The South African Institute of International Affairs (SAIIA) has just published findings on South African companies that operate in Mozambique . Dinga Sikwebu reviews the document and looks at its findings.
Mozambique has emerged as a major destination of South African investment abroad. This is according to a recently-produced South African Institute of International Affairs (SAIIA) paper entitled “˜ Every Continent Needs an America’: The Experience of South African Firms Doing Business in Mozambique .
The paper which is part of the institute’s series on business environments in Africa reveals the following;
South Africa is the largest investor in Mozambique . South African investments amounted to 49% of the value of total foreign direct investment (FDI) that went to Mozambique between 1 January 1997 and 30 June 2002
In 2001, 18% of South Africa ‘s foreign assets were in Mozambique .
South Africa is Mozambique ‘s largest foreign supplier and provided 30,3% of the country’s total imports.
72 000 Mozambicans legally work in South Africa . Wage remittances from South Africa are an important source of income for Mozambican families.
” Mozambique is the biggest recipient of South African investments since 1994 within SADC”, states the report. Sasol’s development of the Pande/Temana gas fields and the construction of the Mozal aluminium smelter have been the biggest investments from South Africa .
Although mining and industrial sectors are dominant in value terms, South African investments have gone to all sectors of Mozambique ‘s economic sectors. “South African investors control three out of four sugar estates, three out of four breweries, all the soft drinks bottling plants, large cereal mills and most tourism facilities in Mozambique “.
According to the report, South African investors are flocking to Mozambique as part of their strategy to remain competitive, to penetrate potential markets and to exploit an abundance of factors of production such as natural resources and low cost of labour. Proving to be titillation for South African companies is the range of incentives that Mozambique offers. These incentives range from concessions for resource exploration, exemption from custom duties and reduced taxation to foreign investors. Since 1994, Mozambique has had in its statute book a law for the establishment of Industrial Free Zones (IFZs). Companies in IFZs enjoy full exemptions from consumption and circulation taxes, custom handling fees and duties. They also pay no taxes on exports and profits.
But it is not only South African investments that have flooded the country. Trade between the two countries is booming. In 10 years, total trade between South Africa and Mozambique has increased astronomically. In 1992 trade between the two countries amounted to a paltry R946.2 million. This rose to R6, 823 billion in 2002. The lion’s share of this increase comes the South African way. The South African share of total trade in 2002 was 93%.
SAIIA’s report finds the impact of South African investments mixed. On the positive side the report refers to increased industrialisation of one of Africa ‘s poorest countries. It also points to technology transfers, price stability, increased consumer choice and the certainty that the investments have brought in the regulatory environment.
But the report also cites some negative impacts. It refers to limited linkages that South African operations have with domestic sectors. Another concern is the capital intensity of South African FDI. According to the SAIIA study, South African companies in Mozambique have created 24 355 jobs. This makes the cost of creating one single job R240 000.
Also of concern are distortions of the Mozambican economy that South African investments are entrenching. Investments such as the Sasol and Mozal ones, accentuate fragmentation in the labour market. The lowest monthly wage paid at Mozal is R2 496 when the statutory monthly minima are R325 and R228 for industry and agriculture respectively. There is also entrenchment of the divide between the poor north and affluent southern regions and also between urban and rural areas.
Trade between SA and Mozambique is booming but not every Mozambican is benefiting Henner Frankenfeld / PictureNET Africa
South African investments in five Southern African countries in 2002
Country
R-Million
Mozambique
1,819
Zimbabwe
47
Angola
42
Tanzania
20
DRC
4
Top five countries that invest in Mozambique
(Jan 1997 – June 2002)
Country
Value
(US$ million)
Percentage
South Africa
1, 164.3
49%
Great Britain
717.8
30%
Portugal
253.4
11%
Japan
130.3
6%
Ireland
103.0
4%