3 November 2013

Mozambique: Clashes Might Affect Economy, Warns Mozambican Business

Maputo — The Confederation of Mozambican Business Associations (CTA) has warned that the current political situation in the centre of the country could have serious effects on the economy,

The CTA points out that when the normal circulation of people and goods is blocked, this has implications for transaction costs, which will be reflected in price rises.

The main problem is that attacks by gunmen of the former rebel movement Renamo have led the government to implement a system of military convoys on the stretch of the main north-south highway between the Save river and the small town of Muxungue in Sofala province.

Since there are only four convoys a day (two in each direction), trucks are obliged to wait for hours while the convoy is formed under the watchful eyes of a military escort.

Speaking to AIM, the interim executive director of the CTA, Kekobad Patel, said "any alteration in the political panorama is always reflected in the economy, and matters are worse if this alteration results from a conflict".

The current disturbances, he added, are in no way beneficial to development and companies are the first to suffer the consequences of disturbances related to lack of security.

Patel recalled that Mozambique has many examples of this from the past. Mozambicans are thus well aware of what political insecurity implies for economic activity, and the costs involved for both businesses and consumers.

So far, however, there is little detailed information of the impact of the current clashes, although Patel said there are cases when transporters suffer delays because of waiting for convoys, and others where they do not take the risk and simply refuse to use the road.

Patel believed that, since the situation is not generalized across the country, as it was in the 1980s and early 1990s, the major impact is likely to be on the position of investors, who might hold back on injecting further capital into Mozambique. Those who were thinking of investing might delay to see how the situation unfolds.

"We need to generate employment to stabilize the country", said Patel, "and this can't be done when the country is living through a situation of conflict".

Asked what the CTA believed should be done to solve the crisis, Patel said that dialogue was the only path forward, and the use of armed force by either side would not solve the conflict but merely worsen it.

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