The demonstrations called by former presidential candidate Venâncio Mondlane have resulted in significant losses for the various sectors of the national economy, particularly the industrial sector. At the end of last year, the Confederation of Economic Associations (CTA) had already reported losses of 500 million dollars (31.6 billion meticals), corresponding to 2.5 per cent of GDP.
In order to better understand the impact of the protests and vandalisation on the industrial sector, DE interviewed the President of the Mozambican Industrial Association, Rogério Samo Gudo, who explained that in addition to the material damage to infrastructure, production lines and warehouses, as well as the interruption of value chains, the demonstrations have hampered the movement of goods, jeopardising the sector’s recovery.
During the interview, he emphasised that political stability and a focus on industrial development are essential for economic recovery, and called for the renegotiation of contracts with multinationals and more efficient use of existing financial mechanisms, with the aim of strengthening the economy and ensuring that industry plays a central role in the country’s development. Follow the interview for more details.
DE: How have companies in the industrial sector been affected by the demonstrations?
The figures released by the CTA point to losses of around 500 million dollars. These are not just losses in the industrial sector, but in the whole economy. However, most of the impact was on industry, which suffered significant damage to infrastructure, production lines and warehouses. The commercial sector was also badly affected. Despite representing only 2.5 per cent of GDP, these losses have a profound impact on the national economy, amounting to around 20 billion dollars.
We’re not even counting the stoppages, but the material damage. Some areas are still without traffic, which directly affects industry. Unlike sectors such as banking or services, industry depends on the physical presence of workers. With mobility jeopardised, production is severely hampered.
DE: Was industry the most affected economic sector?
No doubt about it. Industry was not only impacted by material damage, but also by the interruption of value chains. In addition to the destroyed infrastructure, the supply of raw materials was interrupted, and final products no longer reached the market, either due to vandalism of shops or the loss of the population’s purchasing power. Difficulties in the movement of goods and delays in the delivery of inputs caused a negative cascading effect on production processes.
We’re not even counting the stoppages, but the material damage.Some areas are still without traffic, which directly affects industry.Unlike sectors such as banking or services, industry depends on the physical presence of workers.With mobility jeopardised, production is severely hampered.
The issue of financing has also worsened. Industry was already facing difficulties due to rising interest rates, fuelled by banks’ reserve requirements. With the post-election crisis, these difficulties have intensified, further jeopardising companies’ ability to operate.
DE: Are rising interest rates and a shortage of foreign currency a big problem for industry?
No doubt about it. Many companies need to import equipment and raw materials, processes that can take months. To finance these operations, they resort to bank loans. The problem is that high interest rates and late payments abroad jeopardise delivery times and costs increase significantly. If a company doesn’t receive raw materials on time, it can’t meet production and delivery deadlines, jeopardising contracts and losing business opportunities.
What’s more, while production is at a standstill waiting for inputs, fixed costs remain: wages, energy, rent and interest. Workers can’t just stop getting paid because the factory is out of production. This creates a huge financial mismatch.
DE: Given this scenario, what are the challenges and possible solutions?
Without political stability, the productive sector will continue to be under pressure. An agreement was recently signed between the political parties, but the violent incidents on the same day jeopardised this important political step. A favourable macroeconomic environment is essential for economic recovery, in order to restore the confidence needed for investments in the productive sector.
The issue of financing has also worsened.Industry was already facing difficulties due to rising interest rates, fuelled by banks’ reserve requirements.With the post-election crisis, these difficulties have intensified, further jeopardising companies’ ability to operate.
The solution is to create jobs by reactivating industry. The state does not yet have the capacity to distribute a basic food basket to families, but it can stimulate economic redistribution by generating employment. Industry must be the priority, because it is through industry that agriculture is also strengthened.
DE: Is industrial development essential for the valorisation of agriculture?
Exactly. There will be no strong agriculture without processing. Nobody produces to watch their food rot. Processing is what creates a market for agricultural production. If a farmer is guaranteed to buy his produce (offtaker), especially for processing, he will increase his production.
In addition, processing extends the shelf life of products, allowing for exports and the generation of foreign currency. It is through industry that we create value, qualify the labour force and strengthen the economy. Our challenge is to mobilise resources and ensure that the productive sector is the basis of the country’s economic growth.
DE: What is AIMO’s objective in this scenario?
Our aim is to improve the competitiveness of Mozambican industry by bringing into the discussion all the players who can contribute to removing all the barriers that hinder industrial competitiveness. In 2019, we started debates and awareness campaigns on the importance of industrialisation, through the ‘Pathways to Industrialisation’ project on STV and the MozIndus conference. During the pandemic, we used digital platforms to maintain a dialogue on industrialisation with various sectors.
The solution is to create jobs by reactivating industry.The state doesn’t yet have the capacity to distribute a basic food basket to families, but it can stimulate economic redistribution through job creation.Industry must be the priority, because it is through industry that agriculture is also strengthened.
The health crisis has highlighted the need for local production. At the height of the pandemic, we faced shortages of masks and hand sanitiser. We depended on imports, especially from China, but demand was huge and delays were inevitable. Faced with this, we started producing locally, which demonstrated the ability of Mozambican industry to adapt.
DE: Is the extractive industry part of AIMO?
Yes, because it also involves industrial processing. We have members like Sasol, Mozal and Vulcan. However, the composition of the association varies, as some companies close down while new ones emerge. Our focus is to dialogue with different sectors to understand their needs.
During the pandemic, Millennium bim created a funding line for the industry, but the criteria were inadequate. Today, we face challenges such as political instability, lack of foreign currency and an adverse global context. Industrial development requires structured solutions, including financial and fiscal policies that promote competitiveness for local companies.
DE: How can industry grow in this challenging scenario?
We need to exploit the domestic market and be more creative in financing. Multinationals operating in the country generate significant foreign exchange revenues, but much of this capital doesn’t enter the national economy. If this foreign currency were deposited in local banks, it would strengthen the financial capacity of these institutions and reduce credit costs for national companies.
The health crisis highlighted the need for local production.At the height of the pandemic, we faced shortages of masks and hand sanitiser.We depended on imports, especially from China, but demand was huge and delays inevitable.Faced with this, we started producing locally, which demonstrated the Mozambican industry’s ability to adapt.
Interest rates are set based on risk. If a multinational deposits revenues in dollars in a Mozambican bank, it can negotiate favourable conditions for its local suppliers, reducing financial costs in its value chain. This would guarantee greater stability and competitiveness for the industrial sector.
The renegotiation of contracts must prioritise gains for Mozambique, ensuring that small companies have access to competitive credit, without compromising strategic tax exemptions. The aim is to strengthen national industry and ensure that it plays a central role in the country’s economic development.
DE: Just so I understand: in your opinion, when we talk about renegotiating contracts, we shouldn’t look so much at seeking more taxes, but rather changing some of the principles of the contracts and the gains?
Exactly. And it’s not a big endeavour. Here in Mozambique, some companies are already doing this by placing index-linked deposits with their suppliers. This generates competitiveness, reduces costs and allows small suppliers to have more financial stability.
If large companies buy more locally, the market will develop naturally. Today it’s easier to import, but if we promote local purchases and consolidate our needs, there will be enough scale for us to invest in new industries to supply domestic demand.
Companies need long-term contracts in order to negotiate favourable conditions for their investments with banks. The state could help in this process by promoting policies that incentivise local purchases by multinationals to stimulate competitiveness and the development of new value chains.
National industry is a beneficiary of the megaproject value chain
DE: But is this a more political issue or is it the responsibility of companies?
No, it’s political. It ends up being political. If we don’t have long-term contracts, with the current interest rates, we can’t pay them back in four or six months. We’ll have to pay it off in four or five years. Without a contract, how can I negotiate more favourable terms with the bank? It’s not possible. We need to create a local supply chain that will generate more jobs.
DE: On the subject of the business environment, touching a little on your area, digital, do you think Mozambique is an attractive country for an investor, for example a European or American one, given that it’s not even digitalised yet?
I don’t want to get too far ahead of myself before we finish with local content. We’re talking about the modernisation of the state, and there’s a lot going on in terms of digitalisation, which is very important.
But it’s even more important to realise that the state can develop its economy without much effort. You just have to look at the investments that already exist, understand their production capacity and ensure that they spend more by hiring locally. What is Vulcan’s production capacity, for example? Depending on that capacity, what is the monthly revenue?
If we don’t have long-term contracts, with the current interest rates, we can’t pay in four or six months.We’ll have to pay in four or five years.Without a contract, how can I negotiate more favourable conditions with the bank?It’s not possible.We need to create a local supply chain that will generate more jobs.
DE: AIMO met with the new economy minister, Basílio Muhate. What are the association’s expectations of this new government? Do you feel it will be more of the same in terms of negotiations, or do you believe there will be some momentum to help you? And of the measures announced, are there any that you like the most?
Yes, there is talk of local content and industrialisation. We feel that there is respect for economic development and industrialisation. That touches us. We give them the benefit of the doubt. We’re not saying they won’t do it, but more than that, we’re not just being spectators. We are acting, as you can see. We understand the dynamics and we act on the basis of the state’s vision. Before we start implementing measures, we’re in dialogue with the multinationals, because they know that we have our dialogue with the government and the CTA. We are always aligned.
This is to allow awareness on the side of those who are responsible. We’re not here to stand by. We suffer the consequences, because we are prevented from making decisions that will alleviate the employment situation. Many demonstrations are due to a lack of jobs. We have a responsibility to help create the conditions to solve this problem.
DE: So everything would start with a dialogue to calm things down?
Yes. That’s why we say that, first and foremost, we need peace.
Text: Nário Sixpene
