The dearth of options available to global investors in government debt may end up working in South Africa’s favour as Moody’s continues to delay action on the country’s last remaining investment-grade rating.
Agriculture, Hopes for a green gold rush
As the government pushes for food self-sufficiency,
with substantial exports to follow, investors are taking a close look
at emerging opportunities
Sparsely populated with an abundance of rivers, fertile soils, space and sunshine, Mozambique is attracting international attention. The forests groan with tropical hardwoods, the seas team with shrimp and fish of all stripes, the semi-arid areas in Gaza Province remain perfect both for large herds and for biofuels like jatropha that thrive on marginal land.
South African farmers, keen to take advantage of low EU tariffs on imports from Mozambique, have set up sugar plantations. The US company Chiquita Banana has signed a deal with local ?company Matanuska Africa.
Yet if Mozambique is a growers’ paradise, and the yawning maw of hungry Asia is opening up on the other side of the Indian Ocean, the questions must then be why is there not much more being exported, and why there were food riots in Maputo in early 2008? The answer is a familiar one in the world of African agriculture: a lack of infrastructure to get produce to market and a lack of know-how beyond subsistence farming among the general population.
The fertile growing zones of the north are reachable from the ports only by long, difficult roads with unbridged rivers. For agriculture minister Soares Nhaca, the frustration is that the higher parts of the value chain cannot be reached yet, because, he says: “The electricity needed to process, for example, the thousands of mangoes that are just falling off the trees has not found its way to the fruit areas, which are difficult to access.” ?
As three-quarters of the population work on small farms, and most of those doing the work are women, the administration sees ways to use farming to overcome nationwide poverty. The aim is to spend 6% of the national budget on agriculture, up from 3%, a target of around $240m. A three-year national food plan aims to reach self-sufficiency in maize this year (recent rains have been good and widespread) and an export surplus in 2010. Nearly 1,000 extension workers, equipped with motorbikes to reach remote areas to deliver seeds and fertiliser, will be deployed to reach half a million smallholder farms. A new bridge across the Zambezi river will help open up the markets of the south to the farmers of the north. The agriculture ministry is buying tractors and oxen plough teams. Over 4,000 tonnes of different seed stock are on order, on top of 1,250 tonnes of wheat seed. A project is being mulled over to import fertilisers in bulk to the port at Beira, which would then be repackaged and sold throughout the subregion.
Mozambique is still importing a large amount of food, so there is scope for meeting demand locally, especially in horticulture, cereals, and meat and dairy products, as well as developing the obvious opportunities in the export market.
The potential for agribusiness is being slowly converted into real projects. The Beira corridor has a range of suitable microclimates for high-value fruit and vegetables like bananas, chillies, mangoes, peppers, papaya and pineapples. There are over 20,000 well-irrigated hectares in Chokwe, accessible to the South African hub of Gauteng.
Because all land is owned by the state, there is only the possibility of leasing, for a 50-year renewable period. “This is why we do not have the problem of landless poor in Mozambique,” asserts Nhaca. Though free-market purists may pout, the leases are relatively cheap. Procana is building a 30,000ha integrated sugarcane-to-ethanol plant in Gaza Province, and Prince Energy has a similar scheme in Manica Province (though plenty of jobs are on offer, there is conflict over a resettlement plan on the same area as the Procana site).
Clearly there are serious infrastructure deficits, and commercial banks are still lending at high rates to small and medium-sized farmers, but as and when these constraints ease, expect a green gold rush.