PIETRO TOIGO

Mozambique 2020 | ECONOMY | VIP INTERVIEW

TBY talks to Pietro Toigo, Country Manager of African Development Bank, on the Doing Business Index, processed agriculture exports, and supporting infrastructure projects.

What are the biggest challenges to doing business in the country?

Mozambique lost three places in the World Bank's 2019 Index of Doing Business. While the slight fluctuation in ranking should not be taken too seriously, there are important gains to be made by rationalizing the overall regulatory framework, transferring good practices from some parts of the economy to others. The country needs a more straightforward procedure for work permits, registration of companies and building permits. Besides these problems at the micro-level, we would like to encourage the government to take a comprehensive view on legal frameworks in PPPs and infrastructure projects, in order to streamline the process for investors and crowd in private capital, at a time when the public budget will remain under pressure for some years. The government must take leadership of designing and driving a national program for infrastructure development and energy, with set criteria and standards, and use as far as possible transparent and competitive processes to select developers and implementers, moving away from an approach based mostly on unsolicited bids. These are necessary if the government wants to attract top players. There are already some examples, notably in the energy sector, where significant efficiency and cost gains have been achieved for the consumer thanks to such an approach. The local private sector needs to be more proactive in seeking opportunities, innovate more aggressively and seek transfer of knowledge and technology This is a relatively young private sector that needs to consolidate its competitiveness and be able to face the markets.

How does the AfDB articulate its mandate in Mozambique?

The AfDB focuses on five priorities at the continental level: Feed Africa, that is turning Africa into a net exporter of processed agriculture commodities; Light up Africa, achieving universal energy access; increasing industrial GDP; Integrating Africa, interconnecting African economies and standardizing regulatory frameworks; and Improving quality of life for the people of Africa, creating job and developing skills for the youth. Our focus in Mozambique is to support the government in developing a sufficiently diversified economic base to generate inclusive growth and avoid the resource course scenario, once gas production begins. One of the main pillars of our strategy is agricultural transformation: we want to link agriculture and agro-business to the global markets, strengthen the value chains. While talking about agriculture, also gas has a direct input into agriculture through fertilizer, if the right policy and investment environment is there to actually develop a downstream value chain for this type of gas. A key concern for the transformation of agriculture is climate resilience – an issue that was made all but obvious by Cyclone Idai and major floods that occurred in the last months. These include investments in water harvesting and technologies for basin and reservoir water collection and the distribution of solar-powered irrigation kits. Most of these projects are directed to small-scale farmers and farmers' associations. Looking forward, we want to move one notch up the value chain to have fully-fledged agro-industrial parks. To support agricultural transformation, our second pillar of investment focuses on enabling infrastructures, notably transport, to connect producers to markets, and energy, to support processing.

Can you explore in detail one of the projects you support?

We invested USD300 million of our own resources in the USD5 billion in Nacala Corridor Railway, which connects the Moatize Mines to Nacala Port through Malawi. The railway enables the transportation of coking coal, used for steel production, from the mines to the port for export. Crucially, while the capacity of the railway is 18 million tons of coal per year, it also has a 6 million tons per year of general cargo capacity. This is a private sector investment, done entirely on a banking basis without any government money or public guarantee; revenues from the coal mine will finance the railway, a public service. The idea is to fundamentally create a logistics corridor to ship commodities out of Malawi, Zambia, and Mozambique; there is a lot of potential for resource interconnection between these countries. Zambia, for example, is increasingly importing fuel through this corridor, at a lower cost than before the project was completed. We have extractive resources that we are monetizing through taxation and exports. However, we need to build on these experiences to make sure to create direct linkages between the domestic economy and the natural resource projects.