Watch: Operating costs as barriers to Mozambican manufacturing industry

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Watch: Operating costs as barriers to Mozambican manufacturing industry

3:13 CAT | 23 Jul 2019

The Confederation of Economic Associations of Mozambique (CTA) on Monday signalled high operating costs and lack of funding as the main obstacles to the development of the Mozambican manufacturing industry.

“Based on feedback from our entrepreneurs, we have found that one of the main obstacles to the flourishing of our manufacturing industry, which has led to the closure of several companies, is associated with high operating costs and the lack of financing adjusted to the reality of the country,” CTA president Agostinho Vuma said during a seminar on the challenges facing the Mozambican industrial sector today in Maputo.

Vuma noted that some of Mozambican manufacturing’s raw materials were imported, which suggested that, in order to boost the sector, the Mozambican executive should exempt all imports of raw materials from value added tax and customs duties.

“This measure could result in the reduction in the sector’s production costs by as much as 211.68%, representing a significant gain in the sector’s competitiveness,” he added.

The Mozambican business community was also demanding a change in the electricity tariff structure, suggesting that a seasonal tariff for the industry, in addition to reducing the cost of electricity, would boost the sector.

“In order to induce a reduction of the cost of capital and improve access to financing, it is proposed that alternative avenues are adopted, namely capital market development and the realisation of development finance projects,” he concluded.

According to CTA data, Mozambican industry registered a significant contraction in the last 10 years. In 2017, its contribution to gross domestic product was 8.7%, compared to 11.8% in 2008.

Mozambican business people have reportedly invested more than 9% of the total investment destined to the national industry sector, the remainder coming from foreign investors.