INDUSTRY lures U.S. INVESTORS

THE FUTURE of Mozambique's economy? The country's Minister of Industry and Trade, Carlos Morgado, has no doubts: "It's going to be a success story." "We have implemented the reforms, they are working, and we are committed to them," he explains. The statistics back him up. Industrial production almost doubled in little over four years between 1995 and 1999, with an increase of 91.4%, impressive figures by anyone's standards.

The government's goals, according to Mr. Morgado, are to "add value to our production, add value to our raw materials, and create job opportunities." This entails "attracting and assisting" the foreign investors needed to maintain the current rate of expansion. In this endeavor Mozambique has an important factor in its favor: a preferential trade agreement with the United States, which guarantees four years of duty-free access to U.S. markets and which Mr. Morgado hopes to see extended after that period is up. Meanwhile, he says, "we will promote further investment from the U.S. to capitalize on the implementation of the bill." He adds that Mozambique "must bolster the creation of smart partnerships in order to gain access to this massive market."

The other side of the coin is that manufacturers setting up shop in Mozambique will also have access to the entire Southern African Development Community (SADC), a market of 220 million consumers in 14 countries. Mozambique expects to be in a position to begin implementing the SADC accords in the first quarter of 2001. As Mr. Morgado points out: "A larger market will be far more appealing to the investor. An American may not come for the Mozambican market alone, but a 220-million-strong market will lure him."

Under the terms of the SADC trade protocols, the regional giant, South Africa, which accounts for 75% of the organization's GDP, will open its markets to its partners at a faster pace than they will have to open theirs. This means that the present trade imbalance between South Africa and Mozambique will shrink and that products from Mozambique will soon gain privileged access to the South African market. Meanwhile, Mozambique is banking on a few 'megaprojects' to demonstrate the country's potential and pave the way for further investment.

Foremost among these is the US$1.3 billion Mozal aluminum smelter, a project brought in six months ahead of schedule, saving around US$130 million for its investors. By early next year, it should be running at full capacity, producing 250,000 tons of aluminum per year, using 500,000 tons of alumina imported from Australia and 100,000 tons of coke from the U.S. Mozal is a joint venture whose partners are the Alusaf subsidiary of the U.K.-based Billington (47%), South Africa's Industrial Development Corporation (25%), Japan's Mitsubishi (24%) and the Mozambican government (4%).

The project was sited in Mozambique for sound business reasons, according to Mozal's chairman, Robert Barbour. "We built the smelter to make aluminum and to make a return, we are not champions of development in southern Africa, that's not our business," he says. Among the benefits of the plant's location, near Maputo, are suitable port facilities and access to the South African electrical grid through an agreement with the power utility Escom.

In addition, says Mr. Barbour, "when we started talking with the Mozambican government, we found a very willing partner which had a strategy to revitalize the economy, and part of that was at least one megaproject," he comments. The government had also created a duty-free zone which has turned out to be very successful.