MACIG Connect Series
ACIS is an industry body that represents a broad selection of private sector interests in Mozambique. Could you provide us with some more details regarding the organization’s role and membership?
Carlos Henriques (CH): ACIS was formed in the year 2000 in the city of Beira. In the beginning, the group consisted of a few members who were experiencing difficulties understanding Mozambique’s business environment and legislative requirements. They decided that forming an association was the best way to face up to these challenges. From its regional roots in Beira, the association grew to encompass the entire country. We are not sector-specific; our members come from a diverse spectrum of different industries and include everything from huge multinationals all the way to individuals. Approximately half our members are local companies and the other half are foreign.
As an organization, we are entirely self-sufficient. Our operations are funded by membership fees and revenues generated through events that we organize. We are more active than most other commercial organizations or industry groups. Beyond running debates and networking events, ACIS also functions as a lobbying agent to influence government decisions in a way that will improve the general business environment.
Given the diversity of your membership, how are you able to reconcile friction that arises between different interest groups?
CH: In our association we are always struggling to juggle and balance different priorities so as to benefit the broader interests of our members. On some issues this can be particularly difficult. For example, should ACIS campaign for a stronger currency or a weaker currency? Companies that rely heavily on imports will naturally argue for a stronger currency, while exporters will favor policies that devalue the metical, as it makes them more competitive. Similarly, local companies are more likely to clamor for protectionist measures, while multinationals will fight against them. As an association, we cannot take a position on these issues. Our policy is to encourage policies that promote fair business dealings, and we do not accept members that will not accept a level playing field.
In 2014 Mozambique dropped five places in the World Bank’s Ease of Doing Business Ranking. What would you suggest were the reasons behind this?
CH: Firstly it is important to point out that this ranking, while useful, is flawed. In 2013, Mozambique rose eight places because of the promulgation of one law governing receivership procedures. Regardless of these small fluctuations in rank, Mozambique remains near the bottom of the table. For 20 years, the country has run a system called the public-private dialogue. Unfortunately, over the last 10 years, we have not been able to make any improvement on any of the issues brought up at these summits. This is why Mozambique continues to languish among the bottom of the rankings for business environment.
What kind of changes would you like to see to improve the business environment?
CH: The first change that needs to happen is more participation from the private sector in developing new laws that pertain to the economy. As businesses, we are directly affected by new laws and our voices must be heard.
Government red tape continues to be a problem as the bureaucracy expands. We face new levies, charges and inspections on a daily basis. This drives up our costs, reduces productivity and wastes our time.
Finally, the government’s practice of handing out monopolies to favored companies needs to end. For example, according to World Trade Organization guidelines, all commodities must undergo a non-intrusive inspection at the point of import and export. In Mozambique, this service was granted to one company by the government without any competitive tender. No competition means high prices and no other options. Regardless of who carries out the inspection, the cost of the service should be borne by the customs, not by the operator.
But the most important thing is for all sides to agree that the country needs a vibrant private sector to provide employment and produce wealth. To accomplish this, we need a national agenda that recognizes that the role of the state is to encourage business, not to control and restrict it.
Given the clear challenges that still exist, can Mozambique still be seen as a promising destination for foreign investment?
CH: Without even talking about the colossal resources Mozambique holds in terms of minerals and hydrocarbons, the country’s geography puts it in a uniquely privileged position. Its extensive coastline offers huge potential for more ports and harbors that can be expanded to serve bordering landlocked countries. Right now, we suffer from an electricity deficit, but the country’s rivers can be harnessed to provide cheap hydroelectric power for domestic use and export. However, transmission infrastructure needs to be developed, which is a major priority for the current government. Similarly, we have enormous tracts of arable land and considerable water resources to allow for development of intensive agriculture, but investment must first be made in irrigation.
Several executives we have met with are predicting that Mozambique’s lack of skilled workers will become more of a problem as investment in new enterprises takes off. What is your assessment of the situation?
CH: There is currently no stand-alone law relating to local content. The oil and gas law makes provisions for how many locals should be employed and what kind of training should take place within a hydrocarbon project, but this is not applicable to all industries. The mining law allows for special consideration to be given to bring in expatriates. The skills deficit in the country is a major hurdle but we have to remember that Mozambique is still a young nation. Look at the transformation that has taken place over the past 40 years, it is truly incredible. For many years, the education system essentially collapsed and no new professionals were being trained. Now the situation has improved dramatically and the number of available skilled workers continues to grow. Nevertheless, government needs to commit resources to further improving early stage education. On the other side of the equation, we need to find out how to employ 450,000 new qualified workers per year.
In broad strokes, what are your prescriptions for Mozambique’s economic development over the coming years?
CH: If the planned major LNG projects are developed over the next 10 years, Mozambique’s economy stands to grow by a factor of five. However, at the same time, we need to diversify away from a reliance on natural resources. As such, it is imperative to give support to other industries like tourism and agriculture.
This interview was part of research being conducted by GBR for its Mining in Africa Country Investment Guide (MACIG) 2017. The 2016 edition of MACIG will be published next week, but the 2015 edition can be accessed here and the 2015 Sub-Saharan Africa Oil and Gas Handbook can be accessed here. The GBR team is currently in Mozambique conducting the necessary research and interviews for the mining and oil & gas sectors. To participate in this report, please contact Molly Concannon at email@example.com or +258 82 559 4115