$120m IFAD boost for Mozambique agriculture project
Francisco Ferreira dos Santos. Photo: A Verdade
One of the reasons for the failure of agribusiness in Mozambique is because the state, instead of subsidising the majority of the people who are agricultural producers, has chosen to subsidise the minority living in urban areas.
“In agriculture it seems that it is forbidden to talk about subsidies, but there is no harm in talking about subsidising fuel, there is no harm in talking about subsidising bread,” says Francisco Ferreira dos Santos, one of the leaders of the oldest company operating in the agricultural sector in Mozambique.
He has a messages for the government: “Those countries that are successful in agriculture have a policy of extremely strong subsidies.” He also notes: “The devaluation of the currency helped agricultural production a great deal.”
Speaking at the Conference of the Observatory of the Rural Environment (OMR) taking place in Maputo until today, Friday, the great-grandson of the founder of the João Ferreira dos Santos Group began by revealing some of the reasons for the resilience of the company created in 1897, “with a purpose that went well beyond profit for profit’s sake. Profit was always a question of sustainability, but not properly the mission of the Group”.
Having remained in Mozambique after independence and surviving the civil war, the JFS Group has been focused in Niassa province since the turn of the millennium, with cotton production as its business anchor.
“This year, our company has 53,000 associate producers. We have around one million dollars in the bush in inputs, and will inject more than 7 to 8 million dollars in purchases,” dos Santos says, emphasising that he directs the “only company in the world that is accredited to the two global guidelines that dictate the practice of cotton production, cotton initiative and cotton made in Africa. We are a case study for that”.
Dos Santos explained that the cotton sector responds to three essential things, the drivers of national agriculture: the need for training, the need for inputs and access to markets.
“We also had to intervene in three other areas: rural commerce (we are developing a network of agrarian exchanges), establishing and facilitating financial services, and working in rural electrification – without energy there is no development. All these pillars, from our point of view, are necessary to allow the development of agriculture itself. It is not enough to work in agriculture, if we do not also work on these decisive factors.”
“Those countries that are successful in agriculture have hefty subsidies”
The JFS Group chairman, a trained agronomist, believes that sociology and anthropology are fundamental for the success of agro-business in Mozambique.
“Because our work takes place in the rural environment, sociology and anthropology are critical to realising why people do not do some things that seem obvious. Sometimes the answers are so simple that we cannot understand them here in Maputo, far away, just looking at analyses and studies. We do not have the ability to understand the factors that determine people’s aversion to technology and solutions that are often available,” he says.
With the experience inherited from more than one hundred years of operations, dos Santos proclaimed that “(…) in agriculture it seems that it is forbidden to talk about subsidies, but there is no harm in talking of subsidising fuel, no harm in talking about subsidising bread. We in Mozambique accept the concept of subsidising consumption, but it looks like when it comes to subsidising production, we’re too ashamed to talk about it. But this, my friends, is what everyone does. Those countries that are successful in agriculture have extremely strong subsidies”.
“If we could get back our textile industry, our US$40 million of exports would immediately become US$400 million.”
Ferreira dos Santos argues that “one of the positive ways of stimulating rural development is by injecting money into the regions – that is what other countries do. Especially when prices fall, governments intervene and stabilise prices so as not to have a sub-sector volatile and oscillating. When the price is good all the people produce, and when it falls they reduce, so we have had years in which Mozambique produces 70,000 tons, then another 187,000 tons, and then back down again”.
“There is no value chain, there is no industry that will survive if it does not have stabilised production levels. This would not be subsidies just for the sake of subsidising but subsidising to guarantee a functionality and a minimum volume that we need to operate. In cotton we can do it, without administrative costs, which is no longer the case with corn, for example. In our case we already have an institute, the companies are organised, the producers are organised, every operation is controlled so we could implement such a system without cost,” he insists.
Still on the potential of cotton, which dos Santos says is not white gold or petroleum. “It is probably Mozambique’s best product for value adding potential. In the world, apart from the automobile industry, it is the industry that generates the most employment. Because we have agricultural production, primary processing, spinning, weaving, dyeing, then making up and only then do retailers come in, so it’s an industry that has a brutal value-add, at least tenfold.”
The Administrator of the JFS Group believes that “if we could get back our textile industry, our US$40 million of exports would immediately become US$400 million – which is why cotton-producing countries protect it as much as they can”.
“Currency devaluation helped cotton, along with much other agricultural production.”
Dos Santos asks if there is a better way to boost the rural economy, and challenge Filipe Nyusi’s government. “If Mozambique decides now that cotton is not paid at 23 meticais but at 25, we pay three meticais with no administrative costs. We do not need to create separate machinery to manage funds and control – we have it all set up already. Why not do it? What is the problem of paying another three meticais to the cotton producer if anyone buying bread in the city gets at least one metical? Why do we not do the same in rural areas and let market liquidity bring the development we need?”
For this agricultural entrepreneur, the timing is right. “Currency devaluation helped cotton, along with much other agricultural production. Since 2004 we in Mozambique have had an artificially valued currency. We understand the reason: we want to keep the urban population at 30 percent; we want to control inflation to make consumer goods more accessible; we all want to be in urban societies that work and do not strike, but this comes at a very heavy cost: it sucks the competitiveness out of the countryside.”
“When we see how this currency devaluation had such a positive reaction, because the product prices all went up and production increased … So let’s pay attention to this currency issue,” dos Santos urged.
Source: A Verdade