French confidence still high in Mozambique

“We’re starting to see a few positive signs,” French ambassador to Mozambique Bruno Clerc noted at a cocktail dinner held yesterday at the Résidence de France and organized by the European Business Club (EBC) in Maputo. The diplomat said that he felt somewhat “reassured” by recent measures taken by the Mozambican authorities to curb the current economic and financial crisis that has been stifling the country for almost two years.Mozambique’s economic growth slowed to 3.3 percent in 2016 (a 15-year low) after growing more than 6.5 percent the previous year. Its currency, the metical, has lost more than 140 percent of its value against the dollar since October 2014. The government said last month that it would unable to honor its commitments to repay bondholders following a scandal over undisclosed debts of more than US$2 billion not approved by parliament.

Last December, the central bank of Mozambique decided to increase its main benchmark interest rates by 150 basis points to 9.75 percent, in order to offer the metical some support. It also introduced a new interest rate for the interbank money market, with effect from 15 April, called the monetary policy rate. “It is still too early to appreciate the impact that those measures will have on the Mozambican economy in 2017”, Clerc said in an exclusive interview for Club of Mozambique. “However we are confident that 2018 will show some tangible signs of recovery.”In its most recent forecasts, the Economist Intelligence Unit (EIU) expects significant private investments in the construction and services sectors from 2018 on, while mega gas projects in the northern part of the country are expected to start next year. Economists anticipate that Mozambique will grow at an average rate of 5.1 percent between 2018 and 2021, a number still below the 7.5 percent recorded between 2005 and 2015.

After having maintained its SD (Selective Default) rating on Mozambique’s currency, S&P Global Ratings explains that the development of large coal and natural gas fields will be key for medium-term economic growth. “Much of the rail track to new coal deposits has been laid (previously a key constraint to exports), which should support higher coal production over 2017-2020, provided international prices do not fall steeply,” the rating agency wrote in a report published two weeks ago.However, French interests in Mozambique go beyond the mere commodity sector. Testing, inspection and certification specialist Bureau Veritas has a strong presence in Mozambique – in seven locations, according to the Mining Review, while Seagram’s gin, Havana Club rum and Chivas Regal Scotch producer Pernod Ricard established itself here in 2015, the same year the multinational banking and financial services company Société Générale opened an office in Maputo.France-Mozambique Business Club’s (FBC) General Manager Audrey Gortana Vallet notes that about a hundred French companies and subsidiaries are currently operating in Mozambique, employing a significant number of employees. “Around 10,000”, Vallet says. “These companies operate in the transport, logistics, energy, construction, services, electrical equipment and primary sectors,” the FBC chairwoman adds.

The FBC was founded in 2015 and offers various services to French companies already established in Mozambique as well as to those eager to expand into this southern African market. It was recently appointed to the rotating presidency of the EBC for 2017, and Vallet will now succeed Club of Mozambique’s president and Swiss investor Adrian Frey as chairman of the EBC.There is still plenty of room left for French companies, as the French presence in Mozambique remains very low compared, for example, to the Portuguese’s. “There are only 743 French citizens living in Mozambique,” confirms Yanis Bouchard Pereira, Economic Cooperation Officer at the Club Export Reunion and member of the French-Mozambique Club, who also attended the cocktail dinner.

Asked what the main benefits that French businesses could offer Mozambique were, Clerc stressed technological transfer. “Offering professional and technical training for local employees, thus promoting the emergence of new skills, is at the core of French investment philosophy,” he says.While this may translate into higher prices for the services and goods provided by those companies such an approach is far more beneficial for the country in the long term. A training program in the field of labor inspection in the mining sector, which will provide increased safety for Mozambican workers, is currently taking place with French assistance.Launched in 2015, the EBC is a joint initiative of the European business chambers to promote business and investments in Mozambique. Its members consist of business clubs and economic and trade offices from various embassies, including Switzerland, Italy, Germany, Netherlands, Finland, Spain, Portugal and United Kingdom.

Representing about 600 European companies, the EBC aims to extend the local business network, not only with the objective of helping those intent on establishing their own businesses, but also with that of partnering with existing local operators. The mutual interactions of its members form a communication platform through which they can develop collective responses to various challenges.

The platform is also the main communication medium between EBC representatives and the Mozambican government. The FBC’s new chairman will address the task of organizing all the EBC held during her mandate. “While it is true that members may be competitors, the EBC allows them to join forces on common projects, where each is complementary to the other,” the French ambassador explains. “As such, the club creates a win-win situation for all participants.”The cocktail dinner was sponsored by international audit and consulting group Mazars, the global logistical leader DHL, Société Générale and Pernod Ricard among others. All participants at the evening contributed to a fundraising program in support of two charity projects: the ‘Wamina Girl” project, which helps young Mozambican girls in the management of their menstrual cycle, and non-governmental organization ASAS’s Alulamile Orphanage project, which finances the construction of bathrooms and toilets.