Business Advisory Working Group Mozambique MEETING MINUTES Date of Meeting: 25 February 2015 Place of Meeting: An initiative under: Maputo, Southern Sun Time: From 8h30 to 13h00. Agenda 1. Greetings and Agenda By: Shaun Cawood -BAWG Chair 2. Follow-up on Company Land Concerns Actions By: BAWG Chair 3. BCI AGRO Agribusiness Finance By: Barnabe Zandamela Discussion 4. ETG/SNV Contract Farming By: Rick Overmars, SNV Country Director Discussion BAWG Chair Coffee Break 5. Hollard Insurance Agribusiness Insurance Instruments By Israel Muchena Discussion BAWG Chair With the support of: &
Support Documents Participants Working Language: 6. House Keeping Issues a. Responses to the Labor Survey are still needed b. Date and Place of Meeting 4-2015 Lunch The following documentation was made available to all participants, prior and during the meeting: 1. BAWG Meeting Agenda 2. Document Submitted by CEPAGRI to the DPA s introducing the BAWG to the Provinces 3. Minutes of the previous meeting The meeting gathered 12 companies who are signatories of the LOI. Other participants included representatives from CTA, USAID, SPEED, Grow Africa, CEPAGRI, BCI, Hollard Insurance and other institutions. A full list of participants can be found in Annex I. The meeting was held in Portuguese and English. There was simultaneous translation English-Portuguese-English. Shaun Cawood, Group Chair moderated the meeting. He began by welcoming and thanking everyone for the presence and participation in the meeting. There were no other businesses added to the agenda. 1. Welcome and Introduction By: BAWG Chair The BAWG Chair, Shaun Cawood welcomed all the participants. Minutes 1 2. Follow-up on Company Land Concerns Actions By: BAWG Chair The Chair reported that as discussed in the previous meeting, CEPAGRI submitted a letter introducing the BAWG to the Provincial Directorate for Agriculture, accompanied by a list of companies that signed the LOIs. He also reported that as it pertains to Land, the Land Ministry has requested that the Group submit the companies individual concerns so that they can be addressed. They have to be submitted to the BAWG Secretariat by the end of March. 3. BCI AGRO Agribusiness Finance By: Barnabe Zandamela Barnabe Zandamela presented BCI AGRO, BCI s financial instruments targeted at agribusiness. BCI has established a team of agribusiness specialists, with knowledge of the national as well as the international market, to propose solutions for management and expansion of individuals or companies activities. This product could include investment support, revenue management, equipment and machinery acquisition, export assistance and bank guarantees. Barnabe also highlighted some special lines of credit available at the bank, and discussed the requirements of the bank for those interested in gaining access to its financial services. The following points were highlighted: 1 These minutes are a summary of the key aspects discussed and key interventions. More interventions than reported have occurred during the meeting but are presented in a summary format. Page 2 of 5
a. Although agriculture is risky, the cost of borrowing for Agriculture is very high The bank mentioned that each credit application is negotiated on a case by case basis, with a spread in agreements varying from as low as 10% interest to as high as 25% ( Depending on various factors)an additonal barrier to credit are the requirements needed for loan approval (NUIT, Company Registration, Business Plan, Collateral). All things that SME s generally do not have. b. With donor programs, although the intentions are good, the impact is only good for the bank and not for the people they are intended to help: the smallholders; c. We cannot develop agriculture in Mozambique, or anywhere else for that matter, at 22% interest. The cost of capital in the country is very high, so there is a need for the state to intervene to make agribusiness cheaper. The government should sit with donors and banks to find solutions. d. Guarantees of USD 100,000 are good, but for SME s guarantees of USD 500,000 would be even better. This guarantee issue is major for SME s e. How to improve small commercial entrepreneurs. A fund could be created to inject into a grant co-funding mechanism. f. With regards to the value chain a package could be created that reduces different risks In response to some of the concerns raised by the group, BCI representatives explained that Agribusiness is risky in Mozambique and various factors affect this industry. BCI has the money to lend, but the biggest problem lies in policy. It is not the bank, nor the private sector that has the greatest responsibility, but there is a lack of commitment from the government in particular to resolve the issue. There are some lines of credit that were successful, and there are opportunities for financing at various stages in the value chain, and it is not uncommon to have negotiated rates at 10-12%. Different models with donors to establish guarantees could reduce the cost of money. 4. ETG/SNV Contract Farming By: Rick Overmars, SNV Country Director SNV presented on contract farming in the sesame value chain using ETG s contracting model. Sesame was selected due to the increase in exports and export value in recent years, making it a high value crop. In Mozambique production of this crop has been increasing. The ETG business model is such that they purchase sesame from local famers (based on quality and type) and then resell the produce in high value markets. ETG also provides credit in the form of Agriculture inputs to farmers. Their experience shows that Page 3 of 5
woman famers are the most likely to pay back loans. The targets are small poor farmers. This model is working well for ETG, although it should be noted that they are not the only buyer. To this regard, Guillermo explained that he welcomes competition, and regards it as good for business. Current production levels are not adequate to allow ETG to compete. It Needs 100 thousand tonnes to install a factory and compete on the international market such as China There is an issue of side-selling, which is a significant amount that ETG has been able to quantify. Hollard sees this as a risk that can be managed. 5. Hollard Insurance Agribusiness Insurance Instruments By Israel Muchena, Hollard Technical Director The Hollard presentation was focused on risk. Israel explained what risk is, what kind of risks there are, how to deal with it, and what Hollard offers businesses and individuals to manage these risks. Although Hollard offers a number of products that the Group can benefit from such as social insurance, workman s compensation, property damage and business interruption, employee benefits, crop and livestock insurance has limited capacity due to lack of demand and supporting services. These products can be tailor-made depending on the company s needs. The discussion that followed outlined the following: In the process of gaining access to any form of credit, because of the risk of the person obtaining the loan perishing, individuals are required to have their loan insured. This is a non-negotiable bank requirement. In this manner the bank acts as an intermediary. There are also legal requirements for vehicle insurance. Hollard is currently one of the firms that provide such services. Currently there are eleven insures on the market, previously EMOSE a State Owned Enterprise had a monopoly. 6. House Keeping Issues a. Responses to the Labor Survey are still needed Due to the few responses received from the Labour Survey, the group was urged to complete the survey as soon as possible, to ensure the material that will be presented at the next BAWG meeting truly reflects the sentiment of the whole group. b. Date and Place of Meeting 4-2015 The group agreed that the next meeting will be held in May, date, time and place to be circulated in due time. Members suggested that the save the dates be sent out with ample time to plan flights to Maputo, and also that a different province should be considered for the next meeting. Page 4 of 5
Annexes: ANNEX I: List of Participants ANNEX II: BCI Presentation ANNEX III: ETG/SNV Presentation ANNEX IV: Hollard Insurance Presentation Page 5 of 5