Risks and opportunities for agribusiness in Mozambique
There are many opportunities for foreign agri-entrepreneurs in Mozambique, as stated by the Dutch government and Wageningen University & Research Centre. Journalist Andrea Dijkstra visited foreign farmers and entrepreneurs in the field. “Mozambique is not for the faint-hearted.”
Foreign investors are lining up for Mozambique’s enormous coal reserves and recently discovered offshore gas fields possibly turning the country into the fourth largest gas producer in the world. “But the country also has enormous agricultural potential”, Jan Huesken from the Dutch embassy in Mozambique states. The former Portuguese colony has become one of the 25 most rapidly growing economies in the world; it has 36 million hectares of fertile land of which only 8 million is currently being cultivated and water for irrigation is available thanks to its numerous rivers.
NO LONGER WANTING TO KILL A CHICKEN AFTER WORK
“We too benefit from the economic growth,” says Wilfred van der Kooij while checking chicks that just hatched in the hatchery of Novos Horizontes. For eight years now the entrepreneur has been managing the hatchery just outside the Mozambican city of Nampula. Novos Horizones produces 70,000 broiler chickens per week, of which thirty percent is sold directly and seventy percent goes to 180 Mozambican outgrowers. After five weeks, the chickens return, are slaughtered, packaged and frozen. Through wholesalers, the company supplies to supermarkets, restaurants, hotels and even mining companies. “The growing middle class no longer wants to kill a chicken after a hard day’s work”, laughs Van der Kooij, who was born in Nigeria.
Doing business in the former Portuguese colony has plenty of challenges, Van der Kooij adds. “The language can be a problem, it’s normal to get malaria at least twice a year and we had to invest in two costly diesel generators because the supply of electricity is unreliable.” Lack of infrastructure can be cause for a headache as well. Domestic flights will easily cost around US$ 800 due to the monopoly position of the Mozambican airline LAM. “Our trucks have to be repaired almost weekly.”
OFFICIALS IMPOSING FINES TO MEET THEIR ANNUAL TARGETS
Red tape, however, is frustration number one among foreign entrepreneurs. “It took, for example, many months to clear one of our containers in the harbor”, says Van der Kooij. According to potato farmer Monty Hunter, officials regularly show up unexpectedly to impose fines of sometimes thousands of dollars for the most absurd issues, just to meet their annual targets.
Also Hunter, who has been growing potatoes in the Manica province since two years, admits that there are chances for entrepreneurs, be it reluctantly. The white Zimbabwean, however, emphasizes that the market now at 200,000 tons of potatoes per year is still small in size. “The majority of Mozambicans are simply too poor to afford potatoes, there is no processing industry yet and the quantities that mining and gas companies are buying, will continue to be negligible,” he predicts. “The only thing worth hoping for is an emerging middle class.”
Competing with South Africa is another challenge, as production costs in Mozambique are still very high because seeds, fertilizers, pesticides and all equipment still needs to be imported having a negative impact on the yield per hectare.
MANY LOANS REQUIRE 120 PERCENT COLLATERAL
Financing a business is another issue, says Kevin Gifford, a Zimbabwean farmer also based in Manica who grows tobacco and corn, among other crops. “Without financial support of the Mozambican Tobacco Federation I wouldn´t have been able to build this farm”, he states while adding that most loans in Mozambique require a 120 percent collateral. He now receives funding from the Catalytic Fund of the Beira Agricultural Growth Corridor (BAGC) to set up a seed company. Also Banco Terra (a sister bank of the Dutch Rabobank) provides loans in the agricultural sector in Mozambique.
Future investors are probably better of working with entrepreneurs who are already established in Mozambique, states Gifford. “This would provide more security and building something from scratch is really very difficult in Mozambique.”
MANY RIVERS BUT HARDLY ANY DAMS
Farmers with a keen eye on Mozambique should also keep in mind, according to Gifford, that the many rivers hardly have any dams yet. “You have to pump a lot for irrigation and as many places don´t have electricity, you will have to spend a lot of money on expensive diesel to put in your generator”, the Zimbabwean says. Several rivers in Manica are said to be contaminated with mercury due to illegal gold mining. “Because of this, a Zimbabwean banana farmer forty kilometers from here had to move his entire irrigation system”, Gifford sighs and than laughs. “One thing is certain: Mozambique is not for the faint-hearted.
This article has earlier been published at the BlueBiz Club Africa website of KLM/AirFrance.