“Head of state should lead public-private dialogue” – Mozambique Business Confederation

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“Head of state should lead public-private dialogue” – Mozambique Business Confederation

1:58 CAT | 26 Jul 2016

O País / Rogério Manuel, chairman of CTA

Less than a week before the start of the Private Sector Annual Conference (CASP), Mozambique’s business community is not satisfied with the present course of reforms of the business environment. The “boss of bosses”, Rogério Manuel, says head of state Filipe Nyusi should direct the public-private dialogue to ensure that ministries take measures to facilitate business. In addition, the president of CTA [Federation of Business Associations of Mozambique] wants ministers who do not meet business environment reform targets dismissed.

With the 14th CASP [Annual Conference of the Private Sector] scheduled to start on Thursday, July 28, the president of the CTA spoke about the issues that will dominate the conference, and the current crisis will be an unavoidable one. Debates will feature national and international speakers, but Manuel says that overcoming the crisis implies protecting the domestic producer, especially in the agricultural sector.

O País: 20 years of public-private relationship between the CTA and government have gone by. In that time, what has changed in the business environment?

Rogério Manuel: The gains are obvious: looking at where the country is today. We have come from a centralised economy and, when decentralisation began, we found on this platform the opportunity to lobby and advocate for reforms and the economic policies needed to put the private sector where it belongs. From then on, there state enterprises passed into the private sector and the economy has taken off.

Thanks to the public-private dialogue, we are now an economy which attracts investment.

Previously, it was hard to think of investing in Mozambique, but now many entrepreneurs come here. The upcoming mega-projects and foreign investment are coming to fruition because legislative that encourages investment has improved as the result of our discussions with the government. So the balance of the last 20 years is undoubtedly positive. We are pleased, although we could have done more – there are countries that came after Mozambique, like Rwanda, which have overtaken us in the business environment, because we have not been so quick in reforming.

O País: We are talking about reforms in the “Doing Business” of the World Bank? Mozambique occupies the 133rd position in a number of countries … 189

RM: Of course. There was a period when the reforms stalled. However, it does not mean that everything is bad – there was an opening, and reforms took place.

O País: The 14th CASP takes place at a time when Mozambique is undergoing a deep economic crisis. What does the private sector see as the way out of the situation?

RM: Looking at the current scenario in the light of the interests of both the government and the private sector, one of the measures would be the protection of domestic producers. There is talk of a local production strategy, but this is merely political talk – behind the speeches there is no tangible activity related to local production.

Let me illustrate with what happens in the production of sugar. After independence, all the sugar factories – Chinavane, Mafambisse and so on – ceased activity. Countries like Swaziland carried on and even exported to Mozambique. In order for us to start producing sugar again, certain forms of protection needed to be put in place.

For the Coca-Cola factory to open here, there were also protection policies, because everything came from South Africa. If there had been no such measures, this plant would have died because South Africa could lower prices to dominate the Mozambican market. Hence the refreshment that comes from South Africa or the sugar that comes from Swaziland has a very high tariff rate to discourage imports. What I am claiming is that there should be incentives for the domestic producer. Here, there are no protection policies for producers of rice, tomato, potato, among others. That is why we continue to spend lots of money importing products that we could grow locally.

O País: The private sector does not invest in agriculture because there is no protection?

RM: If there were protection for domestic producers, entrepreneurs would have more than enough incentive to invest in agriculture. The second aspect to getting out of the crisis is that we have to promote national production at the same time that we ease the accessing of agricultural financing. We can not discuss the production of rice or another agricultural product based on a commercial funding. This is unthinkable and unsustainable – it has to be a specific funding. Only a crazy entrepreneur would go to a commercial bank for a loan at twenty-some percent interest to invest in agriculture.

What happened was that politicians were convinced that there should be an opening at the regional level for goods and people, so that all products produced or manufactured in the region come to other countries without paying duties. But there are strategy-minded people and countries because, for example, South Africa already knew it was capable of producing tomatoes to feed the whole region and then make money. But they did not open up for cashews, for example, as they do not produce them. If Mozambique wants to export cashews, South Africa, knowing that they do not produce them, gains nothing from it, so what they do is tax the product.

There was a lack of strategic thinking on the part of Mozambique by joining the SADC protocol. We opened to the region and we killed all productive sectors. To reactivate, we need to reform and go back to the past. Only politicians can do this, for it was them who signed the agreements and only they can renegotiate.

O País: Funding for agriculture is not a new topic, but no solution is in sight. How has Mozambique failed, to date, to create an agricultural credit scheme?

RM: There have been several proposals to create cushions for the credit risk and there were donors who tried to help, but it did not work. Because the effort was not enough: we need more investment in this area. The government is part of that investment, but in a disorganised way. For example, it recently invested millions of dollars, borrowed from Brazil, to buy equipment to mechanise agriculture. But these machines are in the hands of people who rent them out to farmers – activity that should have been undertaken by a development bank, but the donors could not agree.

O País: Are you saying that the National Investment Bank (BNI) is not a development bank?

RM: Yes. The BNI is not playing the role of a development bank. Since its inception, it has been inclined to large investments in infrastructure and energy. Only this year has it changed its strategy and now has some funding for the agricultural sector in partnership with a Chinese bank, but even then, the process is not clear. It is not being publicized, and I don’t believe even the press is aware of the interest that will be charged. We at the CTA we tried to find out, but could glean no information. These are the things that are stuffed away in drawers, slowing down the development of the country.

O País: And how can CASP change this scenario?

RM: What we need is an investment bank specialising in agriculture. So, CASP is bringing in the CEO of the African Development Bank, not because of AfDB, but because of his experience as a former minister of agriculture in Nigeria. We want to bring in wisdom like his to help the government and the private sector. We have invited the former minister of finance of Mauritius, a country that produces a lot of sugar, but is also excelling in tourism. He was the driving force behind the diversification of the Mauritius economy, and we want to learn from him. We have the European Union ambassador to China, who is an expert in the manufacturing area. She is advising four African countries about industrialisation. We are bringing her in because we have everything to get it right in the industrial sector. Look at the coal we produce: we export it raw. And, like coal, the same thing is happening with gas.

O País: In 2015, the government and the CTA introduced reform of the public-private dialogue, establishing points for the evaluation of each of the parties. Is this working to improve business environment?

RM: Not so much. An agreement was signed with the government on what the public-private dialogue would be about. If you remember, we had over a hundred items on the table, but the government asked us to reduce and we accepted, given that it was the first year of governance. We reduced it to just two points in each CTA section, totalling 22 points. But on these points, agreed last year, the government has only completed 12 percent. We expect the executive to explain what is happening – whether it was the war or the economic situation that have been prioritised at the expense of the private sector. But the targets have not been met.

O País: How do you expect to overcome this? It isn’t the first time that the CTA has complained about targets not being met by the government.

RM: We think we should encourage the head of state to lead this process. We agreed, in 2015, that every three months, the ministers of economic portfolios should meet their teams to assess their performance in the matrixes. We also agreed that, every six months, the prime minister should sit with the private sector to assess the performance of all portfolios. Two meetings were held with the prime minister, but those with the economic ministries? Some made them and others didn’t. This lack of performance may be due to the fact that there is no statutory requirement, it emanates from a political decision and not something regulated by law.

O País: And how can the head of state change this?

RM: There are two ways to resolve the situation. First, the head of state can use this public-private platform as a thermometer to assess his ministers. If they do not comply with the defined matrices, then they are not up to the job. So the president would remove them and appoint others. This is one solution.

The other is more complicated, and would take longer. The public-private dialogue would be governed by law. So the first solution would be better. It would be like an employee having a target and you saying: “You must achieve a certain target. If you fail, we’ll have your letter of resignation and you’ll be out because you are not working”. This is the proposal that we will present to the head of state.

O País: The dialogue is not being taken seriously?

RM: Yes and no. Recently, the economist Ragendra de Sousa – who was appointed Deputy Minister of Industry and Commerce – said that in Mozambique there are no business people – just have people with business cards and that’s it. This is ridiculous, and I think it is this perception that some rulers have, a way of seeing national businessmen as not going anywhere. However, when this same ruler feels put upon at a time of crisis, like at present, he makes regular inspections not of others, but of these very entrepreneurs who only have cards in their pockets.

O País: Do you see Ragendra de Sousa’s statements as provocative?

RM: I do not know if his head was in the right place when he said that. But I understand that it was something not much thought about in people at that level. I even liked it in a way because, some time later, the president appointed him as deputy minister of industry and trade. So now let’s see his plan for some serious entrepreneurs in the country.

O País: The motto of this CASP is “The Challenges of Domestic Production in the current Economic Scenario”. What does the future hold for Mozambique?

RM: Looking ahead, we expect everything. Tomorrow depends on whether the people in power bow or not to pressure from international partners, particularly the International Monetary Fund. The future is uncertain: we have all the natural resources, but we are nothing. Now, in this CASP, we expect the business community to present their concerns to the head of state, because the Private Sector Annual Conference is led by him. So he will be there to hear what the yearly balance sheet shows, and we look forward to hearing from him the decisions he will make and the guidelines he will give his government.

Source: O País