Since without investment there is no action, it is now important to adapt the proposals of Mozambique’s Economic Recovery Plan to the financial resources available. It is crucial to take a short-term and a medium/long-term perspective, and to consider the preponderant role of different actors in the different phases.
In the short term, the state will play a decisive role in relaunching the economy and protecting jobs, preventing economic activities and services from stagnating and helping to capitalise companies and families in difficulty.
In the medium term, it is necessary to ensure a transformation of the Mozambican economy, making it more sustainable, environmentally and economically resilient, more digitalised, more innovative, more interconnected and capable of competing on a global scale with a critical mass equipped to make a difference.
In the long term, we will therefore have the role of the state in defining policies and public investment, ensuring the reorientation of our economy, but the private sector will play a crucial role as a driver of change and investment in our society and economic activity.
Public investment involves not only investment in physical and digital infrastructure, but also investment in education, the qualification of the adult population, innovation, the welfare state and public services, particularly health. All of these investments have a place within the framework of support from supranational organisations.
Public investment must be directed towards supporting the growth of a competitive, digital economy that grows in harmony with the environment – betting on reindustrialisation, digitalisation, the development of infrastructure for electric mobility and railways, and the promotion of energy alternatives such as renewable energies.
Stimuli and subsidies to support our industry in its transition to digitalisation and low-carbon production will be important – guaranteeing improvements in production processes, the competitiveness of our business fabric and an increase in wealth creation and job opportunities.
Mozambican companies, especially SMEs, are among the most affected in terms of access to finance. As a result of high interest rates, there has been a slowdown in private investment in the traditional sectors of the economy. In Mozambique, private investment is low and is an obstacle to growth.
Micro, small and medium-sized enterprises are highly decapitalised and it is essential to create the conditions for strengthening equity capital through appropriate fiscal and financial policies. On the one hand, it is necessary to support companies’ cash flow, in line with what the banks have been doing, but to extend this support by creating mechanisms such as:
Creating a public and capital-based fund, open to private funds for operations preferably in co-investment, aimed at companies with an export orientation and the potential to exploit scale;
Redefining and simplifying capital instruments and access to finance, according to the conditions resulting from the life cycle of companies;
Solutions to support the restructuring of companies, supporting the recovery and reallocation of capital to more productive companies, with the reallocation of means of production and workers. The possibility of deducting profits from recent financial years, incentive mechanisms and tax credits to encourage the revitalisation of companies, deduction of accumulated losses, incentives for mergers and acquisitions to create critical mass in the economy.
This is the time to create instruments to leverage private funds that seek to support the ecological and digital transition, offering companies and families opportunities for economic growth and social development.
Issuing green bonds and social bonds. There is a high level of investor interest in these types of products – which offer a financial return but also an environmental and/or social benefit. Mozambique should take advantage of this opportunity. Considering the high levels of public and private investment needed to relaunch the economy, and that these should be directed towards a low-carbon economy, we should promote the issuance of green debt. The benefits of issuing social debt should also be considered, aimed at financing health expenditure, including equipment and hospitals, expenditure to support SMEs, expenditure to support the promotion of employment and education, expenditure to support digitalisation.
Creation of public-private investment funds – Blended Finance. Given the high level of investor interest in financing a green economy, there are opportunities to create public-private investment funds (blended finance) to support innovative projects. Blended finance instruments increase financing capacity, since the existence of public capital in the constitution of a fund improves the risk profile for private investors, allowing them to achieve the risk-return profile required for them to grant loans. This type of instrument will make it possible to leverage the volume of financing granted and could be designed in such a way as to attract various donor institutions, depending on the interest shown (for example, funds targeted at certain industrial sectors).
Possible tax benefits that could be applied to green and social financing transactions (bonds and loans) should also be analysed, as a clear signal of the private investments that should be accelerated.
