How would you describe the contribution of Cimentos de Moçambique (CM) to the development of Mozambique?
In 2019, CM celebrated 95 years of operations. For a good part of its close-to-100 years of history, state-owned CM was the only company in the field, meaning that CM has built the entire country from the ground up. Since opening up to private investors in 1994, the market has become increasingly competitive, but CM still holds a great market share playing the leading role within the industry. Our contribution to developing Mozambique is multifaceted: not only have we built the country's cities and infrastructure, but by investing in our plants and facilities and pushing an expansion plan that has brought us to operating five facilities along the whole geography of Mozambique, we have set the ground for Mozambique's industrialization. Our most important contribution, however, is the development of local content and the confidence we have instilled in our employees. We have helped them to grow and mature. Finally, a somewhat surprising contribution that we are having as a cement industry player is on the front of sustainability. In 2015, we started co-processing crude oil residuals from Petromoc in our kiln, and in 2017, we started doing the same with oil and solid residuals (SPL) from Mozal. Thus far, we have processed 4,000 tons of oil and 2,000 tons of SPL. In 2019, we implemented a program that was pioneered in South Africa, whereby we are receiving unusable tires and processing them. As of May 2020, we have processed 971 tons of pneumatics.
How optimistic are you about Mozambique's economic recovery?
Unfortunately, Mozambique is often dominated by a negative narrative of being “the country where the future never arrives." Too many times we have been waiting for developments and booms that never materialized. We began 2020 with huge hopes, with the development of the LNG projects on the horizon and the metical showing no sign of devaluation. Therefore, we had stretched our targets for 2020, expecting a much better year than 2019. COVID-19 took all of us by surprise, and we are once again waiting for a brighter future. However, I am not negative about Mozambique's future. What is special about Mozambique is its low-cost of economy. In a USD15-billion economy, we do not need a great input of investments to put the economy back in motion. Given the kind of investments in the pipeline, it's truly possible that Mozambique can recover faster than other economies.
How can CM and the cement industry capitalize on Mozambique's bright future?
The LNG industry will be the driving engine for growth across all sectors. Construction of large-scale infrastructure will be, by nature, the pillar of economic growth. On one side, large infrastructure is required by gas projects, and on the other, large infrastructure will be the preferred form of re-investing gas revenues because it is the most effective solution to unemployment as it rapidly inserts thousands of people into the formal economy. The LNG industry is by nature high-tech, so Mozambique's local content cannot be involved in every step; however, the government has tried to maximize the utilization of local content where possible. Cement production is definitely one of these areas. There is no need to import cement, unless where expressly required by technical criteria. As a leading player in the local cement industry, we want to ensure that at least 85-90% of the cement consumption for these projects comes from local producers. This will allow us to create jobs, keep the money flowing internally, and push the government's plan for industrialization. It is time for us to increase the level of internal production and give value to local products in order to ensure a better future for the coming generations. We have to create this virtuous cycle where the money generated in Mozambique will be reinvested here in benefit of the Mozambicans.
One of the challenges in your industry is high transportation costs, which ultimately result in higher prices for the end consumer. What can be the solution to this?
There are a variety of solutions, and Mozambique should be exploring all of them and find the best for the short, mid and long-term view, as they will all benefit the country. So far, there is only one national road that connects the north to the south. The country should heavily invest in its road network. Despite the initial high costs, I see a lot of interest from companies and partners to venture in this direction because it will create employment, reduce transportation costs, and boost traffic and commerce. Mozambique should also think of creating a long-distance railway system to transport goods. Finally, in the immediate term, maritime transportation is the most efficient and cheapest way to connect the coastline and allow goods to move within and to/from the country. The country's ports have a huge potential to serve as regional logistic hubs, contending the primacy of South African ports. We are working with the government to see if we can help connect the dots and create the right conditions for these developments.
What are your main objectives for 2020?
Our main objective currently is to resist the immediate impact of COVID-19 and protect our workers. Financially, the impact of COVID-19 is undeniable. We are currently looking at a 15% sales reduction for 1Q2020, but we have positive expectations for some sort of recovery in 2Q2020. Reaching our sales target will be the key in 2020. We are keeping our strength in the cashflow, working with the existing capital to resist the crisis and making sure the company is in a healthy state once we step out of the pandemic, to capture upcoming opportunities.