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South Africa: Time Now for Mozambique to Take Next Big Step
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Business Day (Johannesburg)
OPINION
23 November 2007
Posted to the web 23 November 2007
Dianna Games
Johannesburg
THE Mozambique government formally takes ownership of the Cahora Bassa hydroelectric dam next week from former colonial power Portugal, an event Mozambicans see as being symbolic of their changing fortunes.
A $700m deal removed the control of one of the country's most strategic assets from the former colonial power, Portugal, which had owned the dam's operating company, HCB, for more than three decades. Having a majority stake will allow Mozambique to leverage opportunities provided by the energy powerhouse based in the remote northern province of Tete, which counts SA among its key customers. Nearby, also in Tete province, the huge $1,5bn Moatize coal project is gearing up for operations. The Brazilian company developing the mine, CVRD, will be spending more than $200m on social projects, training and other "soft" investments to support its 35-year project.
In Nampula, also in northern Mozambique, a deal was recently concluded for the building of a $5bn refinery, while a major investment has also been clinched for a major bioethanol project in the south.
All this is in addition to other mega projects already on stream or in process, such as Mozal, the Moma titanium mine and smelter, Sasol's gas project and the Corridor Sands titanium project.
Even as it presides over these enviable investments, the government is busy issuing licences for diamond and oil exploration. Mozambique's investment promotion commission says it approved projects worth $7,3bn between January and October.
This is not small change for any country, let alone one as poor as Mozambique. But high investment levels and real gross domestic product growth averaging 8% over the past decade tend to mask the realities of Mozambique's widespread poverty, high unemployment, skewed development and significant donor dependence.
It also appears to mask what many business people say is still a difficult and expensive operating environment. A survey of local and international business people operating in Mozambique, undertaken this year on behalf of Business Leadership SA and the Brenthurst Foundation, highlighted a number of problems companies experienced in doing business there.
Most said it remained a high-cost environment due to logistics, transport costs, tariffs and inadequate infrastructure. There was consensus that business continued to be challenged by too much bureaucracy, overregulation and a high government presence in the economy. Another problem was the lack of decision-making power and skills delegated to provinces.
This centralisation of power and the continued existence of a surfeit of complex business and legal requirements act as a particular constraint on companies operating north of the capital.
Decision-making for business registration and operating licences could also be slow, some investors said. Complaints related particularly to projects that involved land allocation, such as agriculture and tourism.
Others said they had found it easy and quick to set up businesses in the country. The inconsistencies suggest some stresses in the transition to a modern economy.
There were complaints about customs delays in moving goods through the border with SA. One company said it could take three weeks or more to get a consignment into Maputo despite the fact it is only a
four-hour drive from Gauteng to the border.
Many complaints by survey respondents related to labour issues. However, a new labour law, which came into force last month, has addressed some of these concerns.
There is no doubt the government is trying to make the best of the upward trajectory it finds itself on. It has a duty to leverage the major projects on its doorstep to maximise broad-based development.
Mozal was a steep learning curve and it is able to apply its experience from this key project to other mega projects. It has made a good start by, for example, building into
these large bids requirements for social investment. It has also introduced a range of investment incentives in strategic sectors.
But it seems to be held back by more intangible problems of mindset as regards economic development. First, there seems to be a pervasive belief that money will solve a host of problems and there is also an inability to prioritise effectively. One provincial government listed 140 priority projects, only a handful of which it could find funding for.
Another issue is the attitude that by giving something, something else is taken away. This affects the issue of economic freedom, still a challenge in this formerly socialist economy. As one businessman said: "The government's default position is to regulate everything and then allow some freedoms. It should be doing this the other way around."
Looking at the gains in Mozambique, one cannot forget how far the country has come in a relatively short time. But accepting the conventional wisdom that less is more when it comes to regulation is the next big step.
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Games is director of Africa @ Work and author of the report, Mozambique: The Business View, produced by Business Leadership SA and the Brenthurst Foundation and released this week.
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