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Monica_55905 Apr 15

FDI in Mozambique - The Right Place at the Right Time

FDI in Mozambique - The Right Place at the Right Time image
Fabio Scala is the managing director of Further Markets, a consultancy firm specialising in Southern Africa. Over the last decade, he has participated as one of the founders of Mozambique’s national investment bank where he served as managing director.
I remember landing in Mozambique over a decade ago to an atmosphere of excitement. Foreign companies at that time had recently discovered major natural resources. It was the time of the “coal rush” in the northern province of Tete and the initial gas discoveries in the Rovuma basin. It was the beginning of a long journey that years later would see the country start one of the largest LNG projects in history.

I have always said that development would happen and be sustained by four pillars. Like dominoes they would fall sequentially, pushing each other in the following order: natural resources; infrastructure; industry and commerce; and agriculture. 

I have been approached many times by investors looking for agriculture projects, but time and again the business model fell because there wasn’t the infrastructure to make it viable. Similarly, investors in industry would remark that many projects would simply not have enough local demand to take off.

I have always been optimistic about Mozambique, where I have focused the majority of my work for the past 10 years. Often, I have been accused of blind or over-optimism, but my thinking from 10 years ago still holds true today. My rationale is simple. Natural resources at the scale being developed in the country justify a strong investment in infrastructure. 

Despite some conflicts in the north of the country, a monumental logistical operation is already taking shape through the construction of sea landing infrastructure, roads and everything else you can imagine to support the gas projects that are being developed. 

And before gas, coal brought developments to the country’s railways. That was the first domino (natural resources) pushing the next one (infrastructure). I believe that the third one (industry and commerce) is already taking shape when I hear that railway sleepers are being made in Mozambique to refurbish their Zimbabwe connection. And then we have my favourite and last domino, which is agriculture. 

Today, the infrastructure that was lacking 10 years ago and that made the projects unbankable, including roads, ports, energy and water, is there.

The growth spurred by natural resources is already creating a demand for virtually everything you can trade, and if one can drop the often unjustified scepticism, one will realise that there is a genuine will, both in the fabric of Mozambican society and the government, to welcome and work with foreign investors. 

If you are committed to understanding the country’s business culture, you will not be short of valuable local entrepreneurs to partner with.

Momentum of opportunity

Make no mistake, investing in Mozambique, like in any other developing economy, is not without its fair number of challenges. There is the issue of the conflict in the north, the bureaucratic legislation inherited from the Portuguese and the language barrier, to name a few.

The truth of the matter, in my view, is that it is is no different than any other emerging or frontier market. The exception here is the momentum of opportunity: fertile land, an abundant workforce and access to a growing regional market that will only consolidate more and get bigger. 

The explosion of growth ignited by the natural resources race is not going away for at least a few decades. Natural gas will play an increasingly strong role in the worldwide supply as a cleaner form of fossil fuel and there are many other concessions to come in time in Mozambique.

That also means your capital needs to be patient. Investing in Mozambique requires patience and commitment. But if you are looking to Africa with a long-term outlook, then you should look no further. From services to tourism and from professional training to distribution, Mozambique is the place to be, and the time is right now.



With thanks to Fabio Scala, and to the African Business Magazine who have supplied this article. For more content like this, please visit https://africanbusinessmagazine.com/