Moz too reliant on mega-projects

MAPUTO – Academics and trade advisers have voiced concerns that Mozambique is neglecting the rest of its economy as it forges ahead with so-called mega-projects such as a new US$2 billion coal mine at Moatize.

Mozambique’s economic expansion has averaged between eight and nine per cent over the last decade. It has been helped by a boom in construction, manufacturing and multibillion mega projects such as diversified mining group BHP Billiton’s aluminium smelter at Mozal and South African petrochemical firm Sasol’s gas operation.”Hundred per cent of what the mega-projects produce is exported,” government trade and investment advisor Egidio Tembe told Reuters in the southern African country’s capital Maputo.”Those figures go into the balance-sheet, but the growth is fake – it doesn’t reflect the growth of Mozambique as a whole.””For the billions invested, it (Mozambique) gets a very small social benefit.For example, Mozal employs around 2 000 people …but it’s still an island,” said Tembe.”There’s no aluminium industry in Mozambique.It’s all exported – there’s no value added.”Critics say that while the government promotes its showpiece mega-projects, lengthy processes for registering companies and tax laws that are more than a century old hold ordinary enterprises back.”We need to get the business environment straightened out, make the labour law more flexible and change tax thresholds so over-tax ordinary business,” said Jim LaFleur, business Professor at Eduardo Mondlane University.But the government has defended the mega-projects, saying that they have brought increased foreign direct investment and improved infrastructure.The Maputo government confirmed this week that Brazil’s Companhia Vale do Rio Doce (CVRD), the world’s largest iron ore producer, will start the construction of a US$2 billion mine in Moatize next year, potentially one of the largest black coal mines in the southern hemisphere.The coal will fuel a 2 000 MW thermal power station and CVRD will build a 900 kilometre railway to a deep water port.Mozambique has been looking to start coal exports and use power generated at Moatize to attract metal smelters and other companies to its rapidly growing US$6,6 billion economy fourteen years after the end of its civil war.”Most foreign investment is in the mega-projects which are capital-intensive but growth in the economy is not that big.We must attract labour-intensive business,” said LaFleur.The IMF, a major lender to the country, made cutting red tape and improving the business environment the theme of its latest statements on Mozambique, an indication that the country is moving far too slowly on those fronts.Nampa-ReutersIt has been helped by a boom in construction, manufacturing and multibillion mega projects such as diversified mining group BHP Billiton’s aluminium smelter at Mozal and South African petrochemical firm Sasol’s gas operation.”Hundred per cent of what the mega-projects produce is exported,” government trade and investment advisor Egidio Tembe told Reuters in the southern African country’s capital Maputo.”Those figures go into the balance-sheet, but the growth is fake – it doesn’t reflect the growth of Mozambique as a whole.””For the billions invested, it (Mozambique) gets a very small social benefit.For example, Mozal employs around 2 000 people …but it’s still an island,” said Tembe.”There’s no aluminium industry in Mozambique.It’s all exported – there’s no value added.”Critics say that while the government promotes its showpiece mega-projects, lengthy processes for registering companies and tax laws that are more than a century old hold ordinary enterprises back.”We need to get the business environment straightened out, make the labour law more flexible and change tax thresholds so over-tax ordinary business,” said Jim LaFleur, business Professor at Eduardo Mondlane University.But the government has defended the mega-projects, saying that they have brought increased foreign direct investment and improved infrastructure.The Maputo government confirmed this week that Brazil’s Companhia Vale do Rio Doce (CVRD), the world’s largest iron ore producer, will start the construction of a US$2 billion mine in Moatize next year, potentially one of the largest black coal mines in the southern hemisphere.The coal will fuel a 2 000 MW thermal power station and CVRD will build a 900 kilometre railway to a deep water port.Mozambique has been looking to start coal exports and use power generated at Moatize to attract metal smelters and other companies to its rapidly growing US$6,6 billion economy fourteen years after the end of its civil war.”Most foreign investment is in the mega-projects which are capital-intensive but growth in the economy is not that big.We must attract labour-intensive business,” said LaFleur.The IMF, a major lender to the country, made cutting red tape and improving the business environment the theme of its latest statements on Mozambique, an indication that the country is moving far too slowly on those fronts.Nampa-Reuters