By Radithebe Rammutle
More than 100 years ago South African farmers left the Cape on their Great Trek to the north. Today this odyssey is continuing as SA farmers seek opportunities north of Limpopo river. In July 2019 SA Forestry Online reported that Mozambique Tree Farming, a consortium of leading SA commercial timber farmers secured 50-year leases for 10 000ha of land in Sofala and Monica provinces in the central region of Mozambique, close to the port of Beira where timber export hub is being developed.
Two separate events in different countries collided to generate interest amongst South African farmers to invest in Mozambique.
In SA the uncertainty over the intensification of land reform prompted farmers to diversify risk by investing in Mozambique. The Mozambican government on the other hand has sought to correct the un-inclusive growth of the past three decades. Though Mozambican economic growth averaged 8% following the 1992 Rome General Peace Agreement that ended the fifteen-year Mozambican civil war, it had an insignificant impact on its citizens.
South Africa played an important role in Mozambique’s impressive growth. Through the Mozal $500 million and Sasol’s investment in natural gas extraction plant and pipeline in 1999, SA corporates pioneered the reduction of risk perception amongst investors. These companies were buoyant over the steps that the Mozambican government took to rebuild its economy devastated by the civil war.
The 1987 International Monetary Fund’s (IMF) Structural Adjustment Programme SAP was the first of development plans the Mozambican government adopted to transition Mozambique to a market economy. This externally driven programme focused on the privatisation of state assets, trade liberalisation and price control relaxations, and the maintenance of low inflation. The SAP development plan lasted for ten years during which the value of foreign direct investment (FDI) annual inflows totalled $211 million.
The inflows grew five times ($1 149 million) in the following decade after the government introduced a national Action Plan for the Reduction of Absolute Poverty (PARPA) and several other sectoral development strategies in 2000. PARPA I, II, and III ran for five-year periods in succession starting in 2000 until 2014. Despite the contribution of these inflows towards growth, the Mozambican private sector remained weak.
Agriculture is the primary source of livelihood for most Mozambicans. The country’s agricultural sector mainly contains smallholder farmers who rely on family labour to cultivate small parcels of land. Examples of food crops that dominate the market are maize, sorghum, rice, and sweet potatoes. Mozambican farmers have also ventured into the cash crop production of cotton, bananas, sugarcane, coconuts, sesame, soybeans, among other products. Goats, cattle, and poultry on the other hand are the mainstay of animal farming.
The minimum impact of the recent economic growth on ordinary citizens has sparked a discussion on the causes of this un-inclusive economic growth and how to create a more inclusive economy.Experts reckon that the Mozambican government promoted mega-project such as the construction of Mozal Aluminium Smelter and other similar projects that had limited impact on the economy. Mega-projects projects did not increase the government tax base because of the generous tax incentives that were offered to them. Thus 40% to 50% of the Mozambican budget is aid funded. Furthermore, the empowerment of small local businesses was not realised because of skilled worker shortages and tough procurement requirements multinational firms imposed.
Thus, the government has pivoted its attention to small projects particularly the capital-intensive sector such as agriculture. According to the joint Monitor Deloitte and Financial Sector Deepening report “Promoting the good performance of SMEs in agribusiness is essential to develop endogenous growth opportunities that strengthen the economic fabric of the country, decreasing dependence on foreign aid and food imports, as well as making it more resilient to exogenous shocks.”
Over the years, land rights expansion has been the primary driver of successful agricultural investment in the country. Yet acquiring land for farming in Mozambique is no mean feat. In Mozambique land is government owned. After identifying a suitable piece of land, prospective farmers go through the administrative process of securing a land lease or a Direito do Uso e Aproveitamento da Terra (DUAT) as it is known in Mozambique. A DUAT cannot be used as collateral to access financing.
Yet this hurdle was not a disincentive for six SA shareholders of Tenga Limitaba, a 250ha macadamia orchards in Niassa province located 120 km east of Lichinga and 200 km south of Tanzania. Vast lands and abundant water supply from various large rivers around the area resulted in a profitable operation.