Interview with Celso Lourenço da Cunha, Director-General, Agencia de Desenvolvimento do Vale do Zambeze (ADZ) Mozambique

31 Jul Interview with Celso Lourenço da Cunha, Director-General, Agencia de Desenvolvimento do Vale do Zambeze (ADZ) Mozambique

The ADZ has the mandate to coordinate economic and social development in the Mozambican portion of the Zambezi River Basin, one of the most strategic resource corridors in the country. As Director-General, what is your strategic vision for ADZ and what immediate priorities are shaping your agenda in the Zambezi Valley?

The Agencia de Desenvolvimento do Vale do Zambeze (ADZ) was created by the Government of Mozambique to ensure the sustainable development of the central region, with the focus on the hydrographic basin of the Zambezi River. Therefore, we cover about 40 districts; across the provinces of Tete, Manica, Sofala, Zambézia, the center of the country. The territorial coverage is the largest of the three regions, because Mozambique is divided between north, center and south and the central region has 225,000 square kilometers of surface area.

Therefore, we have various resources. The hydrographic basin of the Zambezi Valley is one of the largest on the continent. We have special economic zones. The main mission of the ADZ is that, from resources coming from fossil exploitation, we develop sustainable development projects. That is to say, the generations that will come in the future must benefit from the coal that is being exploited today and must benefit from the gold that is being exploited today. This is our main mission.

From the point of view of areas of intervention, or what are the specific objectives of the Agency, we support or carry out studies and strategic analysis at the regional level. We provide technical or financial assistance to private sector development initiatives and we support local governments in matters of planning and territorial land management. As a strategy for this mandate of ours and for the development of the region in the different sectors, it is true that the first pillar, which has to do with the agriculture sector, is where we spend more resources, because without food there is no humanity. The base of development of our country is agriculture; this continues to be the main sector. We intend to stimulate the economy in relation to the development of the blue economy in areas like sea fishing as well as inland waters.

We also intend to stimulate the extractive industry, but in a sustainable way, because the exploitation that exists today is a wild exploitation where there is no respect for the environment and this affects the entire ecosystem. If we pollute the rivers, it means that we will have problems in the development of agriculture and in the development of fish farming. We intend to organize the extractive industry sector, stimulate it, do it in a sustainable way and embrace the use of tourism potential. We have several national parks and we have coastal tourism and inland tourism. We want to take advantage of these potentials in order to carry them as our banner across the different sectors.

The Zambezi Valley Strategic Economic Zone includes important hydroelectric assets such as Cahora Bassa, significant coal reserves in Tete province and high agricultural potential along the river basin. What are the main competitive advantages of the Valley as a regional economic corridor?

The central region has an enormous competitive advantage since we have one of the largest hydrographic basins which allows the dynamization of the agricultural and energy sector because one of the largest energy production plants is also in our country — the Cahora Bassa Hydroelectric, with an installed capacity of around 2,000 megawatts. But not only that, we are also studying, preparing a project called Mphanda Nkuwa, which will also have a production capacity of around 1,500 megawatts. Therefore, this will greatly impact what the region is as an energy hub, which is what our President of the Republic has always been saying.

From the point of view of agriculture, we have climatic conditions and fertile soils for agricultural production, for forestry exploitation. This is one of the aspects that we want to take forward, but forestry exploitation in a sustainable way, not wild exploitation. We intend to make a positive impact in certain agricultural commodities such as rice, maize, beans, sesame and various horticultural crops.

Regarding the question of transport and logistics, the country has three logistical corridors and we, in the central zone, have the Beira logistical corridor, which connects the continent to the hinterland. We share borders with three countries: Zimbabwe, Zambia and Malawi and these three countries at least depend on the Port of Beira.

In what ways is ADZ supporting agricultural modernization and the development of agro-industrial value chains?

We are developing productive clusters with several products along the same value chain. These productive and competitive clusters, in an integrated way, are mechanizing the agriculture sector, therefore replacing production with short-handled hoes with some motor-cultivators. We are carrying out the process of technology transfer. We are carrying out the process of intensive production of commodities that I mentioned. Therefore, this is allowing us to modernize the agriculture sector. We have had support from several partners, from the World Bank, the Kingdom of the Netherlands and Germany, which essentially works on three pillars. One is the construction of infrastructure to support the private sector, which are these productive clusters, the installation and construction of warehouses, the construction of markets with processing units. It is not just building a market that will allow the commercialization of products, it is building markets with processing units, for example some capacity for cold storage, some capacity for the preservation of vegetables. We are also doing what we call strengthening of skills and competencies and providing training to these small, emerging producers in new production technologies.

Likewise we are also doing financing. The financing is through two avenues. We have one avenue which is financing through credit, but with very subsidized interest rates and we have the other financing line through grants. From this grant line, companies must co-participate with at least 30%. This is what allows the modernization of agriculture, but also in relation to agro-industrialization, which will complement the value chain through processing. In relation to packaging, we are now promoting what we call the “Valley to the Table” seal, which is a product certification program.

Digitalization is cited as an opportunity for farmers to cut costs, to make everything more transparent and faster. For your agency, how can greater digital use help farmers?

In the field of digitalization we have the Special Territorial Planning Plan. It is a plan that has the force of law because it was approved by the Assembly of the Republic. This Special Territorial Planning Plan, with the support of the Kingdom of the Netherlands allows us to digitalize this payouts, meaning it is possible for you to arrive in Mozambique and say I want to produce rice and we enter the system and we can give you the indication of which is the georeferencing that is ideal for the production of rice. We can do the same thing with extractives too.

In the agriculture sector specifically, we are developing the Integrated Market Information System which will allow for the alignment first between demand and supply, that is between the producer and the buyer. Second, it will allow the connection between the Ministry of Agriculture sector and the Industry and Commerce sector which used to have separate systems that didn’t talk to each other.

What role do hydroelectric energy, solar and other renewable sources play in the development strategy of ADZ?

Energy is extremely crucial as it impacts all other sectors. When we talk about agro processing, what feeds the processing units is energy. What feeds the preservation units is energy. Therefore, energy for us is extremely crucial. Because we know that the conventional electrical grid does not reach the entire region of Mozambique, especially in rural areas, we are implementing integrated water and energy systems.

At this moment we have six systems implemented and we foresee implementing eight more with our program over the next four years in order to install more resources for a small photovoltaic plant that will produce between 125 and 200 megawatts with a partner, which is Hidropower, to stimulate these rural areas.

When we develop detailed plans within the framework of territorial planning, in addition to the delimitations and the opening of streets, we also place these integrated water and energy supply systems as a way of attracting communities to those areas. It reduces the risk of human losses and reduces the risk of production losses through floods or flooding, because the detailed plans create a sanitation system. These integrated systems allow these populations to be attracted to these zones and after six months we begin to see the establishment of small economic activities, workshops, metalwork shops, bakeries. We begin to see the trade of fresh and frozen products.

This also impacts the agriculture sector because this water supply system provides water for consumption and irrigation of the machambas and the farms. For us it is one of the main programs that we are developing.

What types of projects in the Zambezi Valley are currently most attractive to international investors and especially Japanese investors?

We have not yet received notifications from Japanese investors, but this is also because our visit to Expo Japan is scheduled for this year. We believe that from there we will begin to receive more financing, more financiers and Japanese investors.

In general, the projects that have attracted the most foreign direct investment are in the extractive industry, in the energy sector and in the construction of photovoltaic plants. We recently received investors interested in the Macuse corridor — the construction of the port and the railway that goes from Macuse to Chiúta — which will help to energize the different sectors along this corridor.

Regarding resource mobilization, our main partner at this moment is the World Bank. We also have the support of the German Development Bank, KFW, and the support of the Kingdom of the Netherlands. But because we are a public institution, we also have the support of the government. We receive 25% of earmarked revenues from production tax, land tax and agroforestry tax. In practice, what the government tried to design here is that, because the agency is the entity for local content development, at least 25% of everything that comes out of that region must serve to feed that same region.

With these revenues, we have developed different development programs for the agriculture sector among other programs. With external financing, we have also developed various activities, including skills and capacity strengthening, financing through grants and last-mile infrastructure.

With the World Bank, we have already had the Southern Africa Trade and Connectivity project, which first financed integrated growth poles. It allowed financing of 20 companies with $1.5 million each. Then we had the Conecta Business project, which financed about 26 companies, with $250,000 for small enterprises and $400,000 for medium enterprises. Now we have the Mais Oportunidades project, still in preparation. It will allow us, with about $17 million dollars available, to finance ten companies from $250,000-$750,000. We will see how many companies it will be possible to include. We also have the MozRural project, again with the World Bank, with about $10 million, also under review. This will finance companies in seed production and agro-dealers. In practice, it is for the production and commercialization of certified seeds with the Valid Seal. Through this program, we believe we will minimize the impact of uncertified seed commercialization.

The World Bank supported us with about €45.5 million. This is financing through credit but with subsidized interest rates of no more than 10% because the agriculture sector has very low profit margins.

From the Netherlands, we have had several programs. At this moment, we have the Manguana program, implemented in consortium with TechnoServe, which is the consortium leader, with about €30 million. This program also addresses problems of food security and acute malnutrition and focuses on three pillars: skills strengthening, training and capacity building.

There are regions in Mozambique, such as Tete province, which are highly productive but also present the highest rates of malnutrition because people do not know how to combine foods. For example, maize flour is often consumed alone, or with a roasted chicoa, our local fish, without vegetables like tomato or onion. This program supports communities in capacity building for good dietary practices. It also provides, as grants, agricultural inputs and equipment, because beyond a population that has food but does not know how to combine it, there is another population that does not have the food at all. Therefore, we support this process of improving production practices. These are the financing lines we have at the moment, which allow us to support different actors along the value chains, from small emerging producers to MSMEs.

We also support another actor that we call border line traders. These are people who are not primarily producers but carry out trade, moving products from Mozambique to the hinterland and from the hinterland to Mozambique. They mainly face problems of gender-based violence, often women and non-tariff barriers. We provide training and capacity building for these border traders, giving them knowledge of customs procedures under the Southern Africa Free Trade Agreement to minimize double taxation. We also train women on matters of gender-based violence to mitigate this problem.

At this moment, we have a pilot phase between Mozambique and Malawi at three border points: Mandimba, Milange and one in Tete province. There, we established what we call the Border Support Center, a physical facility where any border trader seeking services or support for clearing their goods goes, presents the invoice and the products they intend to trade or transit and we provide the proper support. We also have a room for women who suffer from gender-based violence to report their situation and we provide the proper referral for that process. As you can see, we address all actors in the value chain to provide support.

What is the biggest challenge you have today with ADZ?

There are several challenges. At this moment, it is really the scarcity of resources. Even though we may be talking about several million dollars, for the scale of the work we are developing, it is still very insufficient. The biggest challenge we face is resource mobilization. In the past, mobilizing resources was easier because Mozambique was on the list of the poorest countries. Today, mobilizing resources is not so easy. We have to show commitment, we have to show responsibility, we have to show accountability mechanisms, we have to show the entire process, that all compliance procedures in the use of resources are in accordance with what the donors impose. From there, other challenges arise, such as the need for more manpower. At this moment, we have about 100 employees. For the scale of the Zambezi Valley region and the projects we are developing, this workforce is still very insufficient.

Others are temporary situations, which we gradually resolve through continuous training of our staff. Some challenges come from one service provider or another, which we promptly address, either by terminating the contract or through attempts to reach an understanding regarding the challenges the provider faces in meeting the expected results. These are the day-to-day challenges, but the main challenge really is the scarcity of resources, because with more we could do much more.

Could you leave a final message for the readers of The Japan Times?

We invite all investors to come to Mozambique, because this is a very strategic country with many opportunities. We border the Indian Ocean and have three corridors to the hinterland, which means that much of the extractive industry carried out by inland countries uses our ports, particularly the Zambezi Valley region. At this moment, Mozambique, in general, has social stability. We faced some difficulties during the government transition process in December and January, but at this moment our country is stable. Our Zambezi Valley region is extremely safe, with a business-friendly environment and there is predictability in regulations, offering solid opportunities for investors with a medium- and long-term vision.

We are open, both in Mozambique in general and the Agency in particular, to public-private partnerships. As I mentioned, we are currently working with Hidropower, we are working with Wood Land and we are working with several other entities to establish public-private partnerships, including some Chinese companies. Regarding agriculture and mining, we have enormous potential for commercial agriculture. We have several irrigation systems, which means that our agriculture is irrigated. We are establishing processing industries with favorable conditions for developing specific value chains. Besides coal, we have gold, limestone, gas and several other minerals, including quartz, which is one of the main raw materials for glass production.

Regarding energy, we have the Cahora Bassa hydroelectric plant, the Mphanda Nkuwa project, the Hidropower project and integrated water and energy systems. Regarding fiscal incentives, we have several special investment regimes, especially in special economic zones and industrial free zones, some of which are under the coordination of the ADZ, which is the entity the government has mandated to promote the development of this region. Therefore, we have all the potential for any foreign investor to come here, invest their money and certainly have a return.