TRADE AND DEVELOPMENT BOARD COMMISSSION

ON ENTERPRISE, BUSINESS FACILITATION AND DEVELOPMENT

Expert Meeting on

"ENHANCING THE PARTICIPATION OF SMALL AND MEDIUM-SIZED ENTERPRISES IN GLOBAL VALUE CHAINS"

Geneva, 18-19 October 2007

PAPER SUBMITTED TO THE EXPERT MEETING*

Characteristics of the most successful supplier development and linkages

programmes The case of Mozambique

by

Mr. Antonio Luis Macamo Linkages Division Manager

____________________ *The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD

Characteristics of the most successful Characteristics of the most successful supplier development and linkages supplier development and linkages

programmesprogrammesThe case of MozambiqueThe case of Mozambique

by

Antonio Luis MacamoLinkages Division Manager

Expert Meeting on"ENHANCING THE PARTICIPATION OF SMALL AND MEDIUM-SIZED

ENTERPRISES IN GLOBAL VALUE CHAINS"

Geneva, 19 October 2007

“The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD”

MozambiqueEconomic Overview

• GDP:– Anual Growth 7.9%– Per capita

• 2003 US$ 264• 2004 US$ 311• 2005 US$ 347• 2006 US$ 366

• Annual Inflation:– 2005 6.4%– 2006 12.5

• Exports– 2004 US$ 1 504 000– 2005 US$ 1 745 000– 2006 US$ 2 390 000

• Imports– 2004 US$ 2 035 000– 2005 US$ 2 408 000– 2006 US$ 2 880 000

CAPITAL INVESTMENT APROVED

• Forecast - 2007: $ 7.5 Bill• Main Sectors: Mining; Industry; Energy; Agro-Industry and Tourism

APPROVED INVESTMENT 1997- 2006

1,227,201.90

4,271,165.60

1,842,526.302,094,627.60

1,526,391.00

143,342.30341,022.60

948,507.701,263,019.10

-

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00

2,500,000.00

3,000,000.00

3,500,000.00

4,000,000.00

4,500,000.00

1

Sectores

'000

US

$

Agricutura and agro-industry Industry Transport and communic.

Tourism Mineral Resources Fisheries

Banking and Insurance Others Annual Average

Mozambique Linkages Program• WHAT TYPE OF LINKAGES?

– Business interactions between MNC and local companies to increase expenditure in country’s economy.

• PHILOSOPHY:– It must make Sound Business sense for MNC and local

suppliers.– Regulated or imposed linkages & empowerment of local

businesses does not work !

• WHEN LINKAGES HAPPEN?– When local Supply companies have energy and vision to

deliver: Competitive Prices; Capacity of adequate Supply ; Quality products/services (World-Class).

POLITICAL SUPPORT AND ENVIRONMENT

• GoM approves a Linkage Program and a Linkages Division is established with in CPI in 1998;

• GoM get continuous commitment from international agencies to support SMEs e Linkages ( CDE; Ex. WBankPoDE; IFC-PEP Africa; Etc.)

• MNC investing in Mozambique committed in empowerment of SMEs and local sourcing;

• GoM approves National Industrial Strategy and National Strategy For SMEs Development.

• CPI adopt Linkages Provision in negotiations for “Investment Project Agreement” between MNC and GoM.

• Specific linkages strategy and incentives in preparation.• More local banks and other organizations supporting

SMEs and Linkages initiative.

How Mozambique Linkages moved (so-far)• Started in one MNC, the Mozal Aluminum Smelter:

– Construction Phase I: Market efforts, familiarization and creation of business environment (mixed successes).

– Construction phase II: the SMEELP was designed and implemented as a partnership program between Mozal, CPI and Apdf-IFC (All 18 SMEs Successfully delivered contracts).

– Mozal operations: SMEELP is replicated as Mozlink I for the operational phase.

• Mozlink II:– Consolidation of Mozlink I and inclusion of other MNCs.– Increased commitment from MNCs by financial contribution to co-

fund the program.• Further expansions:

– Rio Doce – Moatize Coal Mine and Tete/Beira regional market.– Kenmare Moma Heavy Sands and Nacala Region.

• Creation of SME Contracts (by MNC):– Packages solely allocated to SME’s– Ensure realistic scope in terms of size and complexity.– Sufficient back up time in case of failure.

• Assessment of SME capabilities (CPI, Partner Agency and/or consultant ):– SME data base established and periodically updated (CPI).

• Training (Consultant):– Tendering Training (Pre-Tender): How to tender.– Induction Training (Post-Award): How to execute contracts.– On Demand Training: HSEQ, Business Management, etc.– Training Modules written and presented in Portuguese, periodically updated

• Mentorship (MNC and Consultant):– Custom made Mentorship Plan for individual SME.– Business Mentorship: Financial/Commercial assistance.– Technical Mentorship: On/Off Site Technical assistance including HSEQ.

• Communication and Access to information (CPI):– Coordinates communications with SMEs and MNC (Exchange of information).– Website with business information, opportunities and database of selected companies.

Key Components of the Mz linkages program

MOZAMBIQUE LINKAGES MARKET (I)Southern Region:

– All companies committed to locall sourcing.– Mozlink II expanding regionally as a partnership between IFC, CPI and MNCs

including the public Electricity Distribution Company – EDM.– Mozlink includes a supply chain development component.– MNC contributes financially for the program.

15,000,000.00Beer Brewery CDM (SABMiller)

50,000,000.00Agric. & processing sugar caneIllovo and Tongatt

Hullet*

15,000,000.00Logistic & Transp.MAPUTO PORT*

25,000,000.00Coca-Cola

50,000,000.00Natural gas production and

processingSasol Petroleum Temane

150,000,000.00Aluminum SmelterMOZAL

Potential linkage market (US$)ActivitiesCompanies

*Only in the market side

MOZAMBIQUE LINKAGES MARKET (II)Central and Tete Regions:

– Market efforts in course with companies acceptance.– Specific program agreed with Rio Doce for Moatize Coal

Mine.

50,000,000.00Agric. & Processing Sena Sugar and Tongatt Hullet

30,000,000.00Logistics and Transp.

Sena railway & Beira Port

50,000,000.00Power GenerationCahora Bassa Hydrop.

100,000,000,00Mining and ProcessingRio Doce-Moatize Coal

15,000,000.00Agric. & ProcessingMozambique Leaf Tobacco (MLT)

Potential linkage market (US$)ActivitiesCompanies

MOZAMBIQUE LINKAGES MARKET (III)Northern Region:

– Market efforts in course with Kenmare and a Specific program proposed.

– Nacala Refinery* and Port & Railway to be approched.

75,000,000.00Oil refineryNacala Petroleum

Refinery*

20,000,000.00

Logistics and Transp.

Nacala Port & Railway

40,000,000.00Mining and

ProcessingKenmare Moma Heavy

Sands

Potential linkage market (US$)ActivitiesCompanies

*Project recently approved

Mozambique Linkages Results (up to date)

• Local expenditure: +$175,000,000.00• Number of local suppliers: #150• SMEs trained on SMEELP: #45 (18 awarded

contracts)• SMES trained on Mozlink: #50 (all with

contracts).• Next target on Mozlink II: #50 SMEs.

Success factors of Mozambique Linkages• Strong Government support and promotion of appropriate environment:

– Program designed aligning government interests and business challenges;– Linkages Provisions to get commitment of MNC;– Institutional framework for coordination and facilitation (Piloting and familiarization for

team and SME);• Good coordination “one team one project”:

– A steering committee with all stakeholders involved (MNC, CPI/GoM, Partner Agencies and Consultants);

– All stakeholders with a single objective: ensure that SMEs deliver their contracts on time and specifications.

“Failure is expensive and time consuming”• Training Materials, based on the MNCs needs, designed locally:

– Specific requirements of the clients (Technical, Financial, HSEQ)– Address cultural and language barriers;– Fill the gap on understanding of Standards and Procedures;– Business mentorship after training

• Strong commitment from MNCs:– Creation of appropriate (sizable) contracts for SMEs– Provision of technical mentorship to SMEs awarded contracts.– Support the program financially

• SMEs with vision and energy.

Escopil Maintenace: an exemple of success

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Business Maintenance Safety Quality

Sco

res

Aug'04

Mar'05

0100

200300400

500600700

800900

2001 2002 2003 2004 2005

In

Business Growth ($’000):

Escopil assessment:Business Award:

Mozal Aluminum Smelter

Maputo Port (Under private management)

Contact details:ANTONIO LUIS MACAMO

Linkages Division Manager

Phone: +258 21 313 310Fax: +258 21 313 325

Email: Amacamo@cpi.co.mz

Thank you

www.cpi.co.mz