By seeing logistics as a pillar, the sector’s challenges take on a new importance, says Fanile Shongwe, Head of Investment Banking at Standard Bank Mozambique.
Fanile Shongwe, Head of Investment Banking at Standard Bank Mozambique, emphasises the logistics sector as an essential pillar for the country’s economic development.
With an extensive coastline and strategic regional connections, Mozambique has the potential to be a logistics leader in southern Africa.
However, challenges such as infrastructure maintenance and the need for greater north-south connectivity persist. Shongwe stresses the importance of technology to improve efficiency and reduce costs, and sees a promising future, driven by foreign investment and regional partnerships, which could transform the country into a vital logistics centre for the region.
How does Standard Bank analyse the logistics sector and its recognised potential for the development of the national economy?
Mozambique is our home, and we’ve been driving its growth for 130 years. We are Africa’s largest bank in terms of assets, with a presence in 20 markets. We are firmly focussed on sectors that drive economic growth in the countries where we are present, including Mozambique. Infrastructure (which includes transport and logistics) is one of our key sectors, and we recognise its importance in facilitating regional trade, creating jobs and ultimately boosting economic growth. We have close relationships with key stakeholders in the transport and logistics sector and contribute to the growth and realisation of the sector’s potential by sharing our expertise, banking and consultancy solutions. For example, we have been involved in the Maputo Logistics Corridor (CLM) since 2003, which has contributed more than 2.086 billion dollars to Mozambique’s GDP over the last decade.
How would you describe the current state of the country’s logistics infrastructure, and what are the main strengths and areas in need of improvement?
Mozambique is a country with 2,500 kilometres of coastline and 4,500 kilometres of land borders. The logistics infrastructure is developed transversally, from west to east, linking the mining and agricultural clusters within Mozambique and in neighbouring countries to the ports of exit. The country has a 30,000 km road network and 2,500 km of railway line, which is critical in supporting the country’s regional integration, particularly with the entry into force of the African Continental Free Trade Area (AfCFTA). The main strength of Mozambique’s logistics sector is its regional interconnectivity. Consequently, our main ports are strategic gateways to the regional hinterland, both for import and export flows. The main weakness of Mozambique’s logistics sector is the limited north-south connectivity, lacking links that connect the parallel east-west corridors to each other. In addition, the vast size of the country makes it difficult to maintain the road network. Nevertheless, these weaknesses are being addressed through projects to rehabilitate the national road networks, mostly financed by FID.
Looking at the sub-sectors, there are also challenges…
In Roads, the biggest challenge has been to find a balance between mobilising resources and funding for the maintenance needs of existing infrastructure versus investment in expanding the network. For the railways, the challenge comes from the growing volumes handled year on year, driven by increased regional and global trade, which puts pressure on existing capacity and requires constant investment in expansion. The main challenge for ports is to ensure that they remain competitive at regional level by being more efficient, profitable and better connected, enabling them to attract more traffic to their terminals. The port of Maputo, which is managed by MPDC and is part of the Maputo Logistics Corridor, has invested more than 800 million dollars since 2003 to modernise and expand its infrastructure. As a result, it is well regarded and rated for its efficiency in southern Africa. Likewise, the Port of Beira achieved the highest ranking of all Container Terminals in Southern Africa by the World Bank’s Container Terminal Performance Index, ahead of ports such as Walvis Bay, Durban and Dar Es Salaam. This has been achieved thanks to significant investment in equipment, infrastructure and systems. Ultimately, ports and corridors are interdependent. Railways and roads are essentially the arteries that supply the lifeblood to the ports. Without investment, ports will not be able to operate to their potential, and vice versa. There is also a challenge at border crossings, which can be a hindrance at peak times. However, through uninterrupted operation and one-stop borders, the government has been working to reduce transit time.
The country has a 30 000 km road network and 2500 km of railway line, which is critical in supporting the country’s regional integration into SADC
Are logistics costs competitive compared to other countries in the region? What are the main factors influencing these costs?
The main factors influencing the cost of logistics in the region are distance (which impacts fuel consumption, wear and maintenance) and the state of the infrastructure between two points. Mozambique is extremely competitive compared to other countries in the SADC regional bloc, due to the shorter distances from the origin of the cargo to its destination. In other words, Mozambique is the fastest and cheapest route to the international shipping markets for Zambia, Zimbabwe, Malawi and a large part of the south-eastern Democratic Republic of Congo.
How is technology being used to overcome logistical challenges?
Technology is used to increase efficiency and productivity, simplify processes, increase security, reduce costs, eliminate fraud and reduce the likelihood of human error. The automation and digitalisation of processes is a critical tool in the arsenal of companies operating in the logistics sector. MPDC and its partners are a perfect case study of how technology can be applied to overcome logistics challenges. They have managed to integrate technological systems with organisations such as Customs and Km4, which has helped to improve efficiency by reducing waiting times from 24 to 10 hours. Traditionally, fully digital operational management systems, real-time tracking of people and cargo, the use of cameras on weighbridges to identify lorries and lorry marking systems in ports improve traffic management and eliminate the use of paper-based processes. The automated movement of cargo within ports is also another area where technology is being used to improve processes.
What makes Mozambique attractive for investment in the logistics sector?
Mozambique is a strategic hub for southern Africa, which means that investors can easily gain access to the hinterland market, due to regional interconnectivity and the infrastructure already in place. There are also incentives to attract foreign investors, including tax exemptions, Special Economic Zones and a regulatory framework that has simplified the investment process, making it easier for foreign companies.
How is the country positioning itself in the context of regional integration and what opportunities are there?
As a member of the SADC Free Trade Area, Mozambique benefits from common policies, reduced tariffs and trade barriers with its peers. Mozambique subscribes to the SADC Indicative Regional Development Plan and is capitalising on its strategic position by the Indian Ocean, investing heavily in infrastructure that supports regional integration. Regional partnerships between countries create a range of growth opportunities for economies and businesses.
‘Standard Bank is working alongside key stakeholders in the logistics sector to realise the country’s future vision for the sector’
You were talking about development corridors such as Nacala and Maputo. What role do they play in improving logistics in the country?
Development corridors significantly improve a country’s logistics by improving transport networks, optimising trade routes and stimulating economic activity. The economic impact of the CLM (Maputo Logistics Corridor) is tangible and material, but this was the result of material investments and a deliberate strategy to integrate the corridor across railways, borders and roads. The CLM has created more than 331,500 jobs and generated 500 million dollars in taxes over the last decade. The recent rehabilitation of the Port of Nacala has transformed it into one of the most modern in sub-Saharan Africa and it could benefit from a concessionaire with a strong specialisation in upgrading the Nacala Corridor. The most recent advances in these projects include the extension of the Port of Maputo’s concession until 2058, during which MPDC plans to invest 2 billion dollars to double the port’s handling capacity, including increasing operational capacity from 37mtpa to 54mtpa, increasing the capacity of the container terminal from 270,000 per year to one million containers per year, expanding the Matola Coal Terminal from 7.5mtpa to 18mtpa and the General Cargo Terminal from 9.2mtpa to 13.6mtpa. The concessionaires of the Port of Beira have also pledged to invest 290 million dollars over the next 15 years in the expansion and modernisation of the port, increasing container handling capacity from 300,000 to 700,000 containers per year, as well as increases in general cargo capacity, storage, improvement of access points, among others.
What public policies or regulations do you see as essential to improving the logistics environment in Mozambique?
As a developing country, it is important for Mozambique to learn from what developed countries have done well and internalise the precautionary lessons taught by their mistakes. Improving the ease of doing business is a good starting point for improving the environment, and I see the implementation of the Economic Acceleration Package (PAE) as an excellent initiative with several measures that impact the logistics sector. At this level, initiative 11 is key because it aims to improve the competitiveness of airports and logistics corridors by simplifying procedures designed to increase efficiency at borders. There are also incentives for transhipment at the main ports and more competitive tariffs applied at the main ports, logistics corridors and airports. We are encouraged by the steps taken by the Government of Mozambique and South Africa to make CLM more efficient; the Komatipoort/Ressano Garcia border post now operates 24 hours, which has reduced congestion at the border. CFM and Transnet recently signed an agreement that will allow trains from both countries to run uninterrupted, eliminating the need to change locomotives at the border and the resulting delays. This will ease the pressure on the roads and transfer the load to the railways. Despite these positive developments, more needs to be done to reduce bureaucracy at the border post, the digitalisation of the customs process, the implementation of a one-stop system and the adoption of the AfCFTA.
What trends do you see shaping the future of logistics in the country over the next few years?
I’ll start by talking about sustainability in logistics. The European Environment Agency predicts that it will account for up to 40 per cent of global carbon dioxide emissions by 2050 unless effective measures are taken. Therefore, players in the industry will have to take concrete steps to reduce their environmental impact, which means carbon offsetting, optimising transport routes and switching to electric vehicles or from road to rail. That said, there are many other reasons why companies in the sector should implement green logistics strategies, particularly in Mozambique, given the country’s susceptibility to climatic events that cause disruptions in the sector, resulting in lost revenue. We anticipate that there will be a strong focus on climate resilience, which will require co-operation with the national government. The best way to predict the future is to create it, and Standard Bank is working with key stakeholders in the sector to realise the country’s future vision for the sector. In the next five to ten years, LNG projects are expected to be operational and this will bring its own logistical challenges, and the country must be prepared to absorb the additional demand created by these projects and match the level of service required by such a sensitive and critical industry. Modernisation, capacity expansion and the ability to provide value-added services, in addition to logistics as we know it, will now be key issues.
Text: M4D – Photo: Mariano Silva
