11 July 2006

11 July 2006 Minutes

Minutes of the Private Sector Working Group Meeting, July 11, 2006

1. Presentation by Dr. Sergio Macamo of the proposed GRM Industrial Plan

This presentation was postponed until a later meeting due to Dr. Macamo’s travel schedule.

2. Report on the Meeting with the Minister for Industry and Trade

The Chair reported briefly on the July 10 meeting with the Minister for Industry and Trade on the question of price controls. At the meeting, the Minister had clarified that the GRM had no intention of instituting price controls and that the press who had reported this had misunderstood the issue. The Minister had stated that they would be looking at ways to ensure better supply of key goods such as cooking oil and chicken during times of peak demand, especially November/December and March. Additionally, the Minister had discussed the need for price stamps to be affixed to goods in shops so that customers would know, up-front, the cost of items. At the PSWG meeting, Steven Dils suggested that it would be useful if the Minister were to present the same clarification to the public and not just to the PSWG. The Chair then indicated that he would be sending a thank you letter to the Minister and would include this suggestion.

3. Labor Law Update

The Chair provided a brief summary of the meeting that was held between the Prime Minister (PM) and several members of the PSWG (USAID, Italian Cooperation, and DFID). The PSWG had two points that they raised with the PM: (a) the original process had been very productive but then seemed to have broken down; and (b) will the draft law that has been submitted to the Council of Ministers improve Mozambique’s standing in the annual Doing Business report. The PM was very attentive. She accepted with interest the two documents provided by the group (part of the Doing Business analysis that Gilberto had presented to the group in May along with the chart that USAID had prepared on the variations between the existing law, original draft, and current draft). She then spoke to the issue of process, both past and future. She indicated that it was very important to have credibility at each stage in the process, and that issues that were not fully resolved in the CCT process should be transmitted to the Council of Ministers. She then spoke to the future process and timeline. The objective is to have the Assembly consider the law in their October session which would mean that it would have to be forwarded to them by the Council of Ministers in late August or early September. The Council would, therefore, be working on the finalizing the draft law between now and the end of August. She indicated that the GRM believed that improving competitiveness was a major goal in general.

Paulo Fumane of CTA then provided a brief summary of CTA’s meeting with the PM on July 7. At that meeting CTA presented her with the original technical-level document (which had been signed by Minister of Labor). PM seemed a bit surprised to hear that CTA still had outstanding concerns since she had believed that the current draft had resolved those issues. The only pending issue that the PM knew about was concerning indemnization. The PM indicated that she would provide the Council with the original CCT-agreed draft as background documentation for their consideration since (as she again stated at the meeting with the PSWG representatives) open issues should be resolved at the Council of Ministers and not at other levels. The PM also cautioned CTA about the role of the media regarding this issue. Subsequent to the meeting, CTA provided the PM and the Minister of Industry and Trade with a letter which details their concerns very specifically.

4. Presentation by the Maputo Ports Development Company

A presentation on some of the challenges facing Maputo Ports Development Company (MPDC) was given by Dick Moore, Commercial Director of the Ports Company. Mr. Moore presented information on the structure of the MPDC, on the level and type of investments made to-date, and on the major challenges facing the company. There were five major challenges identified:

(a) Local and Regional rail issues: The rail lines from the port to the South African border have not yet been improved to the required standards for the level of cargo needed to make the Port profitable. Per the concession agreement signed between the GRM and the MPDC, this should have been completed several years ago. Additionally, there is a shortage of locomotives and rolling stock on both the Mozambican and the South African sides of the border. This will also reduce the amount of cargo that can get to the Port. Finally, there are and some question regarding the commitment of the South African rails management company to facilitate cargo going to Maputo since they also own the South African ports who would be losing business to Maput o;

(b) IVA rebates: IVA rebates have not been according to schedule which affects company cash flow. No rebates have been provided since October 2005.

(c) Customs Scanner: The MPDC’s issue with the scanners is that the GRM is proposing to pass the costs of the scanner on to the port users by levying a significant charge per container. According to Mr. Moore, these additional charges will make Maputo Port completely uncompetitive with other ports in the region. Additionally, he explained that these charges are completely unnecessary since the scanners will allow the GRM to increase the customs fees that they are able to collect through a significant reduction in smuggling. This increase in customs fees is estimated to be sufficient to cover the costs for the Maputo Port scanning equipment in less than 18 months.

(d) Labor Law: Their ability to modernize their workforce and their operations are significantly hindered by the current labor law as it is just too expensive to release workers.

(e) Economic Analysis Capacity: This capacity needs to be strengthened in both the public and private sectors to all for easier business negotiations.

5. Request for Volunteers for Meeting on Strategic Matrix

A meeting will be held on Friday, July 14, at 10am at USAID to review and revise the Strategic Matrix. The following persons/organizations volunteered: Fritz Kaufmann; Andrea Cillioni; Carlos Mate; Tim Born; CTA (Jim LaFleur); and MIC (Olga Gomes). This sub-group will send their revisions to the entire PSWG on Monday, July 17 for comments to be provided NLT July 19.

6. Next Meeting

The next meeting will be in September. The date is yet to be determined, but will be provided shortly.


Proposed PAF Matrix for PSWG

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