Enhancing BE Stakeholder Engagement in Mozambique

The main objective of the assignments was to establish the potential for BERF’s Innovative Stakeholder Engagement workstream to provide support to:

  • ANJE (Associação Nacional de Jovens Empresários), a business membership organisation (BMO) for young entrepreneurs based in Maputo, and also for
  • ACIS (Associação de Comércio, Indústria e Serviços), a major BMO with a Head Office based in Beira and a management office in Maputo.

The objective is to promote business environment reform through strengthened engagement between BMOs and their members. ANJE and ACIS could more effectively and convincingly represent private sector views on the business environment to government and advocate for reform through effective public private dialogue (PPD).

ANJE (Associação Nacional de Jovens Empresários) Mozambique

ANJE is run by a small group of enthusiastic and energetic young volunteers. The organisation has had some considerable successes: it has built a recognisable brand, attracted sponsorship and significant interest, evidenced by its more than 9,000 followers on Facebook and approximately 500 registered members. It has also successfully integrated modern communication tools into its day-to-day engagement with members, including the free newsletter tool MailChimp, social media, and WhatsApp groups.

However, while ANJE has evidently created a platform on which young entrepreneurs are eager to engage, it has struggled to keep up with its fast growth and the growing needs of its membership. BERF analysis highlighted the following issues:

  • ANJE is run by volunteers with other business interests and limited capacity.
  • Roles and responsibilities in the ANJE team are not clearly defined. For example, all ANJE management team members have access to the organisation’s main email inbox, with no one person assigned to responding to ANJE member enquiries.
  • ANJE has struggled to maintain an accurate database of its members.
  • Feedback from ANJE members indicates a dissatisfaction with the frequency and quality of communication, with some queries and membership registration requests going unanswered.

BERF supported ANJE to draw up a Communications Strategy  which includes the messages, tools and activities that should form the basis of its day-to-day communications function. In light of ANJE’s existing use of a variety of communications tools, its eager to engage membership and the internal operational issues it faces, BERF concluded that ANJE would be well placed to receive further support from BERF. BERF proposes to implement an IT solution that would facilitate strengthened communication with its membership and build on ANJE’s existing good practices.

ACIS (Associação de Comércio, Indústria e Serviços) Mozambique

ACIS is regarded as one of the premier BMOs in Mozambique with an excellent reputation for effective advocacy with government and the provision of relevant business information to members. ACIS provided frequent and high quality communication with its members through social media, newsletter publications, networking events and an online library of documents. But the organisation has in the past year struggled to maintain these high standards as a result of organisational changes, according to feedback from members, which has led to a loss of approximately 16% of its membership base.  BERF noted that there is scope for ACIS to improve its communications with members.  For example:

  • The ACIS Facebook and Website have not been updated since November 2015.
  • The main communication with ACIS members consists of a weekly news summary, which according to members has declined in quality and has not been relevant to their businesses.

In consultation with ACIS, BERF has proposed that the organisation should re-establish and strengthen basic communications practices. To this end, BERF has supported ACIS to draw up a Communications Strategy (Appendix 4) which includes the messages, tools and activities that should form the basis of its day-to-day communications function.

BERF has agreed to support ACIS, once it has successfully implemented its Communications Strategy and strengthened its communications function, with the design, development and implementation of an innovative technology-based platform of communication with its members.

Building Capacity for Improving the Business Environment in Montserrat

BERF has helped the Government of Montserrat (GoM) develop a strategic and institutional framework for improving the business-enabling environment in Montserrat. The report sets out international best practice, key functions that are required for the government to engage effectively with businesses and investors, improve business and sector regulation and drive improvements in the business environment (BE) and provides options for the design of an intervention within GoM in areas related to the BE that would build capacity in engaging with and supporting businesses and investors.

International Best Practice

In theory, best practice in business environment reform (BER) consists of

  1. legal and regulatory framework for business generally and small enterprise in particular and includes the rule of law and access of businesses to commercial justice;
  2. a policy framework for business and private sector development; and
  3. the institutional framework for design and implementation of, and compliance with, policies and programmes linked to the regulation, promotion and representation of business.

Operationally, best practice has been condensed into a standard institutional framework that facilitates BER via

  1.  linkage of the BER programme to national development priorities,
  2. establishment of a public-private dialogue (PPD) mechanism to ensure that challenges are identified and addressed in an open and transparent process;
  3. access to and usage of technical resources to support the introduction of technological and legal reforms and
  4. support from international donors in the diagnostic and implementation phases of the reform process.

Also, in most cases, the institutional mechanism functions as an operational unit within one of Government’s leading economic development agencies.

Current Status of BER in Montserrat

At the time of this study, Montserrat, like other Caribbean countries, had already initiated a limited number of BER. GoM itself has attempted to address BER such as through developing an investment promotion strategy. The strategy was designed in 2012 to “promote private sector investment in Montserrat”. Also, it defined specific objectives in a small number of sectors including high quality tourism, geothermal energy, agro-processing and mining and manufacturing.

The investment promotion agency was to be established as an operating arm of the Montserrat Development Corporation (MDC). However, the MDC was terminated following poor performance and concerns over management of money, as evidenced by the findings and recommendations of a Task Force (TF) review of the MDC in March 2015.  Consequently, this primary investment promotion capacity was never fully realised and was itself terminated with the closure of the MDC.

Prospective foreign investors have continued to express frustration with the poor BE. Moreover, GoM has failed to streamline four Acts governing investment concessions into one Investment Incentives Act to bring clarity and improve the processing of foreign direct investment (FDI) proposals.  The absence of a transparent, supportive and efficient investment facilitation system is therefore a major constraint to creating a more supportive enabling environment for both foreign and locally sourced private sector initiatives on the island.

More recently, GoM’s Department for Information Technology and e-Government Services (DITES) have created Information and Communications Technology (ICT)-based reforms that were encouraged by DFID. The result was the adoption of an Automated System for Customs Data (ASYCUDA) World, which covers most foreign trade procedures, handles manifests, customs declarations, accounting procedures, transit and suspense procedures.  This new system now allows customs brokers to file their declarations online and receive customs approvals of those declarations within 24 hours. DITES has also created online access to land information via www.landinfo.gov.ms, and an online system whereby visitors needing to obtain tourist visas to visit Montserrat can now do so via www.immigration.ms.  This is especially convenient for new visitors to the island since they can receive their visas online in a short timeframe from application to the actual issuance of visas.

Montserrat’s Current Capacity to Implement BERs

Montserrat’s readiness to implement BER depends on the government’s organisational capacity to

  1. introduce ICT solutions for transactions that the private sector undertakes on the basis of that country’s Doing Business Rankings;
  2. modify, upgrade or introduce new legislation and regulations to allow the reforms to take legal effect and
  3. oversee and participate in the formulation and implementation of reform initiatives.

Callenges to effective BER identification and implementation include

  • assimilation of private sector priorities and concerns,
  • increasing the ICT capacity at DITES,
  • potential throughput limitations of the office of the Attorney General,
  • GoM’s reluctance to forego online revenue due to credit card payment mechanisms associated with the availability of online services e.g. tax payment etc.; and
  • capacity constraints of GoM.

Most developing countries face such challenges. Those that have succeeded at achieving marked improvements in their BE have done so by developing temporary solutions such as a reliance on outsourced technical expertise and leapfrogging priority lists of a nation’s legal agenda to ensure efficient enactment of new legislation or actual amendments to existing Acts or regulations.

Such strategies are not a panacea for longer-term capacity building within government.  However, such “workarounds” have proved successful in other Caribbean countries (e.g. Jamaica and Grenada) and could facilitate GoM to act on institutional constraints.

The BER Model: Options for Montserrat

Three potential institutional approaches were considered for Montserrat:

  • A stand-alone institution would exist as a relatively independent agency tasked with multi-disciplinary functions normally provided by a national investment promotion entity or its equivalent.
  • The attachment of BER functions to an already-established and functioning private national agency such as the local arm of the Organisation of Eastern Caribbean States (OECS) Business Council, the Chamber of Commerce, or the Small Business Association.
  • Attaching the institution to operate as an arm of a leading government Ministry or entity that already has responsibility for advancing economic planning and implementation of key development strategies.

On the basis of an assessment of the strengths and weaknesses of each option, BERF’s consultant recommended option 3 for adoption by GoM. The recommended model which is called “the Business Facilitation Services Centre” (BFSC) aims to strengthen three core components of BER:

  1. the ease of doing business,
  2. business facilitation/support services including investment promotion and
  3. competitiveness – in terms of the development of highly conducive sector eco-systems.

GOM needs to manage the risk that 3 major components could overwhelm available capacity: initially, the BFSC should concentrate on just one or two main activities and gradually build its capacity.

A proposed Action Plan and budget is included in BERF Montserrat BE Capacity Building

BE Constraints Facing Mozambique’s Forestry Sector

Mozambique’s forestry sector is not meeting its potential to contribute to GDP growth and rural incomes. Harvesting is not being sustainably managed and value addition to forest products is low. BERF  examined the business environment (BE) constraints facing Mozambique’s forestry sector, including forest sector governance and the legal, regulatory and institutional conditions that govern business activities in log harvesting and downstream wood processing. The work sought to identify sector-specific BE constraints faced by enterprises in the forestry sector in Mozambique, and make recommendations to the Government of Mozambique, DFID and the World Bank for possible forestry sector-specific BE reform interventions to mitigate binding constraints, promote inclusive growth and sustainable management of forest resources.

Constraints on natural timber harvesting, transport and export:

1) Forest inventory and allowable annual cut (AAC)

Mozambique does not have an accurate, nation-wide inventory of its commercial timber stock. There is an overestimate of available stock and an excessively high allowable annual cut. As high as 60%, of the annual harvest is unlicensed. Accurate data is essential for the planning, monitoring and supervision of the natural forestry sector and affect the potential for downstream value added activities.

2) Licensing and concession of natural forests

Timber logging regimes under the forest regulation include the simple licence or forest concession regime. Imprecise delimitation of the exploitation area, short duration and limited incentives to sustainably manage the resources make the simple licence regime hard to control.  There are also many shortcomings facing the forest concession regime in Mozambique, the process to apply for a forest concession or licence is highly bureaucratic, and approval of which is dependent upon approval of a management plan that is costly to obtain.

3) Tracking, export and law enforcement

A new enforcement agency under Ministry of Land, Environment and Rural Development, the National Agency for the control of Environment Quality (AQUA), was recently established to monitor the utilisation of land, the implementation of procedures for territorial planning, the exploitation of forest resources and control of environmental quality. As a new institution, AQUA lacks capacity. Further, the lack of presence, or capacity, of government at local district levels leads to delays in procedures and ineffective enforcement. The prevailing lack of institutional coordination and limited capacity contribute to the illegal timber trade.

4) Illegal logging and export of hardwood timber from Mozambique to China

This is a significant constraint on Mozambique’s forestry sector. One study found that the amount of timber officially exported to China was 5.7 times greater than the volume declared by Mozambique’s forest department as having been exported to China. Even without exact figures on illegal logging and the associated petty and grand corruption, most observers agree that the challenge for Mozambique’s forestry governance and law enforcement institutions is enormous.

Recommendations:

Recommendations relate to overall forestry sector governance, policy-making and enforcement. These include supporting the national forestry inventory process, establishing a more accurate AAC, spatial planning, and enforcement at the national, provincial and district levels. Given challenges relating to transparency and illegal logging, careful political economy analysis and public-private dialogue will be critical to the design of donor partner interventions.

Constraints on Wood processing industries:

1) Key constraints to the growth of value added wood processing industry

While the unhealthy dependence on log exports has resulted in underinvestment and low capacity in the downstream wood industries, firms also face additional constraints, including high operational costs, limited infrastructure, high costs of capital, costly and lengthy administrative procedures and limited access to technology and qualified labour.

2) Log export ban from 1 January 2017

A complete ban on export of logs from January 2017 is now in place for all native species to combat illegal log exports. However, similar efforts to promote the domestic processing industry through log export bans have failed in the past. The processing industry has limited capacity to absorb and process virtually all types of harvested timber species in the country. Therefore, until the domestic wood industry is revitalised and a proper package of incentives are put in place, the effectiveness of the export ban measure would be limited.

3) Access to markets

The state is the largest procurer in Mozambique. However, the state procurement system is arcane, lacks transparency and does not take into account the needs of local producers. Construction materials and joinery products (doors, windows) are a potential source of import substitution, but demand for sustainably produced joinery is low. Joinery products must be shaped and dried according to standard specifications, but there is no construction measurement standard and limited capacity for kiln drying.

4)  Constraints relating to customs policy and implementation

The multiple, duplicate inspections and documents do not provide security for the government or guarantee revenue; instead they simply hamper legitimate firms. Systems are not interlinked and some require entire lists of export items to be retyped by functionaries. The government also gives certain imports duty exemption, so there is disincentive for local production. Further, the law requires concession-holders to establish sawmills in concessions but the conditions necessary to export directly from the districts do not exist.

5)  International certification and access to international markets

International certification has been seen by some as a necessary step for market access, but there is no market incentive for companies to assume the cost of any form of certification. However, overseas markets outside Asia do demand certification.

Recommendations:

Key recommendations include strengthening policies to promote the development of a value added wood processing, including most urgently the implementation of the 1 January 2017 log export ban, and the development of construction materials standards. Lower priority reforms include improving access to markets and addressing regulatory constraints on trade. 

Plantation forestry sub-sector:

Mozambique has around 7 million ha available for establishment of forest plantation. However, if accessibility criteria, other land uses (for example, small farmer or commercial agriculture), rights and needs of local communities or fulfilling the criteria for forest certification are considered, land availability for forest plantations drops to around 3.5 million ha.

Currently most plantations are located in the central and north regions of the country particularly in Manica, Niassa, and Zambézia provinces. These are mainly Eucalyptus and Pinus species plantations established in the central and north regions.

There is interest from foreign investors in large-scale agriculture and forest projects in Mozambique  since 2005, and there is potential for forest plantations to supply the growing domestic and global demand for wood and wood products. 

Critical support to policy-making for this subsector is recommended, including strengthening key institutions and developing appropriate laws and regulations.

Several cross-sectoral areas of regulation, including land access and administration, tax policy and access to information, are also discussed along with more specific reform recommendations in the BERF Mozambique Forestry Sector BE Diagnostic Feb 2017.

BE Constraints on Youth Entrepreneurship in Mozambique

Mozambique has been achieving seven per cent GDP annual growth over the past 10 years, but the formal job market is unable to create sufficient employment opportunities for the 400,000 or so young women and men entering the labour market each year. The promotion of youth entrepreneurship can help provide opportunities in starting and growing enterprises.

BERF provided an assessment of the key business environment (BE) constraints and other barriers faced by young entrepreneurs (15-35 years) in Mozambique, and identifies potential interventions to help stakeholders address these constraints.  In addition, the report identifies a number of relevant global best practice on policies and programmes aimed at promoting youth entrepreneurship.

Key constraints:

The UNCDF Youthstart Global report (2015) indicates that the major challenge facing young entrepreneurs in Mozambique is a lack of access to finance.  57 young women and men in rural and urban areas identified limited access to capital as a common problem. Most financial services operate within the informal economy.  Mozambique was ranked 18th in sub-Saharan Africa, below the regional average, in terms of ease of getting credit.

The design and implementation of National policies that aim to promote youth entrepreneurship is variable, such as the Innovation Strategy (2006-16), Youth Policy (2013), Employment Policy (2016), and the Financial Inclusion Strategy (2016).  While entrepreneurship is usually mentioned, it is amongst a plethora of issues relating to broader youth and employment issues. Furthermore, these policies/strategies are seen as belonging to their respective ministries, and do not have a broad interdisciplinary engagement across the economy.

There are insufficient business development service (BDS) providers supporting Mozambican micro, small and medium-sized enterprises (MSMEs), in particular youth entrepreneurs. Youth entrepreneurs in Mozambique require more and better support in starting and running their own enterprises, but there is not a strong tradition of mentoring. As an illustration of this, Ideialab Mozambique is having to recruit and train its own mentors, rather than being able to identify experienced and volunteer mentors.

Business Membership Organisations (BMOs) have limited capacity. They represent youth entrepreneurs and their small-scale enterprise members can play important roles in representing the interests of their members, and providing effective advice and services to benefit their membership. However, youth entrepreneur organisations in Mozambique, such as Associacao Nacional de Jovens Empresarios de Mocambique (ANJE), are over-stretched, and lack resources.

There are also insufficient business linkages between mid-sized and large enterprises and MSMEs in Mozambique. One shortcoming of recent investments (both domestic and foreign) and the government’s investment promotion policies is that there has been a strong emphasis on capital-intensive ‘mega projects’ (aluminium, gas, coal). Whilst these investments have contributed significantly to GDP growth, these projects have not resulted in commensurate job growth, as characterised by what is termed as ‘jobless growth’. It is important to promote the greater engagement of large businesses (including foreign investors) and business associations with indigenous youth entrepreneurs.

Recommendations:

A number of potential interventions, aimed at increasing start-ups and improving survival rates, increasing youth entrepreneurs’ sales, incomes and profits, and enhancing the quantity and quality of jobs in youth entrepreneurs’ enterprises are presented.

  • Improving the BE for youth entrepreneurs and promoting an entrepreneurial culture, including a visible and supportive role from government with new policy initiatives, coordinating with wider BE reform initiatives, and promotion of entrepreneurship education at secondary and tertiary levels (including Technical & Vocational Education & Training [TVET] institutions and universities).
  • Promoting better access to BDS, mentoring and financial support
  • Strengthening membership of representative, member-based associations that provide effective service delivery, advocacy and lobbying, as well as creating stronger business linkages with larger private sector enterprises.

The Mozambican government should play a leadership and coordinating role in association with DFID and other development partners as well as various social enterprises, both in promoting youth entrepreneurship and in mainstreaming youth issues into BE reforms and other relevant policies and programmes. Given DFID’s extensive investments in related projects in this area, it is in a strong position for leveraging its current support to a range of initiatives with a particular youth focus or with youth components.

More details are provided in the Report