The opportunities for South African companies in Mozambique lay in servicing the burgeoning infrastructure, mining, agro-processing and port development industries, Rand Merchant Bank business development director Tshepidi Moremong said on Thursday.

Neighbouring Mozambique relies on western aid for some of its budget, but economic growth has surged since 2001 and gross domestic product is expected to rise 6.5% this year.

With profit margins shrinking in South Africa, local companies are increasingly looking for better growth prospects in other countries. But the focus has been on investing in developed countries rather than in markets on the same continent.

Mosidi Modise, co-head of Frontier Advisory’s executive education and thought leadership division, said foreign investment of billions of dollars into coal, gas and infrastructure was driving growth in Mozambique.

There were opportunities for South Africa companies in support services such as construction, engineering, retail and banking.

Maputo Corridor Logistics Initiative CEO Barbara Mommen said there had been no let-up in the growth of trade along the corridor between Gauteng and Maputo, not even during the last recessions.

Mozambique was more politically stable than South Africa from an investor’s point of view, Ms Mommen said. The people were “peaceful”, but they were poor and lacked basic services such as water and electricity.

The recent mayhem in South Africa’s mining sector was a reminder that the country still had a long way to go in promoting “a sense of stability for investors”.

In her experience of South African companies that went into Mozambique, those that did not develop their staff and invest in them would eventually fail.

“In return (for investing in staff) you get huge loyalty and passion for work,” Ms Mommen said.

“My experience has been that South Africans have been terribly arrogant when they go into other African countries. South Africans are sometimes viewed with suspicion in some countries. You need to take the time to understand the business culture in other countries.”

Ms Moremong said there were challenges to investing in Mozambique, the biggest one being the lack of infrastructure such as good roads.

There were issues relating to power supply and “elevated costs” of doing business, including the cost of finance because Mozambican banks were relatively undercapitalised, she said.

Further, many of tax concessions for foreign investors might come to an end because donors were finding it increasingly difficult to provide aid when their own countries’ economies were in trouble.

Source: Business Day