Mr Facitela Pelembe participated in the fight for national independence, and as a patriot, he believes that security is a fundamental matter. “For the Mozambican economy to develop, for harmony between investors to be promoted, peace is much needed as well as guarantees and security,” he says.

The company is an important player in many areas across the sector, including static security, electronic systems, transportation of valuables, and security guards. To ensure good quality of service, Macro Segurança offers continued training for employees. “Our motto is make a difference,” says Director General of the company, Manuel Langa.

Already present across the country, Macro Segurança is setting its sights even higher in terms of expansion and its role in national security. “[Our] expansion is being implemented across the country, from Rovuma to Ressano Garcia,” says Mr Langa.

 “We always want to raise the bar when it comes to our quality standards so we can actually become the Interior Ministry’s number one,” adds Mr Facitela Pelembe. “The main objective is not to fight crime, but to prevent it.”

Mr Langa cites three pillars on which Mozambique’s success rests: industrial development and economic competitiveness; progress in human capital made possible through innovation and the presence of new higher education institutions in the country, and infrastructure improvement and territorial planning.

Energy
Generating 80 per cent of energy production in Mozambique, Hidroeléctrica de Cahora Bassa (HCB) is not only one of the country’s biggest companies, but also a national symbol.

Formed in 1975 by the Portuguese government, just over 30 years later, the Cahora Bassa hydropower plant was finally handed over to the Mozambican state.

“Our main challenge was to ‘Mozambicanize’,” says Chairman of the Board of Directors of HCB, Paulo Muxanga, reflecting on the company’s reversal in 2007. “This was achieved through much effort, so that at this time, we have a work force of 760 employees, and less than 1 per cent are foreigners. All senior posts are held by Mozambicans.”

Indeed since its transfer to the state, HCB has focused heavily on training Mozambicans.  However, despite its contribution to raising both the country’s man power and electrical power, the energy sector and its capacity to serve growing industrial requirements remains one of Mozambique’s great economic challenges.

In order to confront this challenge, the Cahora Bassa dam – which is already the largest hydroelectric power scheme in southern Africa – is being expanded. The expansion of Cahora Bassa, along with the construction of five new hydroelectric dams in Mozambique, will increase the country’s energy production potential to about 3600 megawatts (MW) in the coming years.

The Cahora Bassa Norte project will increase HCB’s power generation capacity by 1250MW (current capacity is 2075MW) and is estimated to cost $7 billion.

“We need to invest in more energy production,” says Mr. Muxanga. “Mozambique today is not the same as 1975. Things have evolved, and there is much more power consumption. It is estimated that by the year 2020 there will be a need for 600MW more.”

Future prospects
With such challenges in mind, going forward, the government has approved a five year plan (2015-2019) to strengthen national unity and create conditions that promote investment, as well as develop economic and social infrastructure. 

Amongst the landmark projects implemented by the plan is a trans-national development that will provide electricity to the whole country and significant other investments to the rail network which will further boost connectivity.

Mr Rogério Manuel, President of CTA (Confederation of Economic Associations), who worked alongside the government to make sure private companies were taken into consideration in the latest five-year plan assures that this new phase of development will provide substantial openings for investors looking at the country.

“I believe that with this opportunity and with more information provided to investors, more people will come here,” he says. “There are opportunities for everyone.”