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Mozambique looks up: Lonrho dominates in outside investment

WALKING along the wide Portuguese-style avenues of the seafront capital of Maputo, sipping a cold Laurentina beer in a street cafe, or munching on grilled prawns in an outdoor restaurant, it is hard to imagine that Mozambique is the world's poorest country.

But with a per capita income of dollars 70 to dollars 80 per year, 60 per cent illiteracy, an infant mortality rate of 325-to-375 per thousand and a total economic output worth dollars 1.2bn, Mozambique has a tight grip on the bottom rung of the global economic ladder.

'The regrettable fact is that the country is producing almost nothing,' said John Hewlett, chief executive of the Lonrho subsidiary that is the country's biggest foreign company.

Yet there is hope of economic growth in the aftermath of the country's first democratic elections last week and the stability they promise. The economy grew by 5.6 per cent in 1993, the first full year of peace. Similar growth is expected this year. Inflation, officially above 40 per cent, remains high but the slide of the national currency, the metical, against the pound and the dollar has slowed.

Much of the future will depend on the attitude of foreign investors, since with foreign exchange earnings of some dollars 150m per year and a foreign debt at nearly dollars 6bn, Mozambique has little domestic capital for investment. The Mozambique Liberation Front (Frelimo) government abandoned its socialist policies in 1987 and embraced a structural adjustment programme drawn up with help from the International Monetary Fund and the World Bank. International aid since then has totalled nearly dollars 6bn.

So far, though, foreign investors have shown little interest, despite Mozambique's rich deposits of minerals, vast fertile farmland and tourist potential. Last year foreign investment was estimated at a mere dollars 25m.

'Investors are not exactly in a queue. And if they were they would wait until after the elections,' Mr Hewlett said.

Lonrho has been the pioneering foreign investor, with interests in tomato and cotton farming, the Cardoso Hotel in Maputo, gold mining, an oil pipeline and a dollars 4.8m joint project with Royal Ordnance and Mechem, the South African arms company, to clear landmines from the countryside.

Lonrho accounts for the bulk of dollars 101m in British investment in Mozambique, which accounts for nearly half of all foreign investment.

Part of the problem in attracting outside investors is that while the government says it is keen, businessmen report that bureaucracy is still plodding. Joe Sandercock, BP's director-general in Mozambique, points to another problem. 'Middle management simply does not exist. There are virtually no skilled workers,' he said. 'For any company that wants to come to Mozambique, investment in training is crucial.'

On paper, Mozambique's natural resources look impressive. Coal deposits of six billion tonnes in Tete province, 40 billion cubic metres of natural gas under Inhambane, a million hectares of forest with eucalyptus, pine and rare hardwoods, pegamite deposits in Zambezia province that can be mined for beryl, mica, bismuth, and semi- precious stones, and what is believed to be the world's largest reserve of tantalite.

Mozambican officials hope the country's largely unspoiled beaches could attract 300,000 tourists a year, bringing in dollars 80m. More than dollars 100m worth of tourist projects have been approved by the Center for Investment Promotion.

In the shorter term, now that the Renamo rebels have shifted their war from the bush to the ballot box, the economy might get a boost from its main ports, Maputo in the south, Beira in the centre and Nacala in the north - east Africa's best natural deep harbour.

'The real asset Mozambique has is to service the hinterland, but there needs to be a change of business culture for that to become truly efficient,' says Mr Hewlett. Right now the ports are running at a fraction of potential capacity, so companies in Zimbabwe, Malawi and Zambia prefer to use more efficient ports, such as Durban's in South Africa.

Nevertheless, businessmen who know Mozambique, such as Mr Hewlett, see potential. 'If Mozambicans would open themselves to a free flow of people and funds, and lift all controls on investment policy, they could create a minor Brazil in Africa,' he said.

(Photograph omitted)