We talk to The Industrial Association of Mozambique about the country’s industrial landscape, as well as its potential as a destination of foreign investment for South-East Africa.
Industry plays a critical role in Mozambique.
Since gaining independence from Portugal in 1975, followed by an extensive 16-year civil war which finally concluded in 1992, the fallout of this conflict continues to threaten the country’s development. As such, weathering challenges is nothing new for Mozambique.
As one of East Africa’s poorest countries, over half of Mozambique’s 24 million people live below the poverty line. Despite this poverty, the country is blessed with a wealth of raw materials, including mineral resources inland and recently discovered natural gas deposits offshore.
Mozambique’s major industries are encompassed by manufacturing, including food, beverages, chemicals (fertiliser, soap, paints), petroleum products, textiles, cement, glass, asbestos, and tobacco. Thanks to the abundance of arable land, agriculture is another major economic force.
With a growing number of SMEs across these industries, access to finance can be a real issue along with the existence of enabling legislation implemented by the public sector on behalf of private sector progress. This was highlighted earlier this year, when the World Bank approved a grant of $150 million from the International Development Association (IDA) to support the country’s Sustainable Rural Economy Programme, which is particularly aimed at Micro, Small and Medium Enterprises (MSME’s).
The country’s foreign direct investment (FDI), which amounted to $2.3 billion in 2020, was primarily targeted at the manufacturing sector. South Africa continues to represent the majority of Mozambique’s FDI, as a major investor and leading trading partner.
Mozambique’s strategic location and strong ties with South Africa are nothing but advantageous, in forging stronger links with the true economic engine of Southern Africa.
Within the country, 2020 heralded what might have been a strong year of economic recovery for Mozambique, with positive indicators such as renewed political stability, an increase in FDI, and the prospects of future gas revenues. Yet the unforeseen challenges of COVID-19 well and truly threw a spanner in the works.
Now, both the country’s private and public sectors are engaged in implementing the necessary policies and legislation to drive economic recovery and create an environment that is attractive for business.
INTERVIEW: THE INDUSTRIAL ASSOCIATION OF MOZAMBIQUE (AIMO)
Spearheading a coalition of the country’s industrialists and business people, Chairman of the Industrial Association of Mozambique (AIMO), Rogério Samo Gudo, discusses overcoming economic hurdles and strengthening business sustainability.
Rogério Samo Gudo | Chairman of the Industrial Association of Mozambique (AIMO).
The Industrial Association of Mozambique (AIMO), comprises a group of over 300 members belonging to Mozambique’s various sectors of industry. The official body plays a critical role in the country’s economic development by streamlining communication between the public and private sectors, to eliminate fiscal barriers and create an enabling business environment.
Can you talk us through the origins of AIMO; how it came about and its initial vision?
Rogério Samo Gudo, Chairman (RSG): AIMO was created about thirty years ago. It was formed by businesspeople and industrialists who wanted to improve the business environment in Mozambique. At that time, there was a transformation of our structural economic system from a centralised system to an open market. This resulted in a lot of discussion amongst the Private sector and the Public sector to allow clearing the challenges that were presented by the previous system.
One of the biggest challenges at this time was the question of how to raise capital – the legislation desperately needed to change in order to allow new systems to be competitive. An open market means that you also accept the competition – so how is it that you position your economy to be ahead? This means also having policies to develop the country’s industrial sector. In order to develop this system, you need to have a vision. And the government wanted to ensure that the people were involved. There were investments needed in training and capacity building, all of which were aligned with the new governmental policy.
AIMO was one of the founders of the Confederation of Business Association in the years following that. The impact of the change on the economy did not just impact industry; it was felt across trade, agriculture, logistics, so there was a need from the government to have one entity as a focal point to all of the sectors. AIMO was one of these members.
Since inception, how has AIMO developed and progressed in terms of its key objectives and the messages it tries to get across?
RSG: Of course, during those years there were many challenges, one of them was how to have alignment between the sectors on addressing critical issues to the government. The other challenge was on was how to develop the private sector’s vision to industrialise the country. So, we had to work with the government to introduce the right legislation, policy and strategy for the development of the sector. This was our primary objective in the early years.
Since then, we have seen a lot of industrial development in terms of mega projects. This meant there was also a need to integrate the smaller and medium sized industries in Mozambique into these larger projects to enable them to absorb as much as possible the business opportunities created therein, with benefits such as more jobs, and above all, sustainability in creating more contribution across the whole value chain including training and specialisation.
AIMO has been instrumental in contributing true partnership amongst different entities within any programme developed by the government and shared out amongst members. This creates a sound and vibrant contribution from the private sector to ensure that we are aligned hand in hand with the government.
Of course, the challenge is also to transfer the knowledge to the people, making sure that they can develop and follow the changes of the market – not just within Mozambique but also globally, since the world today is so connected. We have seen this through COVID-19. You want to make sure that everyone understands the market demands.
Mozambique is one of these countries where we have many natural resources. We try to avoid these resources becoming scarce, but instead become a contribution to wealth and to the economical development and sustainability. Our voice is that we as industrialists we play a very important role in the country, by transforming those resources to final goods and add substantial value to our economy, by enlarging our employment and creating new industries.
This has been our main voice – to spread across public institutions, including universities and also to other business associations. We also have international relationships. One of these is with the Scotland African Business Association (SABA) – we interact with them to understand their history, in the oil and gas sector, and how they have undertaken those challenges that we are now facing. So, we are learning a lot from them.
We also have partnership with Anglo-American for the sustainable development initiatives so we can learn and replicate the good practices across our industries in Mozambique for more benefits to our communities. We make sure that we create more sustainable employment.
How has COVID-19 affected operations for The Industrial Association of Mozambique?
RSG: Mozambique has always been on a path of overcoming something – if it’s not war, it’s insurgence, or climate change. There are so many challenges that this country has faced. Today, with COVID-19, it’s just another one of these things that we have to overcome. Of course, we have been impacted. Industry itself really faces those challenges, because we possess physical infrastructures. Most of those infrastructures involving plants, equipment and people. Climate change brings a lot of rains that affects both our work and employment, so this is a really big challenge. Of course, with COVID-19 we have been hugely affected by the measures that we have to adhere to, to save lives. With industry it is so challenging with people working from home when you need labour and people on the ground to make it happen. We have also been impacted because of the sourcing chain that we have, we import most of our materials from around the world. Now, the prices of materials are shooting up. The life of industrialists is not easy!
Have you got any projects in the pipeline you wish to highlight?
RSG: One of our biggest challenges is the competitiveness of our businesses so we design projects to bring as much collaboration as we can, to assure that we capitalise trough synergies with other instituitions. So, we have created the Industrial Development Agency.
Through this we are able to deploy and provide even better support for our members, not just in terms of policies and strategies but also services. We want to attract investment, which will allow us to be able to assist even more, since we have identified this as a big weakness within our members. We have been discussing with many entities, including Anglo American to assist us in this initiative on how we can attract alternative funding including venture capitalists. The biggest challenge that we are facing right now is the cost of money, which affects the cost of our operations; this is why we designed this new project to attract affordable funding for manufacturing and also partnerships, which will benefit our members.
Another major project concerns working towards ISO certification amongst industries in order to enable them to supply quality goods domestically and export to other markets. Here we have design a programme in partnership with Mozal, to reduce the cost of certification for our members.
Finally, are you optimistic about the future of industry for Mozambique?
RSG: Manufacturing is the engine for the economical transformation. The natural resources need to be transformed to a final product – that is what is consumed and not the raw resources. They need to be transformed through industry so it is a critical role that we play in the country. A few weeks ago, the government launched PRONAI an industrialisation programme to develop a framework which will base our economy in industrial development this tells how important this is for the country and we are so grateful to understand that over the past years the government has acknowledged that you cannot develop the country without developing the industry. We continue to work hand in hand, to assure that we improve the enabling business environment for industrial investors.