Infrastructure, part 1: Transport

In one of my first more serious posts back in September I wrote about how I experienced infrastructure as one of the key factors in the development of a country which could be influenced in a relatively short timeframe. (In the long run, I discussed back then how I personally saw education as the key factor in the quest towards growth - both economic and social - though I will elaborate on this topic in a couple of weeks time.) 

I recently read that in Belgium, caused by the persistent snow and below 0 temperatures, there was at one point about 1000km of traffic jams spread all over the tiny country. This clearly underlines the importance of having a well-established, sustainable and balanced transportation network - which Belgium currently somewhat lacks - and it got me thinking about the state of transport facilities in Mozambique, several times bigger than Belgium, and several times poorer.

Mozambique is huge, and the roads connecting the three biggest cities - Maputo, Beira and Nampula - are for a large part in surprisingly good condition. Traveling between major cities usually entails a trip of more than 1000km, equal to more or less 20h on the road. Still, as long distance busses leave at dawn, they usually make it in a day. There are still some parts of the main road that are in bad to horrible condition, though numerous construction projects - all foreign, almost all Chinese - are under way to improve and expand the road network. (On a side note, I must add that too many of these road improvements are of very low quality, resulting in even worse road conditions less than half a year after completion of the project.)

However, these improvements serve to hardly anything when the means of transportation are quite simply below par (understatement!). The fleet used for public transport consists - bar the odd private company - out of second-hand, third-hand, fourth-hand cars, or probably an even bigger number. Bus breakdowns are therefore just part of almost any trip, so that a 20h bus ride could just so easily turn out to take double the time.

(Mozambique is one of those places where cars come to die, after a successful life in Europe or the States.)

Railroads are an even bigger problem in Mozambique. The country possesses three major harbours (in Maputo, Beira, and Nacala), and in Malawi, Zambia, and Zimbabwe, it borders three landlocked countries. A recipe for success, you might think? Unfortunately, not really... The lack of a decent railway connection between the harbour of Beira and the heart of say Zimbabwe, means that mass transportation of goods becomes a huge hassle. Not surprisingly, most of the goods in Zimbabwe are therefore supplied from South Africa, even servicing large parts of Zambia and Malawi.

Not surprisingly, and nothing too soon, linking these harbours with more centrally located areas by improving the existing railroad has moved up the development of infrastructure agenda, with improvements on the 250km stretch from Beira to the border slowly getting under way.

For me, a well established and sustainable transport infrastructure is therefore a necessary component of a successful growth strategy. However, I don’t see it as a cause of growth, only as a facilitator in the positive case and a potential stumbling block in the negative case. Clearly, just building roads is not enough: you need companies to manufacture/buy/operate trains and busses, and a population that can and wants to attribute some part of their (limited) disposable income by using it and paying for these services.

One final example from Maputo serves as a clarification: the road linking Maputo with the industrial hub of nearby Matola is in excellent condition, though people using it are subjected to a toll gate fee. However, alternatives are available - roads through the peri-urban areas in bad condition, with long traffic jams and frequent accidents. So people do have a choice, and clearly the faster, safer but more expensive option is more then valued by a large part of the society (mainly those who are in the position to allocate some of their income to paying the fee).

Coming up: ‘Infrastructure, part 2: Technology’

Where did all the middle-incomers go?

Welcome back.

And as promised, a weekly contribution. This week I’ve based my entry on an observation/conclusion I made after a discussion with a friend. Enjoy, and as always, please comment.


The observation is the following: ‘In a society like Mozambique, both the cheapest and most expensive products are basically in no need of support what so ever, while the sales of goods commonly labeled as middle class are hardly taking off’.

The really expensive and really cheap products hardly need any help in getting sold: big solar pumps, flat screen TVs, and laptops are being sold to people who need them and who can afford them. On the other hand, the very cheap products need no (or hardly any) support either: small car components, light bulbs or lanterns are all readily available in a multitude of shops, all doing very good business.
In between these two groups of products, we find products that are usually associated with middle class or medium income groups. However, for these products (I’m thinking small black and white TVs or ordinary desktop computers) it seems to be really difficult to find a working product-market-combination.

When looking at the type of products that I’m involved with on a daily basis, the above statement passes the test. In effect, the cheapest of products (solar lanterns and phone chargers) hardly need a push in the form of marketing. People know what these products can and cannot do, plus they can afford them. At the other end, solar water pumps, solar water heaters or big systems for hospitals and schools are equally being sold without any major difficulties: the people who are in need of these products know where to find them, know exactly how much they cost, and are able and willing to pay that amount.
However, the products in between – small solar home systems for lighting and perhaps a radio and b/w tv – are in dire need of market support. In lack of a middle class, the target audience – the people falling in the first category of small and affordable products – first has to be convinced that this is the product that they should be aspiring to buy, after which an even bigger hurdle awaits in the form of actually financing the product. (Regarding the latter, see my entry of February 1st)

Still, who doesn’t like a challenge?

Luc.

It's Raining Banks, Halleluja!

Hi everyone,

I know I know, It’s been a while. But… after celebrating Christmas and the New Year’s with friends and family, and enjoying two weeks of training and meetings in Zambia, I’ve settled back into the rhythm in Mozambique. And more importantly for all of you: the blog is back, and this week the topic is Finance.

On my return to Mozambique, unfortunately, I ran into some financial problems myself (creditcard blocked, uber annoying), though everything has been solved now. Still, it made me realise once more how big a role financial institutions play in the global system, and the huge potentially crucial role they can play in developing countries.

For me personally, it was simply frustrating knowing that I had sufficient funds on my account, but there was just no easy way of accessing it. In Mozambique, a similar problem is making it more difficult for people and for the country to develop: there is so much potential capital here (ideas, skills, capacities, business opportunities) which simply cannot get unlocked or unleashed because of the numerous of stumbling blocks people face day-in day-out.
The biggest stumbling block I see at the moment – the topic of the week, surprise, surprise – is the lack of a good connection between on the one hand the enormous amounts of people who either want start-up capital or want to deposit their savings, and on the other hand the plethora of banks and other financial institutions who have branches in even the smallest of villages. Here in Chimoio there are no less than eight different banks (including two microfinance institutions) which all have offices on the main street which stretches on for less than a kilometre. Plenty of opportunities to acquire a loan, or deposit your savings, one might think.

Think again. For the average Mozambiquan, it still remains difficult to even open an account, partly because of the stringent preconditions banks require from potential customers – a long waiting period, general costs when opening an account, depositing a minimum amount, having an officially registered address. And how difficult it may be at times to open a bank account, it’s nothing compared to the countless procedures that come about when trying to successfully close a loan.

In sum, the financing supply is definitely present – somewhat overrepresented in my opinion – but at the moment it just isn’t matched with the equally big financing demand. This explains why the numerous financing options and credit schemes for the poor just haven’t taken off as expected (with the odd exception).

Finally, I would like to briefly describe an example from Zambia, where they have tried to avoid this finance-matching problem through the “lay by” principle. On request of the client, the retailer/shop owner can allow the client to pay in instalments, and the client will only be able to take home the product or system once the total sum has been paid over a certain time period. This way, the retailer carries basically no risk – with the exception of him safeguarding the paid advances from the client – and the risk is carried entirely by the client. The client actually just opens a savings account with the retailer, where he wants to buy an expensive product (most probably within a certain time period).
As of yet, I haven’t come across this innovative system in other countries, and for me some questions still remain unanswered – e.g. I would prefer to keep my savings at home if I couldn’t open a bank account, rather than give it to a retailer in good trust. Still, this second option is growing in popularity in Zambia.

To be continued.

Luc