Characteristics of the most successful supplier development and linkages programmes The case of Mozambique

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1 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, 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

2 Expert Meeting on "ENHANCING THE PARTICIPATION OF SMALL AND MEDIUM-SIZED ENTERPRISES IN GLOBAL VALUE CHAINS" Geneva, 19 October 2007 Characteristics of the most successful supplier development and linkages programmes The case of Mozambique by Antonio Luis Macamo Linkages Division Manager The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD

3 GDP: Anual Growth 7.9% Per capita 2003 US$ US$ US$ US$ 366 Annual Inflation: % Exports 2004 US$ US$ US$ Imports 2004 US$ US$ US$ Mozambique Economic Overview

4 CAPITAL INVESTMENT APROVED APPROVED INVESTMENT '000 US 4,500, ,271, ,000, ,500, ,000, ,500, ,094, ,000, ,842, ,500, ,227, ,526, ,263, ,000, , , , , Agricutura and agro-industry 1 Industry Sectores Transport and communic. Tourism Mineral Resources Fisheries Banking and Insurance Others Annual Average Forecast : $ 7.5 Bill Main Sectors: Mining; Industry; Energy; Agro-Industry and Tourism

5 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).

6 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. WBank PoDE; 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.

7 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 cofund the program. Further expansions: Rio Doce Moatize Coal Mine and Tete/Beira regional market. Kenmare Moma Heavy Sands and Nacala Region.

8 Key Components of the Mz linkages program 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.

9 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. MOZAL Coca-Cola Companies Sasol Petroleum Temane MAPUTO PORT* Illovo and Tongatt Hullet* Activities Aluminum Smelter Natural gas production and processing Logistic & Transp. Agric. & processing sugar cane Potential linkage market (US$) 150,000, ,000, ,000, ,000, ,000, CDM (SABMiller) *Only in the market side Beer Brewery 15,000,000.00

10 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. Companies Mozambique Leaf Tobacco (MLT) Rio Doce-Moatize Coal Activities Agric. & Processing Mining and Processing Potential linkage market (US$) 15,000, ,000,000,00 Cahora Bassa Hydrop. Sena railway & Beira Port Sena Sugar and Tongatt Hullet Power Generation Logistics and Transp. Agric. & Processing 50,000, ,000, ,000,000.00

11 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. Companies Kenmare Moma Heavy Sands Nacala Port & Railway Nacala Petroleum Refinery* Activities Mining and Processing Logistics and Transp. Oil refinery Potential linkage market (US$) 40,000, ,000, ,000, *Project recently approved

12 Mozambique Linkages Results (up to date) Local expenditure: +$175,000, 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.

13 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.

14 Escopil Maintenace: an exemple of success 100% Escopil assessment: Business Award: 90% 80% 70% Aug'04 Mar'05 Scores 60% 50% 40% 30% 20% 10% 0% Business Maintenance Safety Quality Business Growth ($ 000): I

15 Mozal Aluminum Smelter

16 Maputo Port (Under private management)

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19 Thank you Contact details: ANTONIO LUIS MACAMO Linkages Division Manager Phone: Fax: