Mozambique is not often cited as a poster boy for the African growth story. Compared to its wealthier peers in
sub-Saharan Africa it remains a relative minnow. Unlike its cousins in west Africa, it does not have vast resources of oil to tap and its mineral wealth is limited. The country still relies heavily on donor aid, which makes up almost 6% of gross domestic product (GDP) and subsistence farming continues to employ the majority of Mozambicans.
Yet despite these shortcomings, Mozambique is booming. In May, finance minister Manuel Chang announced that he expects foreign direct investment (FDI) to leap by up to 30% during the next four years. He expects investment to top $560m by 2011, up from $430m in 2007. The nation’s GDP has grown on average by almost 8% a year since 2003 and is expected to grow by 7% a year until 2010, according to International Monetary Fund estimates. A backdrop of economic and political stability
since the 17-year civil war ended in 1992 has allowed key sectors, such as agriculture, construction and tourism, to drive growth. Export earnings have also been boosted by the construction of the Mozal aluminium smelter in Maputo, the country’s largest FDI project to date.
Inflationary pressures
Inflation is also under control at about 8% but this figure will increasingly come under pressure as global food and oil prices soar. Mario Machungo, Mozambique’s former prime minister and president of the nation’s biggest bank, Millennium bim, is optimistic about the country’s progress but also realistic. “We are facing new challenges that we didn’t presume when we made up our medium-term plan. They are the rising price of oil and the rising price of cereals and other foodstuffs,” he says. “It is not a specific challenge for Mozambique – it is a worldwide challenge. We’ll accommodate the new situation and make some investments in order to reach the goals we have set ourselves.”
Mozambique champion
Millennium bim, which is majority-owned by the Portuguese BCP Group, is a commercial, retail and investment bank with a network of 78 branches throughout Mozambique.
It posted profits of more than €25m in 2006, up from €12m in 2005, and chairman Joao Figueiredo has estimated that profits for 2007 could reach €33m.
“Our growth was substantial in terms of profits, credit [provision] and in the number of clients. In every sector we have grown substantially,” says Mr Machungo. As to the future – expansion is the name of the game. “We plan to open 55 more branches through the country, especially in rural areas. I think that this opportunity is more urgent than it was before. The development of rural areas is our key priority,” he says.
Last December, the bank signed an accord with the government-backed Economic Rehabilitation Support Fund and was granted more than $1m to allow the bank to expand into regional Mozambique. “Financial institutions have to be prepared to invest in rural areas in order to push up food production,” says Mr Machungo.
The middle way
He also believes that the development of a middle class in Mozambique is the key to economic development. “We have to play a role in developing a middle class and look at how to finance medium- and micro-scale enterprises to help these people build their businesses.”
As part of its drive to capture the middle market, Millennium bim was the first bank in the country to offer telephone banking. It has also pioneered mortgage lending and has developed a range of tailored personal loans to meet specific customer needs.
The next step for Millennium bim is to build enough scale to be able to participate in the bigger mining and infrastructure projects taking place in the country. The bank might be a giant in the context of Mozambique’s limited banking sector but it remains small in relation to its pan-African competitors. Mr Machungo is aware of the challenge but also optimistic: “We need to stop looking at ourselves as simply a bank in Mozambique but to think in terms of the whole region.
“The financial system in Mozambique including the central bank and other banks is changing for the better. The role played by the central bank is very important because it is helping the commercial banks to develop their business and thus make it easier to develop the country.”
