HOW TO LEVERAGE YOUR RESOURCES TO BE A REGIONAL HUB AND ENSURE SUSTAINED DEVELOPMENT AND LONG TERM ECONOMIC

GROWTH

Mozambique Gas Conference

Maputo, December 03, 2013

Outline

The successful strategies to make oil and gas major contributors to the GDP of Mozambiques’ communities – multi generational strategies.

Critical economic and social areas to focus on and channel investment to enable sustained growth

Developing regional markets and gaining regional support – how to find local markets

Ensuring development of the economy as a whole – investing in diversification

Abstract

In today’s world, sustainable development is a phenomenon that many scholars address when explaining its role on promoting economic growth driven by natural resources that a certain country has. Sustainable development requires some coordinated actions taken by governments as for example, controlling higher inflation, growth of government consumption and a slower pace of financial development which impinge negatively on economic growth.

Endogenous economic growth can be possible only when crafting favorable policies to attract more FDI inflows which will increase long-run growth due to their contribution to increasing the existing level of knowledge through labor training, skill acquisition and the introduction of alternative management practices, inputs and technology.

The successful strategies to make oil and gas major contributors to the GDP of Mozambiques’ communities – multi generational strategies.

1. Identifying Mozambique Strategy -What to look for

Actions to enterA new geographic

Or product markets or existing ones

Actions to capture Emerging marketOpportunities and

And defend againstExternal threats to the

Country’s businessprospects

Actions toRespond changingMarket conditions

And othersExternal factors

The patterns ofActions and

Business approachesThat define a

Country’sstrategy Actions to

Strengthen marketStanding and

CompetitivenessBy acquiring orMerging with

Other companies(countries)

Actions to gain Sales and marketShare via lower

Prices, morePerformance features,More wider productionSelection, managing

R&D

Actions to Strengthen

CompetitivenessVia strategic Alliances andCollaborativepartnerships

The patterns ofActions and

Business approachesThat define a

Country’sstrategy

Sustainable Growth of SMEs on knowledge –based

Pipelines as contributors to Mozambique GDP

The oil pipeline system in Mozambique has to be constructed as a part of an interconnected regional network which include two or more disjoint system serving the SADC region, and Asian market.

Creation of an independent regulatory structure to oversee oil and gas industry in order to diverse export options (essential issue) to sell gas in a competitive price.

Creation of a coordinated partnership with suppliers to develop more supply chains as the oil and gas market is less characterized by heightened level of uncertainty.

The natural gas transport cost depends on pipeline construction, operational and maintenance costs. The regional or intercontinental natural gas pipeline projects are mainly characterized by high infrastructure construction costs and a low relatively low operational and maintenance cost.

The pipeline network system will benefit local and international market thereby increasing revenues that will boost GDP.

Mozambique GDP insight

The Gross Domestic Product (GDP) in Mozambique was worth 12.80 billion US dollars in 2011. Its value is roughly equivalent to 0.02 percent of the world economy, currently with per capita of 500 US dollars boomed by the first exploration of natural resources that influenced the economic growth of 7.5% the highest and stable one in the region.

GDP (current US$) $14.59 billion 2012 Population, total 25.20 million 2012

Many countries have managed precariously revenue from its natural resources, have poorly negotiated with mining companies.

The size of the financial sector contributes significantly to economic growth. However, any increase in the quasiliquid liabilities/GDP ratio by 10% raises the annual per capita GDP growth rate by 1.8%.  

GDP Insight cont

Economic growth may be particularly important in societies where political aspirations are currently in excess of resources, since growth may forestall what might otherwise prove to be unbearable social tension.

Although it is clear that not the whole population gets the benefits from FDI the number of trained people is still growing and gives value to the community where these people are inserted. The exploration of natural resources has to contribute on the equality of life style of Mozambique citizens and benefits the future generation.

The overall performance in GDP has to be guaranteed by the maintenance of political and macroeconomic stability which deepens the internal market in the current framework of natural resources exploration that will accelerate the development through a strong economic growth with an inclusive equilibrium.

The GDP growth for agricultures has been two or four times more impact on the economic growth. The Gross Domestic Product (GDP) in Mozambique expanded 0.4 percent in the second quarter of 2012 over the previous quarter. Historically, from 2000 until 2012, Mozambique GDP Growth Rate averaged 2.02 percent reaching an all time high of 7.40 percent in March 2005 and a record low of -5.00 percent in September of 2004

A lesson to be learned from Caspian region

Source:EIA North Caspian pipelines

Profitable Gas trading hub

In order to have a competitive, sustainable and secure natural gas market governments have to increase competition in the gas market to minimize costs in in the local market.

Strategies and policies to enhance gains on GDP and development have to allow:

A change from public ownership to privatization

Design a monopolistic market structure to allow capital intensive infrastructure and low returns on investments which will enable development and a platform for exchange. (buyers and sellers). Trade without ownership is impossible. However is so crucial to enable competitive markets to function.

If this happens Mozambique will boost and improve the physical and virtual hub. (Geographic location and regional intercommunions.

Mozambiques’ communities – multi generational strategies to benefit the locals

Recently Mozambique has discovered massively natural resources such as gas, coal and so on. These resources have been identified where the population live and develop their basic activities such as agriculture, and pastoralism. However, approaching these communities require a very well coordinated strategies designed by governments as well as by the investors when are interested in operating in such areas with natural resources.

The presence of natural resources will dramatically alter the way those communities live as new form of planning is undergoing. The government has to use a knowledge to maximize the planning and development process and to improve infrastructures that surround these communities.

SMEs fragilized

Mozambique SMEs access to finance is the key element and one of the most significant challenges for entrepreneurs and for the creation, survival and growth as well as their prosperity in business.

THE GROWTH of mining and energy projects has to contribute massively in the boom in services providers companies.

a) The food industry, particularly,

b) Corporate fast food and

c) Catering services in the country that we are lack of.

Critical economic and social areas to focus on and channel investment to enable sustained growth

One of the most important hub which is a keen to promote a sustainable development in a given country is education. Education represent the third generation in a globalized world. A very well concerted and planned education hub can allow a critical mass of knowledge actors who will strenghen efforts to exert more influence in the new marketplace.

FDI will enable a recruitment of skilled work force attracting research and development firms and multinational companies specializing in the knowledge economy and service industries.

Scientific and technological knowledge is an important strategic resource, to foster and strengthen the capability of independent innovation as the developing country's basic strategy, and continuously increasing the government financial investment ahead of the deployment of strategic technology to cultivate and develop the own technological

capabilities. six knowledge capacities as a firm’s critical capabilities of managing internal and external

knowledge in open innovation process: inventive, absorptive, transformative,

connective, innovative, and desorptive capacity.

Critical economic and social areas to focus on and channel investment to enable sustained growth

African need for infrastructure and economic development is the key element for the continent to craft strategies aiming at attracting FDI to exploit resources they have in abundance and allow them to benefit from the transfer of technology, as well as to solve problems such as institutional framework and absorptive capacity.

Urbanization; sanitation; roads, ports, railways, etc.

Inflation

Appropriate use of monetary policy can promote a stable financial environment necessary for economic growth by maintaining a low inflation rate.

Sustainable development and trip wins

The triple win outcomes that strengthen all three strands of sustainable development. (Source) PNUD

SUSTAINABLE GROWTH AND DEVELOPMENT

Developing regional markets and gaining regional support – how to find local markets

Developing regional markets and gaining regional support – how to find local markets

Ensuring development of the economy as a whole – investing in diversification The objective of diversification is to produce the best portfolio, the one with the most favorable

combination of risk and expected return. The best possible minimizes the risks due to a residual uncertainty for any given level of return. It reduces the risk of investment portfolios because assets returns in different countries are not perfectly correlated.

Venture investments that diversify across portfolio company stage of development have greater success in bringing companies public and exiting their investments via acquisition. However, investments specialization has insignificant impact on venture fund success rates.

Because the market is imperfect, it is uncommon to achieve a well diversified portfolio of venture capital. This phenomenon force companies to specialize.

International diversification is currently an established fact stock and bonds portfolios. Another kind of strategy to minimize the risk is to diversify among different stock markets.

A well diversified portfolio will highly lower the risks than a purely domestic portfolio even considering exchange risk which tends to be diversified across several strong and weak currencies.

Given the relative independence of national economic growth and stock markets, there also exist abroad investment opportunities that have no substitute domestically

Cross strategies

Creation of a special bank for investments with a specific role of charging taxis from multinationals (for example 50 cents of usd ) in each unit gas export.

Support cluster linkage to promote value in sub-sectors with potentials

To promote the creation of networks and connection among SMEs in regions and to develop their manufacturing capability and business management.

Development or investment Bank

Legislation on Social Responsibility

And…

THANK YOU FOR YOUR ATTENTION