Economy

The Big & The Small

FDI

The surge of megaprojects as a result of Mozambique's resource boom has driven growing FDI figures in recent years. The authorities now need to focus on smaller-scale investments to boost the supply capacity of local businesses.

Having emerged from civil war in the early 1990s on the path to a market economy, Mozambique’s FDI record has mostly been dictated by the development of mega projects related to natural resource discoveries. With local businesses now struggling to meet the high-tech, export-orientated expectations of large foreign investors, the country is in need of a wider range of service companies to keep the resource train rolling—there is no lack of interest.

The establishment of the large-scale aluminumsmelter Mozal in the mid 1990s by a consortium of foreign investors sounded a signal to the international investment community of Mozambique’s credentials as an FDI destination. According to statistics released by the Investment Promotion Center (CPI), FDI reached $974.5 million in 2011 and fell by 26% in 2012 to $725.8 million, not taking into account some mining and gas exploration investments that were given the go-ahead in 2012. Aside from continuing investment in the country’s budding extraction sector, agriculture, banking, construction, and tourism were all relatively significant investment pulls over 2012.

Significant investors include Anadarko, which has discovered between 32 and 65 trillion cubic feet (tcf) of recoverable natural gas in Area 1 of the Rovuma Basin, northern Mozambique; Rio Tinto, which has extensive coal operations in the country and is looking to develop a new transport plan for its assets in the Moatize Basin; and Vale, which is also investing in the Port of Nacala to support its Tete-based coal business. “We are looking at investing about $1.1 billion in the port, while the whole corridor will cost around $4.5 billion to connect Tete to Nacala, including the port,” said Ricardo Saad, CEO of Vale Mozambique.

Despite falling seven places in the World Bank’s Doing Business report to 139 in 2012, the CPI was lifted by news that Mozambique was listed as the third most attractive country for foreign investment in a report released by Rand Merchant Bank (RMB). The CPI has been instrumental in improving the country’s investment promotion in recent years. “CPI’s critical role is facilitation,” said Lourenço Sambo, Director General of CPI, adding that, “if an investor wants to purchase land, lease property, set up a company, or hire services, we can assist.”

The CPI is now prepared to take on the challenge. “Construction, services, and mega projects will boost economic growth, but we need sustainable development, which will take 20 years,” said Sambo, concluding, “FDI is very important to bridge the gap, but we have to also build up the local capacity to invest. The key is joint ventures. We work with Mozambicans to invest here. We will follow the Namibian model, where it is a must to have a local partner.”

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