Mozambique: Mega-Projects Hire Hundreds of Mozambican Companies

Maputo — There are now 471 small and medium Mozambican companies who have contracts to supply goods and services to the country’s mega-projects (such as the Mozal aluminium smelter, the natural gas treatment plant run by the South African petro-chemical giant Sasol, and the open cast coal mines operated by Vale of Brazil and the Anglo-Australian company, Rio Tinto).

A further 100 SMEs are occasional suppliers to the mega-projects, according to data provided at a meeting of the Coordinating Council of the Ministry of Planning and Development, under way in the northern port of Nacala since Monday.

The income from supplies to the mega-projects rose from 45 million US dollars in 2002 to 350 million in 2011. The Ministry regards this figure as unsatisfactory, since the mega-projects still have to turn to foreign suppliers to meet many of their needs, given the inability of Mozambican companies to meet their demands.

According to the Minister of Planning and Development, Aiuba Cuereneia, cited in Tuesday’s issue of the independent daily “O Pais”, 378 investment projects were approved in 2012, for a total investment of 4.8 billion US dollars. If all these projects were to come to fruition, they would create over 32,000 new jobs.

About two billion dollars of this proposed investment is concentrated in 22 projects to be undertaken in the Nacala Special Economic Zone. But these 22 projects will only create about 6,000 new jobs.

The meeting indicated that among the challenges facing the Mozambican economy are a poor business environment and the high interest rates charged by the commercial banks.

“We agree that improving the business environment is a challenge – covering procedures, such as the time and cost involved in starting a business, access to credit, plus the high interest rates”, said Antonio Cruz, a senior official in the Ministry at a Monday briefing with reporters.

He said that, in order to lower the cost of investment, a strategy to develop the financial sector has been drawn up, which should be approved later this year.

Specific measures to improve the business environment include guarantee funds from Denmark to benefit business activities.

Although the central bank repeatedly cut its own interest rates last year, the commercial banks have been slow to follow suit.

The Standing Lending Facility (the interest rate paid by the commercial banks to the central bank for money borrowed on the Interbank Money Market) currently stands at 9.5 per cent. But the average interest rate charged by the commercial banks is more than twice this figure, and in January was 19.83 per cent.

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